America loves investing in risky ventures, and startups love money so they go to fish where the fish are.
If Europe would invest into local startups instead of propping up the real estate bubble, they wouldn't sell themselves to the US for money. Our downfall is by our own design here.
Governments don't create startups but they can 100% create the right legal, monetary and tax incentives to steer private capital and workers towards them, but as long as they are steered towards protecting the interests of gentrified land owners and those of 100-year-old companies, nothing will ever change and we'll just stare at how US and Chinese companies are overtaking us.
Rich people can invest relatively small amounts in hundreds, if not thousands of startups through preferentially treated retirement funds and pay no (or little) tax on the ones that make it big.
This is what has made it so easy to secure funding in the US.
Should Europe do the same? There's definitely an ethical dilemma in making the rich, richer for the sake of innovation.
>There's definitely an ethical dilemma in making the rich, richer for the sake of innovation.
What do you mean? The European rich have always been getting richer via inheritance regardless of innovation. That's a monetary and legal policy hack that's been in place for decades/centuries here which is how the richest families are centuries old.
Investing in innovation instead would be a much needed breath of fresh air and give current generation of youth some skin in the game instead of a defetist mentality that there's no point in working hard because the zero sum game is rigged. So I don't get your point.
- In Europe, getting funding is literally like pulling teeth. Just to get a measly hundred thousands of € in funding you're expected to provide a comprehensive business plan, financials, etc. that would rival M&A due diligence other places. In Silicon Valley you can get more funding by simply meeting the right angel investor, and providing a good pitch - done deal.
- In Europe, the end goal for many startups is to be acquired by some megacorp or market leader, for something like €10m-€50m. In the US you can multiply that number by 10 or 100, or in general have ambitions of developing the startup into a unicorn.
That was at least how things used to be. US has a long, long history of (risk willing) VC investments - while European countries have been lagging far behind.
Good VC cultures have developed in some European countries for the past 10-15 years, and startups have become more ambitious, but unfortunately there's still a culture of nickel and diming startups. And the places that rob you, will fund you maybe a month or two worth of capital.
EDIT: Should be said, that I'm also from Europe. And as someone else have pointed out in this thread, Europeans hate risk.
I say this as proud European: the problem isn't just VC culture, it's European culture. In Europe there's an extreme risk aversion to trying things that have nonzero risk of failing.
I know a tiny bit about this regarding the UK but no other country in Europe:
My mental shortcut has always been "The US never inherited debtor's prison." Historically in the UK at least, getting into a situation where your debts can't be honored was utterly ruinous (this has improved IIUC). In the US, there are strict upper bounds on how much sway creditors can have over you. One could imagine this would result in a chillier credit market when creditors have fewer protections, but ironically, this makes it easier to get credit in the US because creditors don't have another option. Interest on a successful venture is still the quickest path to making one's money grow, so even knowing the debtor could walk away and the worst that would happen is "bankruptcy followed by a judge telling you you get pennies on the dollar of your investment", people still put up the money.
The most obvious example of how failure to pay debt in the US isn't personally ruinous is probably that our current President has filed bankruptcy six times.
(Note: I am speaking broadly and about non-medical debt. Medical debt in the US is ruinous for several significant reasons. But that's generally a non-overlapping concern to most tech-company funding).
> - In Europe, getting funding is literally like pulling teeth.
Because Europe was not able to print unlimited Euros to flood its economy with free cash like how the US was able to do it thanks to the reserve currency status of the dollar. But no worries - now that dollar's monopoly is ending, the American investment landscape is also coming down back to Earth. US startups and companies wont be able to burn endless amounts of shareholder/investor money to out-compete and kill all competitors anymore. That should allow all regions in the world to be able to compete.
> That was at least how things used to be. US has a long, long history of (risk willing) VC investments - while European countries have been lagging far behind
> Europeans hate risk
Right, that's because Europe did not have zirp-enabled free cash. You can dump millions on all kinds of ideas including dumb ones when you have free cash and still see 1% of them make it big even if 99% of them fail. But when you don't have free cash, you have to be careful.
So finding investment wasn't a problem or issue of the European culture or business landscape. The US being able to burn cash on even dumb ideas thanks to zirp made it appear like it was a problem.
zero-interest-rate-policy-enabled, i.e. it's a reference back to the prior paragraph. But I don't think the US government's money-printing tells the full story. There's been just as much "cash" created by stock market overvaluations and un-backed securities.
> There's been just as much "cash" created by stock market overvaluations and un-backed securities.
Yes, though they originate from the free-cash printing. Both through the central bank (Federal Reserve) and private banks that were allowed to do fractional reserve lending, the US infused immense cash into its economy, which led to all the phenomena you mentioned. Because in countries that cant have zirp, such overvaluations of stocks and securities are scarce. Indeed, the derivatives market took a life of its own and created derivatives of derivatives backed by derivatives that were loosely tied to real-world assets and that also contributed to the bloat. But the real deal was always the zirp.
I'm sure Europe is less nice, but also it's hard to even try. e.g: when you get accepted into YC you immediately go to Delaware, and even if the whole company is still in europe, it's no longer an european one :/
Isn't funding at that extreme level pretty much localized to a few areas in the US, like Silicon Valley/Bay Area, Portland/Seattle area, New York and maybe Colorado. It is probably easier than in the EU, but I don't think may start ups in Alabama are getting crazy funding.
As for getting acquired, that's the same in the US. Either you goal is total dominance on your own or getting acquired by Alphabet, Meta, Microsoft, Oracle or Salesforce.
You do have a point, start ups doesn't have access to the same level of uncritical funding. The SV model also isn't ideal, but it should be possible to find somewhere in the middle.
For a while there, funding in US was as simple as putting the right keywords into your proposal, and sending it to the right treasury office, getting it practically auto-approved. I hope they will align closer to the sensible European practices in the future.
Unfortunately that’s the case because large US-based companies can leverage their existing global sales / marketing / governance setup to rationalize very high exit valuations. In the EU we don’t have the large software shops that can do that. So for an EU based startup - it’s exit to a US-based company or go all the way to an IPO / profitability.
Also it seems to be missing some techs company: pigment, aircall, contentsquare (but not sure if it's a mistake)