Europe’s Startup Unicorns

UK had great laws geared towards mobile workforce and specialist contractors could claim business costs against their tax - this combined with little bureaucracy and use of de facto lingua franca was a recipe for success. From April next year this will end as government was looking for extra money and decided to adjust IR35 (a law that essentially says if you work as an employee you should be taxed as employee, but without having any employment rights), so that now the client has to determine whether contractor is a deemed employee or not. The problem is that the penalty for doing wrong determination only exist if you declare that someone is not a deemed employee, but investigating civil servant finds the opposite. That means risk averse companies change their contracts so that the contractor will always be deemed an employee to avoid getting fined (the fine plus all taxes that would have to be paid even if contractor already paid all the taxes). This still wouldn't be a problem if the rules about deemed employment were clear - but after so many years HMRC still keep losing cases where they get the determination wrong themselves. What this means for contractors? They essentially become employees without rights and the effective tax rate they will pay may be even around 54% plus they won't be able to deduct any business expenses (except what employee could have deducted - but that is essentially dead). Suddenly the market for IT specialists in the UK became unattractive and companies who are struggling to find people working for severe pay cut start to look overseas.

edit: if you want more spice to this, then imagine that our Chancellor is married to woman that her and her father have substantial stake in Infosys.

Are you determining these numbers simply by a site search? That's just wrong. In case of Spain this even returns 3 and there are effectively 2 unicorns in this list.

Too much friction I guess. Keyboard layouts suck for coding (makes it harder to start with what you have), not enough english skills for proper autonomous learning and searching, a lot of bureaucracy that makes starting and running a software business more difficult, and people thinking that they have to be math geniuses to succeed. This reduces the overall amount of talent, so you're basically left with entrepreneurs who can't code and full-blood C++ programmers who started at five years old.

From my experience it’s more favourable to startups. The investor regulations are good so there’s a decent amount of capital, and the English language makes it easier for talented employees to immigrate to the UK.

The existing financial hub in London makes a great environment for fintechs in particular.

I'm the German founder of a UK startup: It's a number of environmental factors:

1. Funding: UK has 3-4x total deal volume compared to Germany [1]. I've heard somebody say UK (London) is comparable to NY, which is a 2nd tier US VC market.

2. Tax incentives: Early-stage investors get significant tax reliefs under the UK government's Enterprise Investment Scheme (S)EIS. They made a big difference when fundraising, almost every startup I know has used EIS. I see nothing of the sort in Germany.

3. Policy backing: My understanding is that around 2010 the startup sector was seen as a strategic investment both by UK and local governments, in particular the City of London. Which lead to the establishment of Tech City ('Silicon roundabout') as we know it today. In Germany, on the other hand, most politicians aren't aware of how bad the current state is. Of course there is a lip service, but in a way the success of the 'Mittelstand' (SMEs) never made it a necessity to foster startups.

4. Culture: One factor is risk aversion, for certain, but also how Germans perceive innovation plays a big role. I would describe it as an incremental view of innovation rather than disruptive technology, like a new type of car paint that dries 30% faster.

I'm not a pessimist at all, but that's really one of the things that makes me bearish for Germany going forward.

[1] https://news.crunchbase.com/news/european-venture-report-vc-...

Why do you think the UK left? The EU is not much more than a regulatory burden to them.

Where are you getting these numbers from? I only see 2 for Spain and 9 for Germany...

There's not really a universal definition of unicorn. At its origin and most basic it was just a private company over 1 billion in valuation. Since then, various sources have tried to amend it so that its "private startups" but there's not really a good definition of startup either.

I can see in that list some that have HQ in London, but their origins and main teams are still in other countries. This is mostly due to investor's requirements to relocate.

I think it's related to risk-aversion of investors in EU. While spitting out millions of dollars anything with a slight chance of success is common in the US (and to some degree in UK apparently), EU investors are much more conservative in their spending, which affects the valuation of these companies.

Other countries (e.g. Spain and Germany) have a lot more bureaucracy and fees around starting a company.

Labour market and taxation are more flexible over here than on the continent. Also London was/is basically the financial capital of Europe, and the easiest destination for young talent for cultural reasons (it's easier for developers to learn English to a passable level than German, French, or less popular languages, when most of the ecosystem is built in and around English).

This said, Berlin started later than London but, from what I hear, got much hotter in the last 5/10 years, so there might be some rebalancing in progress.

Here's a helper question: have you seen Bayer producing a Covid vaccine?

Nope, they're happy producing aspirin. Less risk.

Germans less interested in moving fast and breaking things than Brits in my experience. Especially outside of Berlin.

Two things:

1. Unicorns are lottery tickets. People dream of being rich.

2. Unicorns represent Big Wins: an idea that was worth a huge sum of money. It makes the world a richer place, figuratively and literally. The person who had it (and more importantly, the people who run it) are Big Heroes.

Companies like Facebook and Uber aren't just big companies. They change the world, making value from something that wasn't valuable before. That may be a Good Thing or a Bad Thing, but it's a Thing in a way that ten thousand smaller companies don't.

As with celebrities, we probably talk about them disproportionately to the value -- in part because they give us something in common to talk about. But there's usually some kind of "there" there, as well.

They initially competed on price and your first instinct wasn't to assume Dutch origin? Mine was.

While the main HQ is in San Francisco today, it started out in The Netherlands. There's still a Dutch subsidiary and office, but it's mostly used to employ people.

I worked for one of the companies listed from the start of explosive growth from ~100 employees to 1000+. It was really fun.

Some of the later PMs were toxic (I wouldn't say it's much better in large enterprises though), but it was great to focus on the engineering at the start and work closely with lots of different partners.

dog-eat-dog is the natural state. Some people like it, other think it's toxic.

I like to really explore innovative options so too fast of a pace can be annoying being at the bottom of the latter at a fast-paced company.