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The major problem in EU is not really starting the companies. Most countries have ways to incorporate by filing a form and sending an email or two.

The problem though is financing, French investors for example are really stingy and you won’t get somebody to just throw a few millions at you to see if you succeed.

France has decided to build the “French Silicon Valley” multiple times by grouping schools and companies together, providing facilities and so on. But it always fails because there is no VC money pool.

If you start a company here, better think about profitability from the get go.

This is the core: enough smart folk, enough ideas etc but people here sit on their money. EU investors invest in sure things and sure things are just not FAANGS when they start out. The appetite for risk is close to 0. You can see this when getting into EU incubators who try to mimic HN: they are absolutely waiting for that thing to happen where they are sure they will have ROI at which moment you can just walk to a bank or to a much better investor. This slows things down but mostly kills them entirely.

> EU investors invest in sure things

Which is mostly real-estate

> French investors for example are really stingy and you won’t get somebody to just throw a few millions at you to see if you succeed

Isn't that...normal? Where did the attitude come from - that startups are somehow entitled to funding worth of several lifetime median incomes, for their half-baked business ideas that are unlikely to ever turn profit? That if the country doesn't shower the founders with angel investor money just for showing up, they are somehow unreasonably risk-averse and stingy.

As an example - Docker, arguably the most influential software of the past decade, was developed in France. HN has derided French investors for not investing in it, leading to the company relocation to US. Afaik, Docker is still burning money, with no end in sight, and will continue to do so indefinitely unless a buyout at ridiculous valuation happens. Looks like...the stingy French investors were right after all...

It has problems. If you have an idea that will take you a year to develop with 10 people, you need one million up front (simplifying a lot). But if the investors only give you 250k, they you need to spend time working on getting that missing 750k which will dilute your focus from the product you actually want to build. But the initial investor will still want that product.

I definitely think that there is some middle ground to find between not being able to rise money for any project, and being able to get 100M funding for a juicer.

If they stingy French investors have invested then into Docker, which now you say is posed for "a buyout at ridiculous valuation"? Yes sounds like they missed out big.

> If you start a company here, better think about profitability from the get go.

How is this a bad thing? Compare this requirement to, say, Uber, who has been losing billions, and has used investor money to engage in price dumping to corner the market.

There are tech startups and then there are "burn cash by subsidizing the 10% using VC money" startups. Uber is the latter and imo the role of the investor is to be able to distinguish which one is which.

However there is a case when you need money to actually do things, e.g.: pay employees, run clinical trials, rent or build up production capacity. If you don't have initial funds then you will be bogged down by doing contract work to hopefully fund your idea one day. It will slow you down and also quite possibly tangle you in support contracts in products you don't actually want to maintain.

> There are tech startups and then there are "burn cash by subsidizing the 10% using VC money"

My feeling is that the absolute vast majority of tech startups in the US are of the second kind.

> However there is a case when you need money to actually do things, e.g.: pay employees, run clinical trials, rent or build up production capacity. If you don't have initial funds

This has always been the case. Until unlimited US money perverted the incentives to become "waste billions to corner the market by barely legal means" or "wasted billions until someone buys you".

> My feeling is that the absolute vast majority of tech startups in the US are of the second kind.

Let's take a look at YC companies, which is representative to the kind of startups we're talking about here. Do you think the majority of them get the funding to burn and subsidize the 10%?

Yes, let's take a look: https://www.ycombinator.com/topcompanies/

Doordash losses: 204 million in 2018, 667 million in 2019, 461 million in 2020. 1.2 billion dollars in losses over three years. [1]

Cruise: Hard to find any data (the name doesn't help). Raised billions while producing zilch. Was acquired by GM, and is now generating only losses to the tune of 200-300 million dollars per quarter. That is, losses of around 1 billion dollars per year [2]

Instacart: Doesn't publish profitability (suprised Fry face). Had it's first profitable year in 7 years in 2020. In 2019 lost 300 million dollars. Previous data unavailable.

Should I go on?

Even the proftable darlings are usually profitable if you look at them right.

AirBnB: up and down, up and down. Sometimes down with losses up to 674 million dollars a year: [4]

Dropbox: became profitable only last year. Prior to that? Well, losses up to 484 million dollars of losses per year [5]

And so on.

The vast majority is fuelled by litrerally endless investor money with only two modes of operation: corner the market (that is, outlive other competitors who don't have such an unlimited amount of money) or get sold.

[1] https://www.businessofapps.com/data/doordash-statistics/

[2] https://www.statista.com/statistics/1077077/gm-cruise-operat...

[3] https://www.businessofapps.com/data/instacart-statistics/

[4] https://craft.co/airbnb/metrics

[5] https://craft.co/dropbox/metrics

Every cost causes a difference at the margin. Businesses are fragile when small. And most of these costs are just economic dead weight, ridiculous paper proof of work schemes where all you're really proving is that you've wasted a certain amount of time and money.

If I were to identify one big flaw, it would be that EU governments don't recognize that small businesses can't do regulatory compliance as much, so they should be exempted. Or you get no small business formation that can turn into large businesses.

There's usually a certain amount of exemptions already. Things like not requiring audits for companies below certain turnover etc.

The cost/effort of running a tiny deadbeat company in Europe can be very marginal (I run one). That's how all plumbers and carpenters and car mechanics run their businesses: if they can you can too.

Don't they recognize that, with somewhat perverse consequences? I remember reading there is a cliff in compliance in France where if you hit 50 employees additional regulations kick in, so companies are motivated to stay at 49.

This is a really damaging take. In any area imaginable, a low barrier to entry has been proven to breed more people on the high end of skill and commitment. There's nothing wrong with folks who don't want to deal with dehumanizing red tape.

> only really lose the easy "fill in a form and off you go" businesses. I don't imagine that's much of a loss

Sounds like you could easily justify soviet bureaucracy with that logic.

> It's also worth pointing out that if someone is falling at the hurdle of just registering and starting a company then the chance of success is very low

You're not wrong about this specifically. But why would I open in a difficult country if I can open in an easy country?