Factors that act(ed) as drag on the European tech/startup scene

Granted that was 20 years ago, many orgs offer IC tracks now. Pay is still lower compared to US based roles.

Same goes for Australia, where I studied and worked in the mid-2000s. The expectation was to work for a few years with the intention to move into management.

I've been bought out by a French company twice in my career and worked closely with developers in Paris for years, and at least in my experience, this is still very much the case. There wasn't a track for senior IC and at the time I was a Principal Engineer who had reported directly to my (exited) company's CTO. I was used to pretty much free range, being treated as equals to the front line management.

Paris managers didn't know what to do with me, why this keyboard jockey kept requesting meetings and taking on projects. One manager treated me like I was lost and even tried to add me to his Jira board. After quite a few conflicts I finally asked for a title change. Boom, instant cred, no more weird issues.

Super generalization of course, but my experience was harsh and blatant. I could tell a lot more stories to back it up mainly because I thought it was so odd.

This is still the case and all the money is sucked by the management that is growing faster than the developers and just stratifies slowly. Another important point is the one of countries want to control a domain before even beeing big players in it. Look at LLMs and the recent European legislation. This mean that not only companies will be chilled from starting anything, but that the people that could have made that possible will just go elsewhere. In some European countries there is also a caste system where you need to be coming from a specific kind of school (or in some companies a single school usually the same as the C-suite is coming from) to even be considered as hireable. Starting and maintaining a company is also extremely difficult in some European countries where the paperwork, tax and permit burden is just incredible compared to the U.S.

I am European, and I wish this was not true, but you are so right. It happens everywhere, SMEs, mittelstands, corporations...

Even at top EU universities, in many fields, most professors are managers that despise technical know how!

I have worked at several US universities, and this was not the case. Plus hierarchies were much flatter. Social structures here in the EU make lots of innovation surprisingly hard.

> at American companies, pay for developers was abysmal comparative to the US.

something went wrong here with comparison...

I worked as a programmer in Spain (my homeland) between 2008 and 2014. My yearly salary was 16k euros, putting me in the bottom 25% of earners, or just about the poverty line. Considering the american market, people have a hard time believing I used to live paycheck to paycheck working as a programmer. Anything tech related used to be a "nerd" job and I got paid less than my friends working as mechanics or policemen. In fact I didn't learn programmers were supposed to get paid big bucks until embarrassingly late.

Luckily in the last few years this has changed, in part thanks to Covid and remote work. At least now software engineers can get paid a decent income, which makes working in tech in the EU more bearable.

Dutch here and I completely agree with this observation. Culturally being an engineer in Europe is not "high status" and also not high paying.

TLDR: companies and culture actively stimulate young engineers to move "upwards" (which in EU culture means: becoming a manager) while at the same time coming up with press releases on how they can't find engineers locally.

It seems to me like an entirely self-manufactured problem.

Also the fact that large companies such as ASML and Philips form illegal cartels to keep salary levels down (while importing as much labour from abroad as legally possible) doesn't help to stimulate people to remain an engineer.

Then there's companies like Philips who actively patent troll (or steals IP from) every local start-up they can find or convince to share more info.

Yep, as an anecdote. My dad was working for 35 years at a "tech company" here in Europe. When he went into pension all his coworkers told me what an unusual thing this was (kind of warning me that I shouldn't try to do the same haha). It is incredibly hard to make a technical career here.

>In France, initiatives are very often top-down - bureaucrats invent a project and try to rally organizations. Even when it works, it’s almost alway useless

If you do this in the us you get Shockley -> Fairchild -> Intel OR Engineering Research Associates/Univac -> Control Data Corporation -> Cray Research

If you put a bunch of smart people together, and manage them like shit, they will go start their own company in the US.

Your point about languages and cross border regulations may be true, but is doubly so for the United States. In some (narrow sense) the US is like a highly devolved EU - you have 50 different countries but they all speak the same language (not even really different dialects), use the same currency and largely have the same legal requirements for technology firms.

> For example, the cultural differences

This makes the first 300M market harder and the next 300M easier.

People outside of the SV bubble aren't swayed by the equity nonsense and prefer to be paid actual cash.

Yes it's famously problematic. It's got better with time partly due to US based firms coming in and blanket offering lots of employees they hire there equity so tax authorities were forced to figure out their policies, but for example when I joined a US FAANG from a European country in 2006 I was warned that the tax authorities might question the equity because they weren't really familiar with stock options.

Mostly the issues are therefore related to strange tax rulings that would lead to bankruptcy in some cases. It's not unique to the EU, the USA also has some edge cases where people can be bankrupted by tax bills on money they never received.

The main issue in the article is that the author assumes that those factors "drag" EU startups, but as others pointed out, there are fundamental differences in values, cultures, and principles between those places.

> - If you’ve worked in tech in the EU, can you share examples of this affecting you?

As I have worked in both ecosystems, some things that I have on top of my mind are:

1) The taxation on unrealized stock options: For me, it's the worst. Roughly speaking, if you have stock options, you have to pay for the appreciation of that stock, even if it is an illiquid asset. And since in Europe we do not have some clear equivalent of 409A, it's a no-go to pay for something that has no intrinsic value.

2) Salaries: Since companies cannot pay with SO, some of them use some synthetic mechanisms like phantom stocks or virtual stock options, but all of them have a small issue: The returns are not so great, maybe 1.05x-1.10x. It's better to be in a big company with a great upfront salary than to run for something that will not provide even a 20% downpayment on a house.

3) Low payment with no learning: People underestimate this aspect, but for me, startups are an environment to deliver and learn at the same time with some cap on the salary. In the US, this is not something controversial, but here in Europe, I know startups where the average developer cannot even choose to work on a Linux workstation and most of the founders have little knowledge of how

4) Talent density: The tech diversity in talent is great here, and it's awesome to work in a multicultural environment, but the problem is that, at least in some places in central Europe, the talent density is not as great as some places in the USA, especially in cultures where the least denominator reigns in terms of accelerating and fostering talents. It's more or less the Procustes bed: if you're short, they will stretch you out; if you're big, they will cut your legs.

5) Talent culture: This is a big difference that I see in comparison with the US. Most of the founders in US see developers as expensive talent but they fundamentally understand that without

6) Low probability of exit; more likely to go and be acquired: Self-explanatory: no one will run to build something that will end up acquired by some other tech company in central/western Europe or have a very low probability of exit. I saw cases where a scaleup was just afloat and meanwhile, the founder and the executive team were enjoying the nice things in Europe while underpaying people with illiquid, non-valuable stock

7) A secondary market is non-existent; most of the contracts do not have the right of first refusal. Once you have this illiquid asset/liability in your hands, it's almost impossible to get rid of it. Due to the cap-table structure here in Europe, there is no culture of selling shares outside.

These days you can ever hear folks asking questions like "do we really need to collect that" or "can we make it so we never have to process this bit of information" which, in retrospect, should have been the default for the tech industry.

Globalization in a nutshell.

> Live in Europe, invest in America.

And where does this leave Europe in the future?

Those are income-based and the quoted generational figures look at mobility from poor to median, not median (or above median) to rich.

I would like to see these figures for wealth. I have a hard time believing it’s easier to climb from the top 20% to top 1% of wealth in any European country vs the US or China. Wealth is a more consequential measure of socioeconomic status than income anyway.

The ranking the article links has the US below the nordic/germanic countries, but above most latin/eastern countries. As a European-American, that squares with my experience.

https://www3.weforum.org/docs/Global_Social_Mobility_Report....

raw data to save others the copy pasting i did into a spreadsheet:

{"Denmark": 85.2, "Finland": 83.6, "Norway": 83.6, "Sweden": 83.5, "Iceland": 82.7, "Netherlands": 82.4, "Switzerland": 82.1, "Austria": 80.1, "Belgium": 80.1, "Luxembourg": 79.8, "Germany": 78.8, "France": 76.7, "Slovenia": 76.4, "Ireland": 75, "Malta": 75, "Czech Republic": 74.7, "UK": 74.4, "Estonia": 73.5, "Portugal": 72, "Lithuania": 70.5, "USA": 70.4, "Spain": 70, "R Cyprus": 69.4, "Poland": 69.1, "Latvia": 69, "Slovakia": 68.5, "Italy": 67.4, "Croatia": 66.7, "Hungary": 65.8, "Bulgaria": 63.8, "Romania": 63.1, "Greece": 59.8 }

You don’t understand social mobility, it does not imply what you think it does. It primarily reflects the smallness of a country and wage compression. Countries that are neither small nor have wage compression, such as the US, will always show poorly by that metric.

You can, in absolute terms, dramatically increase your income in a country like the US and still be less “socially mobile” than a small income increase in a poorer country. People care about dramatically increasing their income much more than they care about being “socially mobile”. If you care about individual prosperity, social mobility is at best a secondary measure of success.

This isn’t a new phenomenon, the EU still struggles to produce genuinely innovative companies.

You mean in the US it's easier to exploit people?

Less experience overall (5+5 years), but I strongly agree. I think the main reason for this are the incentives, which halvarflake mentioned briefly in his post.. if you can directly affect valuation of your company (which in turn directly drives your own net worth through ISOs/RSUs etc), working hard actually becomes fun and rewarding. Take that away and a 10-3, 4 weekdays, 60+ days vacation, work life balance kind-of-job starts looking a whole lot more appealing in comparison.

Yes and now compare to Asia... one of TSMC's complaints about how hard it is to run a top-tier fab in the USA is that Americans don't work as hard as Taiwanese people do. So compare Taiwan to Europe and imagine the gap!

> Europe is light years ahead of the United States in that regard.

The available data doesn't support your conclusions:

> Until proven otherwise, I treat every cultural and regulatory difference between the two places as a contributing factor to that, rather than an obstacle to be overcome. The US is a nightmarish country to live in, unless of course your wealth is significantly above average.

Their richest country is slightly richer than our poorest state, even if comparing GDP per capita.

> Kind of like assuming that there must be something wrong with urban planning in Paris or Berlin, because there aren't any skyscrapers in those cities.

Skyscrapers are expansive, while Europe growth over the last 20 years has been only a fraction of ours.

> The US is a nightmarish country to live in, unless of course your wealth is significantly above average.

Then why do we have a net immigration from Europe, instead of a net emigration?

What extra evidence do you need to recognize that poorer countries, with fewer opportunities than we have, less infrastructure (skyscaper...), and an active immigration to the US are maybe not good places to live?

People voting with their feet is the only indicator I'd trust.

>of a state is to enable (all of) its people to live safe, prosperous, and dignified lives.

And for that one must be innovative, open for new things. The world ows you shit..

Ps: in my experience eastern Europe does significantly better in software because the old company aristocracy did not entrenched like that..

I’d say brain drain is the root problem. It’s hard to build a competitive ecosystem when the most ambitious and skilled people move away. From Europe, they move to the US. From within the US, they move to one of a few cities, most notably San Francisco.

Agree. This whole "EU is too fragmented/too risk averse" rhetoric in my opinion is insufficient to address why other advanced economies (Canada, Australia, NZ, Japan) also had regressions in the competitiveness of their tech sectors like Europe, and why US weaknesses don't seem to hold US businesses back.

In the end, it all boils down to whether you can get the $$$ to build at scale, and US businesses can get the most $$$ because US controls the world reserve currency (cf. Seigniorage). It's not surprising that the start of US outperformance correlates with the beginning of massive QE in 2008.

That's a fairly weak excuse, IMO. Neither Singapore and Israel has a dominant currency, and yet both far, far outperform EU countries of similar size.

The problem is cultural and, as a result, the regulatory environment.

The reserve currency/low cost of capital angle is huge.

The Euro is a major global reserve currency.

Why would it be hard for an american investor with "free money" to invest it in European startups, if there were no other reasons for them to be a worse investment?