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Comment by light_triad | Hacker News Reader

There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs, fear of being labeled a failure, working to live, focus on worker's rights, stability, and pensions, general risk aversion etc.

A big issue is there's a lack of mega successes high margin software businesses that pump knowledge and money back into the startup ecosystem. From a cultural standpoint, some countries like France are also obsessed with credentials and what you could call a notion of 'innate superiority'.

The end results is a VC ecosystem filled with young finance types that went to locally famous schools with little experience in startups that deploy small amounts with deal terms that would be considered absurd in the US.

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"There's many factors that make Europe less competitive than the US: small fractured markets"

This first one seems the largest hurdle w.r.t. startups. If you are a startup founder of say a ride hailing app - the total addressable market is much larger in the US for the same level of effort. If you want to scale beyond your home state (i.e. California) in the US, there are probably just a handful of different state/city taxes/regulations that need to be accounted for.

If you start in a country in Europe, you need to factor in:

- language translation of the entire app

- different country cultures/customs (i.e. tipping, wording of prompts and promotions) - even down to the naming of the app which might have a negative connotation in a different language

- prior to the Euro - differences with respect to currency, trademarks, patents, etc.

- entirely new country regulations and politicians that need to be "handled" - each in their own separate language which means a separate lawyer and lobbyist needs to be on staff for each country

- home court advantage - French probably prefer to support LeCab while Spaniards probably prefer to support Cabify

You are right in terms of the addressable market. Except in some niches, like pharma, it is too fractured. But IMHO, the biggest problem here is mentality. Starting a business and taking risks is not something the society encourages. That is what we have from centuries of rent-seeking aristocrats.

A good counterexample is Sweden, where class structure is flatter and imitating American trends is seen as cool. Unsurprisingly, Stockholm punches above its weight class in terms of startups, despite Sweden being a tiny market.

Low salaries increase competitiveness, while high salaries decrease it. That's one of the things you already learn as a kid when you live in an export-driven economy.

Even if your country is not particularly export-driven but you participate in competitive markets, the same effect may apply. For example, the US lost many manufacturing jobs to China, because American salaries were not competitive (low) enough.

Finland is sometimes said to be a country of engineers, for historical and cultural reasons. That doesn't mean engineers are paid well. On the contrary, engineer salaries are low and Finnish engineers like to complain how much more they would earn in Germany. What it does mean is that engineers have a higher social status than in most Western countries, and a lot of people want to be engineers. Finnish companies can hire good engineers with little money.

Finnish companies have traditionally been good at developing technology and bad at commercializing it. Explanations vary, from the low quality of business leadership to the lack of domestic capital; from the small size of the domestic market to foreign companies buying successful startups; from the cultural dominance of heavy industry to the culture of respecting laws and regulations.

This is an interesting post. Thank you to share your thoughts.

    > Finnish companies have traditionally been good at developing technology and bad at commercializing it.

Can anyone provide some concrete examples?

Polar and Suunto. Excellent technology, but they were never marketed very well and achieved only moderate success.

One was acquired by a Chinese corporation, the other is in financial trouble.

Suunto was a phenomenal company. We just got a guy from Suunto recently at my current workplace and he's incredibly sharp.

It's true, speaking as a US to Finland expat. The median CS grad I've met here in Tampere handily outclasses the CS grads I knew at Northwestern - which is no MIT, sure, but they're definitely no slouches.

Marc Andreessen once described reading a magazine as a teenager and seeing the "Midwest tinkerer" archetype of tech mogul, people who figure out a little bit of everything from scratch because on a farm you just have to do that to stay afloat and then bring that mindset into their SWE work and become minor legends wherever they go, and having this sudden enlightenment moment that shifted him from quiet nerd to confident striver. I spent my honeymoon year in northern Finland and came to the conclusion that the whole country is like that. Except, no one filled them in on just how absurdly good the margins on software can be when you throw business prowess into the mix. So many companies here been punching well below our weight class. (Okay, the very business-hostile nature of making a startup in the 90s/00s didn't help either - that's less the case now.)

I'm convinced it's more sociological than legal, although there are elements of both. My long term aim while I'm here is to be missing link between Finland and Silicon Valley. These guys are genuinely, still, much better than they themselves realize.

> small fractured markets, low salaries, high cost of living relative to wages...A big issue is there's a lack of mega successes high margin software businesses that pump knowledge and money back into the startup ecosystem.

Honestly, these factors apply to many countries outside of the US and stops them from being startup hubs as well. Singapore is in a similar position; despite its wealth and apparent connectedness as Southeast Asia's preferred location for company HQ, it didn't really succeed in kicking off a virtuous circle of winners helping fund new startups. It's pretty hard/costly to acquire customers in disparate small/nonwealthy markets, especially if they stick to established brands.

A related factor is investors' relative unwillingness to take on risk, because big payouts haven't been observed. So VCs all pile into the same few existing winners that are actually looking like they'll hit a payday.

At one point in 2013-2016 there was a flurry of support for new startups due to aggressive government funding grants and subsidies, but very few of these managed to cross the chasm and raise significant follow-on rounds. A few years later, the funding schemes were cut (due to a lack of observed successes) and the early-stage scene grew quiet.

It feels like only very big, integrated markets can support a dynamic startup scene (the US and China). It doesn't seem to happen without easy access to similar consumers/clients and the willingness of those clients to try new services and companies.

>There's many factors that make Europe less competitive than the US: small fractured markets, low salaries, high cost of living relative to wages, Brexit costs, fear of being labeled a failure, working to live, focus on worker's rights, stability, and pensions, general risk aversion etc.

In some Asian countries there is a thriving startup scene, so cost of living and working to live are not determining factors.

I would say the determining factor is the mentality. Europe focuses much on safety nets, welfare. Europeans learned that they should be content with earning a wage that allows them to live while working 8 hours a day, with enough time off, decent amount of holidays, a good work-life balance. They want state backed pensions funds, free or cheap healthcare, free education.

There are less Europeans willing to work on weekends than there are Americans and there are less Europeans working more than one job than there are Americans.

So Europeans focus more on living their lives while Americans focus more on Entrepreneurship. Their respective societies, cultures, history kind of teach them to behave that way.

It's not that a change in mentality is impossible, but it won't happen overnight.

In Romania there's a huge pool of very talented SWEs. What do they do? They either work for foreign companies, or for a local company working for foreign companies.

They mostly outsource their skill. There are maybe two of three software products made by a local company known worldwide.

This is the result of risk aversion and lack of capital.

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