European entrepreneurs: Les misérables
economist.com
economist.com
As an American living in Denmark, I would personally prefer to bootstrap a business here rather than in the U.S., though it does depend on what kind of business. The main advantage to doing it here, imo, is that the healthcare story is solved, though maybe that'll be better in the U.S. after PPACA comes into effect in 2014. Another plus is better government support for small businesses: grants are available, and you can get some cheap early part-time employees by participating in subsidized internship programs intended to "upskill" people on unemployment. The main downside is high wages (though that matters less in tech, where wages are very high in the US, too), less access to venture capital if you're going the non-bootstrapping route, and some general problems from not being in the U.S. (less media visibility, problems with payment gateways, etc.).
It says the average time to discharge debt in the US is less than a year, so that the vast majority of Europe (by number of countries and by population) takes much longer. The existence of a pocket of 5 million people in Denmark (basically a large city) where it is less hardly diminishes the generalization.
> The main advantage to doing it here, imo, is that the healthcare story is solved, though maybe that'll be better in the U.S. after PPACA comes into effect in 2014.
This comment sounds more motivated by politics than the actual business of start-ups. Healthcare is a significant cost for businesses in the US, but the difficulty of providing insurance for employees is hardly even discussed here around HN as an important consideration for start-ups, compared to, say, finding capital, good managers, compensation schemes, entrepreneurial spirit, government regulation, and so on.
That's not my impression of HN! It comes up fairly regularly, and is cited as a problem by a number of startup founders. Among others, tptacek has mentioned in a few threads that providing founders/employees with healthcare is a significant problem for early-stage, small companies, especially for bootstrappers, and for people trying to freelance (it becomes easier if you're large-ish, where you can negotiate a group plan).
I suppose it's a political comment in the sense that anything in this space is political, but my personal interest is just in somehow being able to work for myself while also having health coverage. I'd like to move back to the US at some point for cultural/family reasons, and the problems with the individual-insurance market are one of the things holding me back at the moment. I hardly care which kinds of politics fix that problem, as long as a fix of some kind appears...
Since this discussion is primarily about entrepreneurialism in Europe, I'll note that most, if not all, of the major economies in Europe have socialised healthcare systems. There are also, at least in the UK, various rules that apply to employers in general but have built-in limitations or outright exceptions for businesses with only a small number of people.
There certainly are hurdles to taking on new staff here, but often it's more about getting rid of employees rather than day-to-day overheads while they're employed. In particular, the difficulty of firing even someone who is severely underperforming is notorious in many of these economies, which makes the risk of taking someone on in the first place proportionately greater.
How did that happen?
Also, would love to meet up.
May e-mail is in my profile in case you, or anyone else from the Copenhagen area, wants to have coffee.
In the US, Denmark is often taken as the perfect example of socialism done right. But people leave out 2 very important factors:
- Denmark has an abundance of national oil reserves, and exploited them very cleverly. (This is a big advantage to less fortunate nations)
- Denmark is much stricter (smarter) when it comes to taking in immigrants than France/Benelux
I'm finn and I would definitely want to start a business in US rather than in europe (or in finland), the advantages are enormous - much better access to funding and very large homogenous potential customer pool being the 2 most important issues.
That said, I do really feel the 'good enough' vibe here in the EU; most people I talk to who have companies (just started or older) have the 'it's good enough this way' attitude. 'We' generally don't want to be billionaires or even have billion Euro companies. Once you are making insane profit margins and have a fat company bank account, all employees are happy, growth is stopped and the goal becomes to sustain that situation. I know great entrepreneurs here who started out with crazy plans; once hitting that point (and that can be any revenue mind you; for some companies it's E10 million/year, for others it's E100 million/year, but rarely more than that) they find it good enough. I think a lot stems from that feeling of not actually wanting to be 'the biggest', just wanting a stable, sustainable company producing profit margins year after year to lick your fingers by.
Edit: read the comments; 500 biggest companies in the world, 132 US, 166 EU and France has more than the UK. Didn't check those things, just copying here for completeness.
It might take another 50 years, but we, eventually, will become a single union. This are interesting times
Now I don't want to say we all have to speak English, but it's, economically, the logical language to go for (http://www.andaman.org/BOOK/reprints/weber/rep-weber.htm) and entire EU youth are watching US movies + US tv shows and thus US culture 24/7. I hear Spanish kids making translated jokes (from dubbing) from American shows. Economy wise it would make sense to just make the union speak something which can be used in international business. And then of course the things you speak off as well to make it 1 union.
They have a funny accent though.
Well... not enough labour mobility without a common language and without labour mobility no optimal currency area. Somebody should really have thought this through...
Similarly, virtually any company in Europe that has more than one accepted work floor language, has $NATIONAL_LANGUAGE and English. And any company where the work floor language is not the national language, it's English.
Really, this battle has long ago been won. Only some archaic government institutions like the EU itself pretend that languages other than English still make a chance at becoming the lingua franca of Europe. Whether or not the UK currently is in a Euro-mood does not influence this at all.
Oh, and you forgot about Ireland.
That said, I agree with the comment about many in Europe generally favoring the "good enough" way over the "home run" way of thinking.
- Lack of "drive". Young people mostly want to find a nice job and that's it. In my perception this is less in France, where people may want to "kick ass" more (historical pride maybe) and maybe in the UK or Germany
- People are 'naive', and by that I mean the sentiment "this is the way it is, don't bother changing". Since everything pretty much works, it's difficult to see faults (or maybe faults enough to motivate a change)
- People in Europe need more hand-holding. They are usually more theoretical as well instead of "go there and do it", something is much stronger in the American continent (which goes from Canada all the way to Uruguai/Argentina/Chile in the south)
- Labor laws, difficulty in getting talent outside of the EU (depends on the country really - still, usually easier than getting an H1B)
Also, every country has its quirks: French cannot speak english to save their lives (usually)
In the end, Europe has a lot of opportunities, they have only to think outside of the box. But don't be so quick to count them out, they have literally thousands of years of experience.
This is an interesting angle.
Are less well developed countries better for entrepreneurs? More holes to fill? Anyone have anecdotal evidence either way?
There are holes to fill everywhere.
what most people don't realize is that the time of uninterrupted careers and job security is over, and so even if you want to be just an employee, you're still essentially an entrepreneur. You'll still have to do constant R&D to keep your products (job skills) current, and do sales to get the next job.
This way you may not have to invest into things and get into debts beyond typical mortgages or car loans, but you'll also lack the potential upside of being in business for yourself.
But the constant renewing of abilities is more a characteristic of IT. In the majority of professions this is much less pronounced
Meanwhile, in industry, there are jobs available, but often not as actual employees. Companies will bend over backwards to hire young people on a "permanently temporary" basis, i.e. perpetual, full-time, single-client freelancers. Legally, this tends to be a very grey area, but if you complain they'll obviously just not renew your contract. So nobody does.
The decrease in job security is probably also contributing to the "brain drain": if salaries are higher elsewhere, and there's no longer a security advantage to staying at home, then why not move?
This is definitely no longer true in Austria. For the first couple of years of their career, young teachers are usually hired on a contract basis. If they are not needed the following year, their contract is simply not renewed.
Together with the infamously bad ability by Austrian schools and school administration to estimate demand for the following years, I've heard horror stories of teacher who didn't know at the end of August whether or not they will have a job in September.
That said, at the moment there seems to be a shortage of teachers, caused by the attempts of the last decade or so to steer people away from becoming teachers (because we have too many ...). So with a decent choice of subjects it shouldn't be too hard to find a job.
I guess I can try comforting myself by stating that it says "In Europe", not "by Europeans". :)
If you look at big business, say the Fortune 500 for example, these organisations are typically much more high profile than their smaller brethren, but there are still... well, only 500 of them. And while the list includes giant individual employers like Walmart, those businesses collectively still only employ something like 20M-30M people depending on how you count. Similarly, while your revenues are probably $5B+ if you made the 500 this year, plenty of the businesses towards the lower end of the list only made perhaps $20M-30M in profit, and one or two didn't even land a profit at all.
Depending on whose definition you take for the maximum number of employees, companies of up to 100-300 people might be considered SMEs. At that point, you could certainly be earning profits that compete with the lower end of the Fortune 500, and there are a lot more SMEs out there than industry giants.
And that's just the most basic, raw economic data about business performance and employment, without even considering cultural differences and efficiencies and innovation and numerous other factors that make smaller businesses important to the wider economy.
There are only 500 F500's because the F500 is the top 500 companies. It feels weird to have to point out that there is in fact a 501th company. You probably haven't heard of #500, but #499 --- second from the bottom of the list --- is KeyCorp, one of the country's largest regional bank chains.
I was just trying to demonstrate that although "big" businesses tend to get a lot of attention, they don't actually employ a large proportion of the working population, nor do they necessarily make much more profit than a large SME. In other words, really big business isn't the driver behind a successful economy, something else is. I contend that the "something else" is SMEs.
"Small firms represent 99.7 percent of all employer firms; employ half of all private sector employees; pay 44 percent of total U.S. private payroll; create more than half of the non-farm private GDP; hire 43 percent of high tech workers..."
I think Silhouette has got the details pretty wrong, but if he had said that SMEs were as important to the U.S. economy as BigCos, and especially the Fortune 500, then it looks like the SBA agrees with him.
[1]: The data between businesses with no employees and businesses with less than 500 employees is mutually exclusive; you can't use those carts to make any points about the contributions to the economy of businesses with less than 500 employees, including those without employees, because that data is missing. "Annual Payroll" is a pretty bad data point to use for judgements about contributions to the economy; "sales or receipts" would be better, but that's only available for all employer firms, with no further breakdown, for some reason. All in all, pretty useless here.
[2]: http://web.sba.gov/faqs/faqIndexAll.cfm?areaid=24 -- seems to be down right now, try the Google cache: http://webcache.googleusercontent.com/search?q=cache:Wv_OfwD...
How so? All the specific figures I quoted were lifted directly from mainstream reporting of the Fortune 500 for 2012, starting with Fortune's own web site.
This doesn't make much difference to my argument anyway. Whoever's figures you take, it's clear that in raw numbers SMEs are a significant contributor, at least on par with big business. But if we're talking about what really drives an economy and keeps it developing, I would argue that a disproportionate amount of the innovation and a lot more flexibility is found in SMEs. BigCos are good at industrialising and achieving economies of scale, but they aren't particularly good at innovating or creating new markets. All I'm saying in this thread is that SMEs don't sacrifice their own direct contribution to the economy at the same time.
Census offers statistics on which employer size brackets employ how many people. ~41MM people in the US are employed by firms with fewer than 100 employees, ~72MM people are employed by those with more than 100 employees. In the smaller company bracket, more people are employed by companies with between 20 and 100 employees than at smaller companies.
All the Fortune 500 tells you is the size of the 500 most profitable companies. And my earlier point was simply this: the "501th company", which just missed being included on the F500, is presumably gigantic; KeyCorp just barely got onto the list.
I'm sure the US has more people who decide to "roll the dice" and rapildly end up either spectacularly successful or spectacularly flaming out; I've seen far less evidence that there's anything wrong with a culture where slower but more consistent growth is rewarded.
The graph we really need is not "number of big companies founded at given dates" but rather "number of companies which will ultimately become big founded at given dates".
The other thing we in the software world mustn't forget is that we have marginal costs of approximately zero (or should I say picodollars?), which makes smaller companies disproportionally more competitive. The only advantage of being big in software is bigger leverage (which is usually in direct competition with agility) whereas elsewhere economies of scale are pronounced.
And regarding "number of companies which will ultimately become big founded at given dates":
I'd love to see some numbers on companies that are big but got there slowly. I suspect it doesn't happen, leaving aside artificially competition-stifled markets such as state-blessed monopolies. Given the nature of exponential growth, I'd be surprised if any of those Global Fortune 500 had no period of fast growth.
Slow growth is also likely to be correlated to inability to react to disruption. So companies in <high-growth country> would necessarily out-compete companies in <steady-growth country> in a free, globalised market economy.
Yes, but not a meaningful one. For the purposes of this discussion, "slow growth" is anything under 100% per year.
I'd love to see some numbers on companies that are big but got there slowly. I suspect it doesn't happen
Interesting. I don't have any data, and I'm failing at finding any right now, but I think of Coca-Cola as being a company which reached its current size primarily through steady growth. I'm sure there are large pharmaceutical and chemical companies which have had slow growth curves -- while any one product may have a sharp growth curve, the company as a whole won't. Insurance companies and banks also tend to grow slowly, and of course Berkshire Hathaway is an example, with a highest ever Y/Y growth rate of 59.3%.
I suspect there's a certain amount of observation bias: Companies which grow slowly are boring, so we don't think about them.
It's the welfare state and related systems. But not a Ron Paul style get rid of the lot, we should recognise that unemployment and welfare payments make a huge amount of short term sense. We do not want a skilled worker made redundant to lose house and family becaause it takes three months to find a job.
But we should look carefully at long term welfare payments (long term unemployment, chronic disability and especially retirement). Just when we should change the expectation from how many jobs did you apply for, to how many customers did you advertise to is important not only for an entrepreneurial society, but a sane and fair one.
Look for work for three months, then look to create a company, and welfare will support you.
Most importantly I would change the focus for those under 24, whose first encounter with welfare (pretty much all school leavers and graduates in this climate it seems) should be a positive creative experience, not a dismal on the scrap heap one
The good parts are a general vibe that the unemployment system is less about welfare, and more about matchmaking. One structural help is that it's run quasi-independently by several non-governmental (though state-subsidized) organizations. Each of these organizations, an "a-kasse", focuses on different areas. For example, I'm a member of one that focuses on researchers. This means they can provide more specific advice to my situation, and also means they develop relationships with both sides of the unemployment puzzle: companies in relevant areas will come to them looking for talent, and the a-kasse will try to connect unemployed people with seeking companies. So they see themselves not only as an unemployment agency, but also as a recruiter to some extent. If you can't find a researcher specializing in data mining, for example, you might go to the researcher "a-kasse" and ask them if they can hook you up with one. This also makes the a-kasse much more informed about what the job market in their area looks like, which in turn guides their educational programs.
Initially it's fairly self-serve, with an assumption of good faith that you're just temporarily unemployed and doing your best to fix the problem; there are offices where you can get assistance, or you can get it online, with things like resumes or job listings. Then, if you're still unemployed after some time, it becomes more mandatory, where you have to go in regularly, so they can try to debug why you're still unemployed, and what could be done to fix the problem. That might include assistance finding/applying for jobs, taking training courses, or other things.
Past that, if the problem is lack of demonstrable skills or work experience, there's a quasi-paid internship program: a company will "hire" you for 3-6 months, but you remain on unemployment, so are almost free to the company, but they do have to pay your pension contribution (this gives the intern a modest financial benefit, but mostly serves to make sure the company takes it at least a little seriously, since the intern isn't 100% free). The hope is that that will turn into a regular job, or at least gain you enough skills/experience to get a similar job elsewhere.
If all that fails, after some years, then it becomes more like a regular welfare system, but this up-to-2-years "a-kasse" system is much more geared towards assistance/adaptation/upskilling.
Sounds interesting approach though.
[1] http://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_g...
Economic growth per person US = .5%, EU 1.4%.
http://krugman.blogs.nytimes.com/2012/09/25/more-coulda-been...
So a lot of the "growth" is just the economy recovering from the austerity/crisis-related policies. The Eurozone's real GDP contracted 5%, so even if we then outgrow the US by 0.5% every year it will still take us ages to catch up.
Come on Economist, money lending at rates the Kray twins used to do is not an indicator of a functioning entrepreneurial society
Other than that usual Economist quality
Secondly, if a week before payday I lend you fifty quid, and you pay me back and buy me a pint to say thanks when you get paid, that's a higher "APR" than Wonga charges, because APR is meaningless for any loan of less than a year.
A quick look at their site - if I borrow 400 quid today and pay it back in one month (seems short term to me) I pay back 159 quid extra ontop of 400!!
And with all due respect I borrow 50 and pay it back a week later costs 9.50, so if you don't mind I am not going drinking at your pub. :-)
I've been starting businesses in two very different European countries, and lived in a third, just like I've been living in America. And I certainly don't believe America is equipped with better laws for entrepreneurs or with a more risk encouraging mentality.
And I certainly don't believe America is equipped with [...] with a more risk encouraging mentality.
While this is certainly not true for all of Europe, I grew up in Austria, and when I visit, I'm struck by the total apathy towards entrepreneurialism, especially amongst the younger generation. There are of course exceptions, and they tend to congregate, so you notice them more. But the vast masses still seem to believe in the "cushy job for life", despite most of my classmates from school not having found it, 10 years after finishing high school. They find it completely unfathomable why you could possibly want to start a company.
It's all a matter of choice: do you want REALLY good conditions for the top 10% or decent conditions for everyone?
Economies like China, the USA or Canada favor the former, lots of European countries the latter.
Europe is a big continent and taking Germany and France and extrapolating it to the rest of Europe doesn't always work.
I think a lot of this stuff is due to the attitude of the general population towards entrepreneurs. If the only question that matters to people is "Have you made any revenue yet?" there's probably not much hope for Europe ever catching up with the US in terms of new fast-growing tech businesses.
(I'm hoping the UK is something of an exception, but I'm not really sure. Lots of people here are still very sceptical or pessimistic about new tech companies, especially very small, innovative ones.)
This is because every party involved who wants money from that bankrupt company stands to gain if they can show that there was malpractice going on. If this can be shown, the shareholders (if they have more than 4.9%) become liable personally and then there is something to get (while usually, after the taxes visited the carcass, there is nothing left). This is why sometimes it takes a long time to resolve.
I laugh at the media-fabricated 'Euro crisis' and the 'Economist'.
You can only build so many empty cities. Or one would think.
No.
BTW, sorry but "There Is No 'Euro Crisis'" http://online.wsj.com/article/SB1000087239639044446430457753...
2.) Even if the EU abolished their unemployment insurance programs and made labor unions illegal, you'd still see startups moving to SF, just for the network effects. The legal system isn't the only factor in producing startups. PG wrote a essay about this.
I stopped reading there. I must be living on another planet entirely from whoever wrote this article.
I don't agree that the various EU governments are starting to "get it". It's the entire contrary for a lot of countries.
There are very, very few, say, EU success software stories (SAP! Yeah. German. Not french). And it's not just software and that is for a very good reason.
In some countries like France and all the other socialo-communist EU countries people are not just looking with a very bad eye entrepreneurs who failed: they're also and, most importantly, developing a hatred of people who work hard and a hatred for the fruit of hardwork (they hate both success and money, success and money being related but not identical).
So there's this entire mindset which is ruining, for example, the France economy and it's ruining it fast. Rich people are leaving the country (Belgium, Switzerland and the U.S. all being destinations now seeing more and more rich french persons coming).
The unions here are way too strong and SMEs and independents are seen as people you should milk as much as you can.
And for those who "succeed", don't you dare to buy a Porsche because you'll then be seen as an "ennemy of the (socialo-communist) state".
Honestly it is sad but France is deserving what it is getting now: recession, SMEs going bankrupt, big companies delocalizing, rich people fleeing, they're debt skyrocketing (91% of the GDP), the GDP that shall fall (0% Q2 growth and now a recession that shall start), the loss of its status as the world's fifth biggest power (should be in 6th place by the end of Hollande's mandate).
Socialo-communist countries spreading the hate of succesful people can only go one way: mediocrity.
France and it's crazy wellfare system is going the way Greece and Spain went. This is only the beginning of the eurocrisis and it shall get uglier by the day. Unemployment is going to skyrocket. In the end debt shall need to be monetized and we'll see a massive drop in the value of the euro.
Because what we're seeing now is a joke compared to what is coming: how is France going to save its sinking economy without investors, without entrepreneurs and without people willing to work?
Want an example as to how crazy the socialo-communists are in a lot of European countries? In Spain in 5 years 210 000 SMEs went bankrupt. Unemployment is sky-high and Spain is probably going to default (it's debt is "low" compared to its GDP but its GDP is falling and its debt is taking +9% per year... It's only a matter of time before Spain becomes the new Greece). So 210 000 SMEs bankrupt: can you imagine how many people previously unemployed are now without a job? And you know what the public servants do? Public servants who have a friggin' job working for the state do protest in the street because they had a 3% cut on their salary.
A 3% cut and they protest in the street. While a lot of people who previously had job working in the private sector don't even have a job anymore.
That is why all these socialo-communist state are fcked. It's over for them. The "sense of entitlement" of the people working for the state is way too important and the part of the state in the economy of these socialo-communist countries is way too important too. There is no way out.
And that is just today... What about tomorrow?
Well, entrepreneurs are way less prone to create a gig in France (or in Spain). They're moving to greener pasture. I've got friends who created companies in the U.S. (SoCal) and in Asia (Tokyo). Why would they stay here in France?
Why would I* stay? You see, now I may be pitching soon: I'm frequenting the local "startup" scene but I already have contacts outside Europe. I'm (of course) willing to move: should I succeed in France I'd be not only milked like a cow to pay for the 56% of the french economy that is directly directed by the state (that number only went up and up: France shall soon default, just like Greece, it's only a matter of time) but I'd also be regarded as a greedy rich bastard responsible for some perceived slavery (which, ironically, is of course the fault of the socialo-communist state and the way-too-greedy state system).
If you live in the U.S. I'd seriously have you consider to not vote for Obama: the public debt of your country never exploded as much than after five years of Obama. That wellfare system and the sense of entitlement it creates shall lead to a socialist country. This has always been the plan of leftists: create a gigantic number of state jobs and promise more and more wellfare, to make sure to get reelected. Once you're too entrenched into socialism the only way out is default.
And then once the nany state defaults you'll get tyranny.
Oh, sure, for a few years your shiny healthcare system shall look nice. And then the discfonctional system shall be hidden under more and more debt.
And then you'll default, just like Greece. Just like Spain is going to. Just like France is going to.
It's not that I'm not a good person. It's not that I wouldn't want everybody to get a good healthcare system. But the only thing socialism leads to is poverty for everyone, besides the leaders. Don't forget where you're coming from and what made your country so great.
F*ck socialism.
/rant off
FYI, this is where you lost me.
But I'm sure you'll find a "socio-communist" reason for e.g. the Spanish real estate bubble. Silly communists and their real estate speculation!