Don’t worry, Europe: you’re about to get a new beginning
gigaom.com
gigaom.com
Goverments with regards to getting involved in Buisness do it in many ways, grants for research helps in a area that creates buisness's without directly doing so. Buisness's that are well extablished and come to a country can deal with goverments for TAX breaks, no startups/new companies can realy do that or leverage that area of govermentale assistance, they get breaks like all new companies.
As for the rest of the article is is realy just focusing lossly upon technology and offers nothing tangable to highlight things. If it had a interview with somebody who tried to setup a technology company in europe and then endedup going to america to do things as it was easier, then the article would have made more sence and of had a good example.
Given the author was involved with Messagelabs who's HQ is located in the UK and not the USA, then I would of expected more references to the direction the article takes. More so as that company would seem to highlight against the article as it was started in the UK, grew well, sold to Symantic for large pile of £'s and not $'s indicating a succesful startup in a country thats in Europe.
So again can see why I disagree on many levels with this article, sorry.
Just as Hollywood could only have become what it is in the US because it fits the (West Coast) American mentality, so too could a Facebook or Twitter or Instagram only come out of the American way of doing business. I don't see anything wrong with that and I've been able to do business here for almost 20 years. The trick is to not treat the environment here as something it's not and has no intention to become.
I find this statement hard to believe. There are many successful companies from other countries. What about F/T/I is different, and could only have come from the US?
Also, the whole data-mining / reselling business, which is "the backer of last resort" for most "free" startups in the States, is probably less developed over here (and is subject to fairly strict regulation).
The point is that the investment either has to be profitable within a predictable future, and then it's a business, or it must be significantly beneficial to the society as a whole, and then it's a state matter. I don't think this is universally recognized in EU (I think the OP confuses Europe with EU), of course, nor do I think nobody in US thinks that way, but general attitudes towards the statement that started this paragraph seem to differ.
The effect is that if you apply for e.g. any of the EU innovation funds, you actually have to come up with a business plan that states what are you doing, how is it similar to others, how and when are you going to ultimately turn profit. It's reasonable for VC to do the same.
In a way, the question of whether these companies are even "successful" at all is actually an important one to consider: they aren't terribly profitable (or are even operating at a loss) and, like many other Web 2.0 companies, are being held up by a promise that "with this many users, we will make money".
Yet, even when you reach the size of these companies--Facebook and Twitter are both larger than the entire possible network connected market in 1998 when these dreams were so horribly vivid--you still are in a horrible position of "ok, but how do we make money? we were told there was money :(".
Now, I'm not from Europe, but I get the impression talking with some people I know from there (who may just be biased or romanticizing) that this sort of insanity simply doesn't play as well in that market: that people think through their monetary decisions a little longer, and are less likely to be tricked.
Meanwhile, people in Europe really do seem to care more about information retention issues, and have passed numerous laws (sometimes ones that people consider quite over-the-top) that indicate a mindset in opposition to this "share everything about you as fast as possible so it can be monetized" concept.
So, if you are wording your statement or in any way reacting to this premise from a "how dare you insult other countries like that" mentality, you might should attempt to recast the position as "what about these other countries makes them better than us and less likely to waste their time building these things?".
(The same argument applies to the other example: many people consider the ideals that lead to Hollywood to be founded on a combination of narcism and rent-seeking; a ton of people go there and spend their lives in pursuit of something that will never work out for them, slowly violating more and more of their personal morals and boundaries in the hope of getting a little closer to their dream.)
People invest in services like Twitter knowing that there is a chance that they might not be monetizable, but believing that if they turn out to be, then the payoff will be enormous. So the expectation value of the return is still high.
Let's say I give you a box and tell you that inside is a social media company. You know that the achievable revenue per user could be anywhere from, what, a penny a month to a dollar a month -- two orders of magnitude of variability. You know that the achievable audience could be anywhere from, say, 10 thousand users to 1 billion users -- five orders of magnitude.
So if you want to determine how much you would pay for the contents of the box, you should try to learn about the potential audience rather than the potential revenue per user, because the former completely dominates the latter in the expected value computation.
Put another way -- how much would you pay to flip a coin where heads you get a billion dollars, and tails you get nothing? If you're allowed to purchase more than one coin flip, and the coin flips aren't too correlated, and you have access to efficient capital markets, probably close to half a billion dollars, am I right? :)
Yes, this Casino capitalism, we don't like it much.
...and by failing to recognize that all human activity worth doing carries risk, you have invented "bunker capitalism".
I am from Europe and I have no idea.
>Meanwhile, people in Europe really do seem to care more about information retention issues, and have passed numerous laws (sometimes ones that people consider quite over-the-top) that indicate a mindset in opposition to this "share everything about you as fast as possible so it can be monetized" concept.
Ok, valid point.
>So, if you are wording your statement or in any way reacting to this premise from a "how dare you insult other countries like that" mentality.
It was more a statement of sincere disbelief. We have quite a lot of IT companies in my country, including social networks (that obviously did not go global).
>what about these other countries makes them better than us and less likely to waste their time building these things?
If I understood the situation correctly, the builders cashed out quite nicely.
That is a very fair point. However, it is not always clear that the investors all did, and certainly not in the case of Facebook once it went public: a lot of people think that these companies are very well positioned to make tons of real revenue thanks to their large userbase (and, to be clear, I am not saying that they are "wrong": only that opinions differ, and there is some reason to believe that these opinions specifically differ in a general European mindset).
While we might use them (nearly) as much as Americans, we don't really believe in the utility of such businesses.
And we don't like to invest in hazy-ass ideas like those.
Now, something like Skype, is another thing altogether.
You will, though, still get health insurance on your pre-existing condition, which makes me way more likely to try (again) in Europe than in US. And if you do something that's generally considered useful there's even a chance for you to score some sponsorship money without a VC dangling off it, you just have to do the necessary paperwork to demonstrate you know what you're doing.
In general, even with the crisis and all, we're doing pretty well over here.
It could be that many of these companies are not doing sexy web stuff, but "uninteresting things" like machines and tools - with a lot of software to support it.
That works for certain problems - such as manufacturing and logistics (only in Germany can they make a motorway 1-way for 4 hours in a day because there's a big conference or football match on).
It's just terrible when you want to be innovative, and aren't sitting on the "top".
The Netherlands is totally the opposite, it's very flat, creative, and people spend all of their time arguing instead of Getting Things Done. Which explains why there are a surprising number of Dutch start-ups here.
The UK is a little in between.
France.. I understand from a French colleague that they can be amazingly creative and disciplined. Unfortunately the people are all to ready to strike if they think that they're not getting their fair share of the income. Now I don't understand why that's so different than the Valley - shouldn't they accept their fair share of stock, as per all good start-ups?
All of Europe suffers from the staffing problems: people are really expensive, and have a large number of rights. It's very hard to sack people, and when you do you have little choice as to who goes (last-in-first-out).
What's wrong with that?
In France, on the other hand, hierarchy is very strict, including within a team. Supposedly, this is caused by the French higher education system.
Taken together, the German and the French model often produce horrible failures when a French company tries to expand into Germany. If there is a problem to be solved within a team, the German Engineers/Workers will expect to hear the following at a meeting: "Listen guys, we have to change this and that, how do you think we could do it?". A French manager, however, is trained to walk into the meeting and say "We are now doing it like this.".
Generally, I would recommend to stop associating strict hierarchy with Germany. Things have been changing for at least 40 Years now and in many fields (probably not all however) the amount of hierarchy is "normal". Things like pulling rank are observed rather seldomly in the technical fields. If you want to see how these things used to be a long time ago, you might want to look at Austria.
Also, if you want a reason for why there is no SV-like feel to any of the German technology "hubs", I'd suggest risk-aversion as a reason. If you asked me what the most central collective character trait of todays Germans is, my answer would be risk-aversion. When you tell a German what he can gain, he will ask you what he could lose.
On a side note, be careful when forming an opinion about Europe if your only fluent European language is English. Things might look very different on the other side of the language barrier. When talking about Germany, for instance, even the most carefully written publication from the UK will have inaccuracies in it. The way in which todays Germany and the Germanys past are convoluted in public discourse in the UK will influence anybody living there, even if he actively tries to avoid it. On the other side of the coin, natives or expats that live in a European country and tell you about it also have narratives, usually heavyly influenced by how they want to see themselves and their nationality. You basically can't trust anyone.
Also, spot on with Anglo news coverage not really speaking for/ capturing the essence in continental Europe. E.g. current Anglo news criticizing northern European countries for 'austerity' measures (well, it's their money, so obviously they will not hand it out gladly).
It's an elusive topic with hardly any good information. Quite unusual to see such a balanced reply here.
I work for a French/German business, I live in The Netherlands but I'm originally British. I work daily with a team from UK, Germany, Netherlands, Denmark and France.
The German team is by far the most hierarchical. After living in The Netherlands for the last several years it really makes an impression working with Germans.
For example if there's a problem, and it's the responsibility of the manager, but the manager is away: nothing is done. No-one criticises bad management. They do what they're told. No questions.
In my experience of The Netherlands it's different: if someone makes a stupid decision, you go drink a cup of coffee with them and explain it to them. You don't hide behind organisational lines.
It could be a company thing: but I've worked with Germans in the past, and we had the same issues then (granted, this was back when I only spoke one language).
> On a side note, be careful when forming an opinion about > Europe if your only fluent European language is English.
Good point. I'm fluent in Dutch and English. Becoming fluent in your 2nd language changes your perspective, broadens it.
For me it has stopped me making assumptions: experience first.
Here is my take on what causes the kind of behaviour you describe: The flipside of German teamwork culture is that it is very hard to restore a dysfunctional team back to how it "should be" once the trust between engineers/workers and managers is lost. After a few instances of people who tried to contribute getting burnt and a few seemingly random but destructive decisions by management, people go into "bunker mode". This means: Serious ass-covering and everybody just doing as they're told (the term for this last symptom is "Dienst nach Vorschrift"). For practical purposes, this is identical to a strict hierarchy, as you will have to go through official channels to get anything done.
For a engineering team or engineering department, this can cause long-term damage. People in Germany are much more reluctant to quit a safe job and search for another than people in the US, so the disgruntled workers will just stay there and perpetuate the bad situation.
There is actually a valuable lesson here for anybody that comes into a managerial position within a German company: In any large organization there is a team or two that has these kind of problems at any time. Hovever, if you get the feeling that this is the rule rather than the exception, the culture of that organization is dysfunctional and in nine cases out of ten that organization is also underperforming.
Ever been to Berlin lately?
I have founded companies in Ireland & never encountered any bureaucracy or red tape which prevented us from following our plans or accessing markets.
In fact, one of the governments business development agencies gave us free rent in an incubator for 2 years, connected us with business mentors, used its connections to setup some key introductions which led to our first sales which really helped get the business off of the ground. All for no commitments or equity stake.
The point where I left for San Francisco was when I realized that no one there realizes that there is a causal link between wealth creation and having wealth. They don't know they have a problem, or even should they suspect it, they don't know what causes it.
On a recent trip back I haven't noticed any change in that - so even if they wanted to improve something, they wouldn't know what or how. The economic crisis provides a convenient excuse for all problems, not an incentive to explore what's wrong.
The easiest argument against Europe for startups is sadly on an individual level: Statistics. If you're one of the best - but not the best - entrepreneur in Europe (500 Million People), you know that almost no one more talented than you ever succeeded. And almost no one less talented either. In San Francisco, both people more and less talented succeed all the time.
So statistics. It's far more pretentious to think you're so much better than the best among 500 million, than to think you'll do well among the 8 million in the Bay Area.
I can't tell you exactly what's wrong with startups in Europe. It's no one thing. It's thousands of things.
Unless you've experienced the Bay Area, it's probably impossible to anticipate what you're missing. I didn't. The stuff you get in the Bay Area is stuff that doesn't transfer over the internet - so just by reading hackernews and techcrunch you have no means to figure out what is or could be different.
I think Paul Graham's argument (paraphrased) that all startups die by default, but in some environments they sometimes get saved, might come closest in describing what's happening.
I think the statistics argument really is the most solid one (though admittedly self-fulfilling, because it means the most driven entrepreneurs leave). Unless something fundamentally changes, any improvements to the ecosystem will have to be gradual over a long time.
You can put a narrative spin on it if you like, pin it on West-Coast entrepreneurial spirit. Everyone likes to believe that their kind are a cut above, after all.
But why did it end up being in Northern California? Do you think that was pure accident? Could it have as easily been Tokyo? Frankfurt? Tehran? Oxford?
Because at the time it started happening, and for other reasons, the US was the top dog in the world economy?
The 2050 Silicon Valley will be somewhere else. Maybe China.
Especially in the area of mobile payments I see a huge market potential because of the unique structure of the EU. If you travel through Northern Europe for example, you have the Euro in Finland, the Danish Krone in Denmark which is pegged to the Euro and then the Swedish Krone and the Norwegian Krone... A mobile app that would allow you to pay anything directly in Euros without having to convert into local currencies all the time would have huge value for the tourists - and the people selling stuff to them as well. With harmonized payment infrastructures and harmonized legal regimes this should be trivial to implement...
The United States does rank higher than any European economy (which surprised me) in the aggregate ranking, there are categories where it is well behind.