I don't understand the trend from these last years of trying to copy successful model by importing just the emergent part and ignoring all which is hidden.
We have the example of the attempt of a French Silicon Valley [1] while there is no incentive for entrepreneurs to build a company (sure, after some hassle, you can still set up your start-up, but if your idea gets success, your best hope is to be bought by an American company like Google). Another more recent example is the "cloud à la Française" where the government catch the buzzword for cloud-computing and wanted to have its own Amazon super-star company. Basically, what they did is try to make a big company out of thin air [2] while just ignoring all that already existed in the domain.
The current party detaining majority is the Socialist Party (PS) so the idea that innovation comes from the state and individual action is just a burden might be due to this situation, but I doubt it would have been a lot better with the other major party (UMP, more right-wing oriented), who has been in majority most of the time without improving the administrative maze of entrepreneurship.
I don't know about much the other countries of Europe (although I have heard that it was not so much better) but the situation of France is very frustrating.
>I don't understand the trend from these last years of trying to copy successful model by importing just the emergent part and ignoring all which is hidden.
It's not a recent trend. Frédéric Bastiat wrote about it in 1850 [1].
Humans have an easy time understanding that something is of human action and of human design (e.g., flipping a light switch turns the lights on), and at recognizing that something is neither of human action nor of human design (e.g., today's weather). We are particularly poor at recognizing things which are of human action but not of human design (e.g., the market).
Recognizing emergent phenomena (i.e., spontaneous order) takes training/practice (and our language, which emerged within the context of humans' poor grasp of emergent phenomena, isn't great at expressing it). Further, politicians are incentivized to treat every problem as if it is in the first category, to treat symptoms as causal knobs to turn (e.g., price controls), thus placing themselves in the role of designer. To admit otherwise is to admit the inefficacy of politics (or more accurately, the state) to "solve" the problem. And with negligible exception, people of every political stripe refuse to accept that truth.
As someone from the periphery of the eurozone I get the impression that France is like concentrated Eurojuice generally that embodies all of the vice (and many of the virtues) of europe generally.
Being from Germany, I want to add that in some (good and bad) ways, Germany is more like Europe than France.
1. Decentralized. Germany is 16 states yelling at each other, while France jumps when Paris calls.
2. Lots of high-tech, no Silicon Valley. There are _a lot_ of successful software companies in Germany, but most are set up like traditional companies, not startups. Also, they mostly serve pre-existing niches, such as the financial industry around Frankfurt. The same holds for Europe.
3. Unsexy. Yeah. While I don't actually care much about the public image of Germany, I am saddened that the European idea has lost its appeal and continues losing it. I mean, what could _possibly_ go wrong?
All in all, I'd say the hodge-podge muddle-through way of things you see in Europe comes more natural to Germany than France.
I think germany lent the eu its regulatory approach so its definitely got that in common. France's chaotic mix of abstract ideas (egality..), arsenal of widely divergent interpretations of them and populism is closer to the eu's politics.
Germans build roads to have road. The French build roads as an expression of some confusingly abstract political idea.
"Germans build roads to have road. The French build roads as an expression of some confusingly abstract political idea."
The common theme is always who is to be f*ed and pay the bill, the taxpayers, and who is to get the profit and benefits, the big, connected, private interests.
All true thoughts, although I am happier the "European idea" (which in your case I take to mean as a federated superstate, do correct me if I am wrong) would be replaced by a looser, EFTA type arrangement.
I mean, wouldn't that lead to more decentralization (and thus innovation, and competition, and yes, yelling at each other but that's how you get the best ideas, not "the center declares an idea and everyone else implements it")
Yes, I'm one of those superstate people. I understand where you are coming from, but am much more pessimistic about the viability of a EFTA-type agreement. In fact, I'm almost convinced that the EU, as it is today, cannot survive if it is not further integrated.
Both these statements of mine hinge on my observation that the strength of a political entity can only be determined at a time of crisis. For instance, the internal economic imbalances of the EU will always make some countries overall net-winners and some net-losers with regards to trade balances. This will inevitably lead to crises.
The USA have just as much imbalance between their states as we have between our member states, but they have one thing that we don't: Federal redistribution. If you live in Alabama and recieve social aid, get farming subsidies or are employed by the military, that is paid for by the whole, not just by Alabama. So it doesn't matter if Alabama is bleeding money in all directions.
In the EU, this is not the case.
I would thus expect an EFTA-EU to fracture or implode when the economic interests of the "big" countries are not aligned for a prolonged period of time. Nobody wants to live as a net-loser in perpetuity.
Also, the EU actually has built-in decentralization! If you look at the contracts, there is ample mention of the "subsidiarity principle" and when you take a look at the legislation, it becomes clear that they actually mean it. There is even some grumbling from the highly-centralized EU states, such as France or Poland, about the increasing significance of the sub-national organizational structures (regions).
The democracy thing could be fixed, if the will was there. Assuming, hypothetically, that things continued to go the way they have gone for the last decades, the EU actually will become progressively more democratic. After all, the EU parliament only came into the power it currently has with the Lisbon treaty.
If the political will to unite Europe dissapears, the EU will collapse like a house of cards, for all the institutions and legal frameworks it has right now can't hold it together alone.
"I'm almost convinced that the EU, as it is today, cannot survive if it is not further integrated."
Small south eu country here. I totally agree with you. And you make good points showing that.
The only thing I disagree, is that I think eu is moving towards a less democratic way (if it survives). Not talking about the eu parliament, but about who it sides with in the economic crisis. It sides with big economic interests, which are at wrong, instead with the "eu idea" and people.
True, they haven't really helped much in the economic crisis but if I compare the European Parliament to our Bundestag here in Germany, I can tell you that things could be worse.
A lot.
Maybe you heared some things about how the German Bundesbank is using its position in the ECB governing council to push its hard-Euro no-default there-is-no-problem stance. The Bundestag is a Parliament in which three quarter of representatives believe every word (well most words) that the Bundesbank says.
So the European Parliament is not that bad by comparison.
No, I didn't know that. Thanks for the info. ..imo, hard euro with no common budget/redistribution/stronger integration, is the death of eu. ..Btw, given what you said, and your local knowledge, do you think it's possible that germany is positioning itself for a possible end of the euro, and return to the deutschmark? Both in a "general feeling" and in more direct talking about that?
Absolutely not. It is important to understand that, even though it might seem different from the outside, the German political elite believes they are doing "the right thing". The problem is that, even though evidence to the contrary is mounting, they are intellectually invested in what they advocate so much now that a change of course has to be forced on them.
Nobody here (except some far-right fringe people) is talking of a return to the D-Mark and I'd even say that no government would survive it. If things got so bad that the EU takes serious damage (for instance abolishing the Euro) and it was obvious that Merkel and her deputies were responsible, they would be kicked out of office.
Here is why: If I may generalize about "the Germans" again, you must understand that our history is burned into our memory, not only because we repeatedly visit it in school, but also because nobody's family was left untouched by the war, the other war and the guilt.
Most people here see the unification of Europe as the only possible way to "break the spell" of perpetual war. And yes, the primary concern is still war, not economics or free trade or all that other stuff growing on top.
Consider this: While it is perfectly possible that a handfull of equally-sized states can coexist peacefully with each other for quite some time, the moment that there is a war, there will always be a next war. I mean 1971 gives us 1914 gives us 1939 and then bam! Irrevocably wedded to France, peace for 70 years. This is how the EU is seen here.
Even if you might find it unlikely that the quasi-demilitarized Germany of today would participate or even start a war, look at what's going on in Hungary. That shit could eventually boil over and start igniting if the EU doesn't get its act together.
And even there we have the perpetual war machine! The current problems of Hungary are largely entangled with how Hungary was partitioned up after ... WWI.
EDIT: I might add that I personally am a somewhat extreme adherent of "the European Idea". However, my descirption of how the EU is percieved as the guarantee for peace does hold for the general population. Interesingly, most young people don't even realize how fragile (and young!) the EU still is.
"3. Unsexy. Yeah. While I don't actually care much about the public image of Germany, I am saddened that the European idea has lost its appeal and continues losing it. I mean, what could _possibly_ go wrong?"
Coming from a small financial crisis stricken country at the periphery of europe, I would like to tell you this:
There is no "germany". And there is no "those lazy leaches". You have swallowed the bait full. You, are not "germany". And I am not "whatever". Generalizations are the root of all hiding. Your interests are not the same as deutsche bank's interests. Mine interests, are not the same as the corrupted (among others, by german interests) local politicians.
They say "germany" to make you think you are one. They say the "lazy" to give you an external enemy. Creating external enemies, is perfect for hiding your industries' and bankers' fing you as well as me. If you live/work in germany, in general, your salary is artificially lowered, to f you, and indebt other countries, to serve the top industrialists and bankers. You pay for the debt, and then you and me pay again for the payment.
I think you overinterpreted what I wrote there. In fact, I generally do not feel very German at all. Having lived and travelled all over Europe and speaking a few languages, I noticed a few years ago that those people from Berlin or Hamburg or Munich are as similar or dissimilar to me as those from Madrid or Vienna or Coventry or Rome or Porto.
Just recently I wrote a comment in a German blog where I advocated the removal of the "Germany" layer because it complicates copyright so much. Seriously, my glorious Hessen and above that: Europe!
From the outside we here in Germany seem so homogeneous, but there are a lot of cultural differences within Germany. And believe me, those Berliners can get to your nerves...
This also reminds me of a little anecdote: When I was in Spain with ERASMUS, I went around with a lot of Italian students. Whenever we came across a Deutsche Bank logo, I pointed it out and said "German Mafia". Many laughs were had.
I am not sure why you're saying that the Sophia Antipolis tech area is an attempt to build a "Silicon Valley" - It's mostly big companies there and there's no incentive to build your startup there.
It's quite huge - around 1500 companies with a lot of R&D labs.
It was not built to mimic SV. And no one claims that except maybe some rare schools/companies brochures that want to sell the place to students/young engineers.
> The current party detaining majority is the Socialist Party (PS) so the idea that innovation comes from the state and individual action is just a burden
That's completely inaccurate... There's a huge effort right now to boost innovation in France by the current government - by Fleur Pellerin, through grants for private companies in tech and many other things.
> It's mostly big companies there and there's no incentive to build your startup there.
SV started around the large military research facilities, and the semiconductor companies. Some startups (e.g. HP) came fairly early, but the large startup boom in the area happened after there was an established large concentration of technology people working for large stablished companies.
> It's quite huge - around 1500 companies with a lot of R&D labs.
Actually, that might be what's needed. Historically, many of the Silicon Valley successes have been started by engineers leaving an established company to work on their own ideas (example: Intel), not necessarily by young people starting from scratch.
> The current party detaining majority is the Socialist Party (PS) so the idea that innovation comes from the state and individual action is just a burden might be due to this situation
Could you possibly be more cliché ? You might want to stop drinking the kool-aid.
Not only do I disagree that this is how people in France think overall (nor even a majority of the government present or past), but I also believe the asphyxic bureaucracy we suffer at the moment in France is neither an effect or a cause of the ideology you describe, even if it happened to be true.
We have the same amount of useless paper filling for everything including claiming social services, most other aspect of our reglementation that have nothing to do with creating a company are also suffering from that maze effect.
What we need is a cleanup of our laws and rules, our parliamentaries seem to feel like they need to add their own little law on top of it every couple of month, but they never clean the mess.
I am very well aware of the huge amount of paperwork we need to do anything in France, but it does not stops someone motivated enough to go through it. I wanted to highlight that even after having started your company successfully, you won't get very far. Of course, the complexity of the bureaucracy is a deep-rooted problem and I am quite pessimistic on the probability that such a clean-up will be done (when remembering the previous attempts).
Europe, China, and whoever else who would like to one-up Silicon Valley needs to analyze SV's success and weaknesses from first principles. I stress: And Weaknesses!
If you don't take this two-sided approach to re-creating Silicon Valley's success, then you run the risk of blindly imitating the wrong things. Also, if you want to not only match but surpass SV, you need to be mindful of such weaknesses.
I have to admit that my sample size is too small to be scientific, but I am starting to suspect that SV startups actually have a rationality problem. Startup founders often have blind faith in aphorisms that have been adopted by the startup community and make decisions on the basis of these "old sayings" and programmer-lore biases while ignoring quantitative reasoning. I recently had an exchange like so:
"We need X so we can scale." (X doesn't run stably and they want me to fix it, but this will be very expensive. Y runs stably, but they don't like it.)
"What does scaling mean quantitatively for your business? Have you worked out those numbers and cranked that through Little's Law and figured out how much it will cost you to support n users?"
"No, we haven't done that yet, but we know we need X because Y would take too much RAM." (But when pressed, they can't quantify what "too much RAM" means with respect to business models.)
Well, I did the numbers myself, and it turns out that Y would just add about 40% to their equipment cost and get them up and running quickly while they're waiting for X to be fixed.
What shocks me even more: None of their investors or advisors had even asked them the question!
Good points. I think the number one Silicon Valley weakness is very high cost of living. I worked in Mountain View last fall and was shocked at the cost of living. I would guess that living costs in my town in Arizona is about 40% of the cost of living in SV. At work, I heard horror stories from co-workers about very long commute times - no way to live.
It is amazing how much less expensive it is in the mountains of Central Arizona: real estate prices are probably 50% less expensive, food perhaps 20%, gas is usually about $0.40 cheaper per gallon, movies less expensive. Also, my wife and I entertain ourselves hiking, kayaking, and hanging out with friends. In Silicon Valley, getting together with people seemed to involve going out to expensive restaurants.
That said, we had a lot of fun in Silicon Valley - a really nice experience.
I'm sure you're already aware of the irony inherent in claiming SV startups make decisions based on "old sayings" and "lore", then justifying that with a single anonymised anecdote :)
justifying that with a single anonymised anecdote :)
Hey, you pay me enough to do a formal study, I'll do a formal study. In the meantime, that's just one in a number of incidents involving supposed young prodigies in a certain startup incubator with a huge reputation. Which is precisely why I wrote: "I have to admit that my sample size is too small to be scientific," However, it's highly disturbing that I find multiples of these sorts of things in such a highly reputed group -- without even trying.
In any case, there is no excuse for someone making a quantifiable declaration about a piece of technology, without even going so far as quantifying by doing a back of the envelope calculation. Those sorts of shenanigans are supposed to be part of the brokenness of BigCo and the PHB.
While I agree with the sentiment of the article, depending on where you are in Europe it can be very hard to sell your big ambition vision to conservative angels who have grown their wealth in traditional industries - sometimes you raise £250,000 because that's all you can raise - especially when you are pre-revenue, convertibles on £150K with a 45% preset conversion is not uncommon.
The mindset needs to change from both sides, investors and entrepreneurs.
Also, the exit path is less obvious in Europe, you're basically praying that the same tech gods that do tech M&As in the US will want to in Europe
Thanks - yes we've had a couple of rounds of funding. VC mainly and DECC as well. First £35K was through competition wins and business link (before that disappeared).
It was very difficult to garner interest from investors pre-revenue. The hardest thing for a hardware start up is explaining the enormous working capital requirement that exists thanks to payment terms and delivery times. We launched the product and first 1,000 units on about £150k (not all in one go) over 2.5 years including tooling etc.
It's getting easier now as we can start to sell the vision but people are still terrified of hardware.
Yes exactly. The end of the article summed it up nicely, the seed funding sometimes feels impossible over here. It's very difficult to find an investor who will give a decent SV-comparable valuation when you are pre-revenue.
It's even worse when you actually have a small cashflow coming in, then they'll just value your company based on revenue x5 - if you're lucky!
x5 valuation?! They must have been really impressed with you to give you that. Generally we've found that small VCs are better than angels, but breaking the link between revenue and valuation is tough.
> Also, the exit path is less obvious in Europe, you're basically praying that the same tech gods that do tech M&As in the US will want to in Europe
Do you really need an exit? For most traditional companies (non-startups), the goal is "become the biggest/most profitable player in your market", not "sell to the highest bidder".
I speak as someone who's done - and failed with - a startup in Europe. Several aspects of the US, and specifically Silicon Valley, are certainly an appropriate target for envy and they're not easy to replicate in Europe for different reasons.
Easy access to funding, a funding culture, a bootstrap entrepreneurial culture, a big tech-savvy audience, a spirit of creativity and experimentalism, a socially and economically mobile milieu... there are so many things that we just don't have in Europe.
It's no accident that (what feels like) most German web startups are copycats of successful American products, sometimes down to the look and feel of the product. Building new stuff is actively discouraged here, nobody likes doing bold experiments: not customers, not investors, not even developers.
Looking at seed funding behavior is a very shallow thing to do in the face of these big hulking cultural differences. Playing around with money, having an exploratory approach to your career, risking failure - those things are just not done in Europe.
Yes, I'm an American who worked on a startup in Berlin, with a similar and sad evaluation.
re: Easy access to funding
-- absolutely, I think it is the risk adversity that kills everything, esp. at the angel stage.
re: a bootstrap entrepreneurial culture
-- Most Europeans don't want to work long hours either and it's legally questionable to ask them to. that's a show stopper.
re: Building new stuff is actively discouraged here, nobody likes doing bold experiments: not customers, not investors, not even developers.
-- Sadly have to agree with you based on my experience in Berlin. Even downloading a new app on a phone is regarded with a good deal of suspicion.
re: spirit of creativity and experimentalism
-- I have a hard time knowing why this is, but I've written on it before. May interest you:
Overall, I also find that Europeans for the most part don't want to do billion dollar startups. They seem to think that there is something wrong with the large amounts of money involved, and saying that this is your goal is more likely to meet (in my experience) with criticism than encouragement.
This seems true across central Europe (France & Germany) while the big successes mostly come from foreigners (i.e. Skype, SAP).
But on the other hand, billion dollar startups create lots of fairly wealthy people that can then be angel investors and pump up the ecosystem. I don't see any other way for the system to evolve, but I was amazed by the degree to which there was a mental barrier against any sort of large scale success.
There are always exceptions and outliers, and Skype is a good example. However, SAP? Never. It's a massively connected consulting shop, and they have always been. Their software is just incidental. There's no innovation there, it's Office Space meets House of Lies.
"I also find that Europeans for the most part don't want to do billion dollar startups"
There is indeed a diff in europe. But having said that, I would like to argue a few things.
a) Anyone would want to get a billion dollars.
b) How many billion dollars startups do you actually know? Not in the money given to acquire them. But in the actual value. In the "wtf, they gave how much for what?!" category.
I am going off in a tangent, but I think an important and relevant one. $ is the world currency. It's backed by the us military. You print billions out of thin air, faster than I actually breath.
In my, maybe naive eyes, billions for bs web or mobile services, among other things, translates to me to: "Holly f*. There is so much inflation coming my way, from all that printing, it's not even funny. I am a couple of years, tops, away from being forcefully transformed from "financially ok", to "fubar-ed, can you give me 500$ to get a piece of bread, pls?"
It's easier to be "large", when you are the empire, print billions out of thin air, and "bring democracy" to the rest.
How many billions was the "let's make a language called 'C'" startup? ..I read billions for bs, and I see inflation and destruction. ..Maybe it's just me.
No, I think the view you state is quite pervasive. In general, it seems that in the US the view of wealth is quite positive compared to the EU, with very rich folks in the EU forced to "hide" their wealth, whereas in the US they are comfortable celebrating it.
Why this is I think is probably a legacy of some historical issues (i.e. a landed aristocracy, inherited wealth, French revolution based on mass pluralism), but would take a longer post to discuss than I currently have time for.
Easy access to funding, a funding culture, a bootstrap entrepreneurial culture, a big tech-savvy audience, a spirit of creativity and experimentalism, a socially and economically mobile milieu... there are so many things that we just don't have in Europe.
In her new book The Upside of Down Megan McArdle also writes about the cultural (and legal) tolerance for failure that the U.S. has. In her review of the evidence Europe has stringent bankruptcy laws and views people who try and don't succeed at things poorly, while people in the U.S. view those who try and don't succeed well.
What a load of crap. The only thing I see.missing is the money and I'm in a relatively small city in the UK, Nottingham.
There are tech events packed with people, startup events packed with people, a bio-tech incubator, two university incubators and a thriving creative scene.
The thing missing is funding, SV doesn't have an exclusive grip on the rest.
It might not be all about what you see. To be fair, the same applies to me.
I didn't want to imply that the industry lacks good people in Europe either. But your examples do go in the direction I'm talking about. Big bio tech and university-tie-ins are not risky, experimental, high stakes affairs. They're predictable and respectable.
a funding culture, a bootstrap entrepreneurial culture
These are two counter tendencies. The funding is available in Silicon Valley, but then your company might end up being loaded with startup bros and senior leaders in order to please the VCs. The bootstrapping is an attempt to avoid this and related outcomes (e.g., losing control over the company).
We're just envious of the money; we don't actually think making cute web apps is a sustainable billion dollar business (or rather, it is, but in the true spirit of classic Ponzi schemes).
I'm not sure I'd consider Apple, Google, Genentech, and Oracle "cute apps". I think for every Apple you're going to have 100 maybe 1000 companies that are near worthless. It's just part of the chaotic process that must be accepted if you want the good parts.
Those cute web apps tend to be changing the way business and consumption is handled on a day to day basis for almost every level and every facet of the economy.
The only Ponzi scheme argument is one that includes the entire western economy.
Or are you talking more specifically about the net-loss web app companies that tend to only pepper the frenzied investment of the valley?
You don't want to copy Silicon Valley, since there are many things about the Valley that suck. What you want is to become something different, and perhaps excel in slightly different niches.
Take a look at other places with booming tech sectors, like these two:
Los Angeles and Orange County have a lot of tech around aerospace, manufacturing, health care, and entertainment (e.g. Oculus, Red Digital Cinema, etc.). Boston taps its deep academic wealth to yield top-notch companies in fields that involve massive eggheads doing scary things with math.
They're not as big as the Valley on web brands, PCs, or mobile, but they're as big or bigger in other areas.
They're not as big as the Valley on web brands, PCs, or mobile, but they're as big or bigger in other areas
I think a lot of people don't realize that Silicon Valley doesn't just dominate in a couple tech niches. It dominates software (46% of investments), biotech (32%) cleantech, IT services (43%) and (shockingly) media and entertainment (40% according to PwC, but even I don't understand this one). There is an entire ecosystem of companies outside of tech that tech people don't even know exists (I know multiple friends starting biotech and cleantech startups that basically don't interact with the rest of the tech world).
More venture capital goes to Silicon Valley every year than the rest of the nation combined and VCs are quickly diversifying into other areas simply because tech startups are becoming so cheap and they have money burning a hole in their collective pockets. And it is only getting worse - SV investing is growing faster than the market as a whole - up nearly a $1 billion this year alone.
If the money keeps pouring in, we may come to see SV (or rather, the Bay Area) quickly extend its domination into other areas like say, automotive (well, if Tesla ever gets off the ground).
I think a lot of people really underestimate the power of the Silicon Valley brand. Silicon Valley has over 60 years of history as being a place where tech companies come from. It has had nearly the same amount of history of venture capital investment. Just like the United States was branded as the place where roads were paved of gold, Silicon Valley is branded as the place where dreams become reality.
This is powerful. It means we draw in the young, the dreamers, the motivated, the intelligent, the networkers and (generally) the doers. We drain other areas of their talent. We drain entire countries of talent. Plus we have three world class universities with stringent entrance requirements that put out huge numbers of people that were literally surrounded by peers starting companies in fields that have easy financing (berkeley - tech/cleantech/biotech, ucsf - biotech, stanford - tech/cleantech). A few National Labs (Berkeley, Livermore and SLAC) and the NASA Ames research center didn't hurt either.
On top of that, we have an area where nearly everyone is a potential beta tester. We're talking about a population of 7 million people who all know someone in tech or related to tech that are willing to try out your random product. Who will talk about it in the coffee shop. There is a large enough initial user base in the bay area alone to get you over the network effects threshold which is important to a whole host of companies (not all of course).
The reason you don't see this in other places is because it took decades and decades to happen and several cultural anomalies were instrumental in it continuing. A big one was that startup founders who got lucky in the early days also didn't hoard their money. They reinvested it in the next generation of companies which really helped keep SV strong. They also tended not to move. Once you come here, you stay (your kids on the other hand are a different matter).
"A big one was that startup founders who got lucky in the early days also didn't hoard their money. They reinvested it in the next generation of companies which really helped keep SV strong."
Nor was their money taxed away. It was theirs to reinvest. Does this hold true in Europe?
That is what they have done in France with Sophia-Antipolis, and in the Moscow suburbs with Skolkovo. Part of the difference here is that they are not just going for the quick bucks, but putting down solid roots in research which will pay off more and more as the years go on.
>>Take London as an example: 27% of job growth in London last year came from the tech sector, with the number of tech startups growing by 76%
These two numbers say nothing at all about how valuable startups are to the economy or to people. The source pdf mentions startups a lot and then mentions established companies with years of history behind them.
I'm not sure about SV envy, or if investors here are just less likely to throw heaps of money at young companies trying to be the next flash-in-the-pan web thing because the SV valuations are utterly unrealistic and are only predicated on equally insane 'exit' values.
Agreed. SV is driven more by gambling and outrageous risk-taking. That paid off when the market for technology companies was young, but now it is maturing and there are more entrants from around the world, i.e. more competition. So Europe's lower investment amounts really amount to putting more players into the game to compete against SV. It's a reasonable strategy to try.
I found this article rather superficial. It touched on a few (very few) points of comparison and ignored a huge number of factors affecting entrepreneurship in Europe.
Rather than waste time expanding on that though, I have a question. In this statement " If we truly believe the next global superstar in tech will hail from Europe, why would we only fund them at one-fifth the amount of their future US competitors?" Who the hell is "we"?
Of course, this question begs the question of whether "we" believe any such thing, because no such idea follows at all from the preceding disquisition. We have several arguments, weak arguments, trying to prop up the idea of a healthy startup ecosystem, and then suddenly we are defining success by the measure of outliers.
But in any event, who is we? The would-be pundits? The startup people in Europe? VC's? The people who give VC's money? Only the last two have any real say in where the money is invested, the VC's much more than the funders.
Do VC's generally believe this? If not, why? Is the claim that they are benighted and too envious. I would find that surprising, given that all the San Hill people I know are hyper-capitalists, to put it mildly, and crunch numbers as readily as most people blink on a windy day.
It's commonplace for VC's to get article and interviews published, given that half of their job is self-marketing, but to be blunt, the attempt to sound like a pundit/prophet is usually much better than this.
The authors argue that a major factor for Israel's economic growth can be found in the culture of the Israel Defense Forces, in which service is mandatory for most young Israelis. The authors believe that IDF service provides potential entrepreneurs with the opportunities to develop a wide array of skills and contacts. They also believe that IDF service provides experience exerting responsibility in a relatively unhierarchical environment where creativity and intelligence are highly valued.[6] IDF soldiers "have minimal guidance from the top, and are expected to improvise, even if this means breaking some rules. If you're a junior officer, you call your higher-ups by their first names, and if you see them doing something wrong, you say so."[1] Neither ranks nor ages matter much "when taxi drivers can command millionaires and 23-year-olds can train their uncles," and "Israeli forces regularly vote to oust their unit leaders."
It's always tricky looking back and trying to work out why some piece of culture developed. The inevitable self congratulatory nationalism and the counteractions makes it even harder.
That said, Israel has (1) a highly concentrated educated, urban population. (2) A large number of people who spend 3-10 years in military tech early on. No long established industries (the country has only existed for 2 generations). (3) A very recent history of young "entrepreneurship," if you extend the definition to include all of the "ideological" settlements ranging from leftist Kibbutzes (communes) to nationalist settlements in the West Bank to religious settlements you will find a lot of exposure to entrepreneurial endevours. Everything in the country was "established" by some form of entrepreneurship within living memory. (4) Solid R&D culture (5) Difficult trade relations making ethereal goods a more attractive option.
Construct your own narrative.
Personally, I credit the (Socialist/Marxist) settlement culture of the 20s-60s. It feels like an analogy to the US' 'go west' initiatives, homesteading and the various mining booms and such. I think that kind of thing breeds entrepreneurship into a culture.
*Israel is not Europe. There is European influence, but most of it is eastern European and it's mixed with Arab/Middle Eastern and lots of other things.
over 10 years ago the Israeli gov started to invest in tech research to spurn more VC funding in certain industries. The EU is only starting to do this now.
What's with the Guardian and "From my perspective, America's not so great!" articles? Not, like, "how could anyone think that?" but why does it seem to be such a regular feature? I admit upfront my being American may cause me to imagine/over-remember this phenomenon.
They're generally a left wing paper, the US is generally perceived as pretty right wing in politics and economics. Plus there's been the whole Snowden affair recently.
Brits in general seem to be on a bit of a downswing in terms of how amazing we think you are. Right now it's pegged somewhere around "you've got as many problems as the rest of us" where before ~y2k we thought the US was some sort of magical fairyland where everything was made of candy.
If it is a phenomenon it's only because of a different phenomenon you may not perceive: the incessant portrayal as US=Gods Country. This is pushed so much that many may see it worthwhile to counter and put it in check with "Come on, it's not that great... see XYZ"
Fair; I was under the impression most of that talk stayed in-house, so to speak. Are you referring to portrayals just by Americans which reach British shores, or portrayals by Britons as well?
I think this simply reflects the positioning of Guardian America, which is aiming squarely at the market gap to the left of the NY Times. There's a noticeable difference in tone between the US and UK comment pages, the US page seeming much more bombastic.
In Britain, The Guardian fills a political niche quite similar to that of the NY Times, perhaps with a little less stuffiness as it does not consider itself the paper of record (a position traditionally filled by The [London] Times, a more conservative paper.) It also has a tendency to be less deferential than the NY Times, but that simply reflects the UK press in general, where politicians are widely regarded as being only marginally higher than scum.
The Guardian is left-wing and not surprisingly usually leaning anti-American.
I think if you were to ask the self-anointed 'elites' in the Guardian editorial room and then the British people what they think of America, you would find somewhat divergent percentages of pro- and anti-...
As an American, I love Britain and believe in the Special Relationship, as much as the Guardian (and occasionally our current President) would poo-poo the whole thing.
This article is very shortsighted. Ambition is not the problem;
1.) Subsidies are broken;
The company with the biggest mouth gets the money instead of the best idea. I've seen it dozens of times with the weirdest legal constructions; Companies create holdings with different companies under them and those companies "hire" each other instead of hiring other parties outside of the holding, so they get all the hours and money.(Lots of tax money is evaded that way)
I know a company that got !3 million Euros! in EU-funding in the last 6 years and no one knows what they do. Now nobody wants to do business with them.
2.) Startup hubs DO need help;
As much as I love the passionate startup hubs, they are not going to get traction without help from a bigger company. I think that the startup scene of London wouldn't be so vibrant if it wasn't for the Google Campus. Companies would be funded more/easier if your being backed by a worldwide-known brand like Google (even if its only the desk your sitting at).
Please see http://www.larrypage.nl for my quest to bring Google to The Netherlands and start a Startup Campus here.
P.S: The United Kingdom is NOT Europe.
Agree with some of the comments below that it was short, generic and "mass market". The thread below was (and is) the only intent of the presentation, blog post and subsequent article... to make this a topic for debate.
-Do I believe a European startup can compete with an American startup Day 1: YES
-Do we have the same level of ambition: Sometimes
-Do "we" (VCs, Angels): take as risky bets?: NO
-Is entrepreneurship the best way for Europe to grow and Europeans to thrive: YES!
Judge me on my actions not my words (which, fair enough will take some time to prove).
(and the role of government and hubs is for another time... different mutator which varies greatly across Europe)
Anecdote: the head of a 3000 person tech company that I chatted with for over an hour thinks of Europe as a flyover continent because most of the disruptive change is happening in Asia and America.
I am in the USA, state of Indiana, and the state government got together with a non-profit to set aside some $40 million of tax money to grow the Indiana startup community.
Only problem, or one of them, is their ignoring the out-flows in that at least for Indiana we have a large outflow of graduating STEM. And of course those that do not leave are saddled with debts.
Of course you can get around these obstacles by analyzing what 'small' startups can be done via hackathons etc by creating a communit/workspace environment where those things are exchanged.
Compared to say Chicago:
Chicago
$1 Billion invested in new startups 2013
$2 billion in M&A in startups 2013
Indiana
Not even $100 Million in either category
In other years Indiana was spearheading biomedical startups centered around IU and Purdue ot keep their Medical grads with STEM home based.
Can anyplace really do the duplication of Silicon Valley as piecemeal?
> Can anyplace really do the duplication of Silicon Valley as piecemeal?
Categorically the answer is a simple "no". Most of these government sponsored programs are attempts to "inject" life into a system that has basically nothing. AFAIK, there isn't anywhere in the world where this has successfully worked. SV is SV purely because of capitalism.
Discussions like this on HN always tend to bring about anecdotal evidence from people who only have experience from a single European country and extrapolate from that. So let me just take this opportunity to remind HN'ers that conditions (be they cultural, legal or otherwise) vary to an extreme degree between European countries.
In other words, don't be scared to start a business in e.g. Germany just because someone on HN says that starting a business in France is problematic. They are completely different countries with different laws and mindsets: http://soimovedhere.wordpress.com/2013/03/04/stop-generalizi...
Europeans have no need for Silicon Valley. Most of Europe is technologically conservative and averse to trying out new stuff, in a way that other audiences are not. Governments will go at great lengths to make sure that the law forbids any entrepreneurial action that threatens the status quo in just about anything. In other words, severe and chronic risk aversion from both the entrepreneurs, their audience and the regulatory environment.
Would companies like Airbnb, Uber, Facebook, Snapchat be ever able to grow if they had targeted Europeans?
How many of you european entrepreneurs here actually target primarily the European market or expect to grow in it?
Nonsense. Smaller governments are always willing to try something new (Estonia, Slovakia), we can vote or have referendum online. Larger follow pretty fast (Germany recognizes bitcoin as currency...)
Also it is very common for american start-up to fix something broken in america. Uber is good example, most EU taxi services are well regulated, cheap and easy to start with. That is why Uber is not so popular in EU.
I'm not sure risk aversion is always the core reason, but there is often a lack of understanding from gov & people. In Europe, you also need to market your products to a very diverse market (dozens of European languages, different social standards in different countries, etc.). In USA, the market is more homogenous.
What we need in Europe is a larger risk appetite. This is something we lack and SV has built-in. However, the systemic tolerance for risk comes not from SV, but from foundation and role of capital markets in US and old UK/Europe economies. In US capital markets were used to sponsor large investment projects on a regular basis, whereas in Europe it was rare.
I'm not talking about fancy CDOs, etc. but enterprises before that, which helped shape the societies' attitudes toward risk in general. This difference is explained in Perry Mehrling's videos available on Coursera if you want to learn about it in greater detail.
Many sides to it. Fully agree on what Christian says about European startups raising too little and not being able to execute on their vision because of that.
At the same time agree with entrepreneurs raising this little, as the valuations often are much lower than in the US and there is less investor selection available.
Then coming back to investors, the low valuations are often correct, just because there are much fewer exit opportunities available. Just count how many European exits there were last year. No exit opportunities means no sense to exit into startups as an investor, because your chance to get the money back is much less.
For Estonian (nation of 1.3m in Europe and one of the poorest in EU, extrapolate from that) related startups, 2013 was the best year ever, with 32mEUR raised by 40 teams. 20% of that money came from Estonia, 80% from Europe and US. There has been almost double growth between 2011-12 and 2012-13. So the growth in European tech and investment ecosystem is definitely there.
Europe shouldn't try to beat Silicon Valley by becoming Silicon Valley. If they want to be superior to Silicon Valley they should develop business models, industries and technology that is superior to anything in the world. Silicon Valley is pretty old and their practices are dated. Getting over Silicon Valley is a matter of development.
Yes, Facebook is distraught by the fact that European startups are offering themselves up for aquisition on the cheap. It's apparently their own fault for not asking for more money.
Don't worry about the money you could be making in SV, you're fine where you are! We'll come to you.
I think the problem is much deeper, and has very little to do with attempts to foster tech success. Europe as a whole is broken: depressed, angry and locked-up, largely as a result of the colossal fuck-up that was World War 2. They think they know better now, but really they're still completely mind-fucked over it. They don't believe in themselves - they don't even trust their own emotions (look how wrong things went every time Europeans have been excited about Big Ideas.) The older generations are seething. And the young Europeans I meet are all in one way or another trying to escape this anguish - by "living the dream" overseas (South America! Australia!) or partying themselves into oblivion, or running headlong into the tight, blinkered embrace of an anonymous middle-class life and career. Sure, Europe has it's large, successful industries - but often this is another form of escape - easier to pour your life's energy into building a more perfect car engine than face up to the devastating emotional history of your country.
Ultimately what you want in a country is happy, confident, well-adjusted people. Until someone finds a way to heal Europe's soul, arguments about impediments to the European Silicon Valley are academic.
This does not sound like the Europe I lived in for 11 years. You have a typical America-centric view of the Europe that is totally out of touch with reality.
Europe is not a simple place because it has many cultures and a huge population, but it is far from broken. America on the other hand, appears to be an empire in decline.
Also, be wary of defining Europe based on its history. Europe is going through great change. In particular, the younger generation of Europe has a lot more in common across cultures than the previous over-30 generations. And they are every bit as driven to succeed as the folks in Silicon Valley. In fact, I would say that if you look at the whole under 30 age group in America and compare it to the same age group in Europe, you will find a lot more pessimism and self-destructive behaviors among the American group.
Thanks for the reply. Just noting that I'm not American (don't assume every ignorant-sounding person you meet on the internet is American!)
I have visited several European countries and met and interacted with many young and old Europeans, and I hope to live there permanently in the future, and so find add more depth to my admittedly incomplete data. I do know that every part of Europe is different - some parts are in my experience much worse than even than the picture I painted (Hungary for instance). I guess I was exaggerating for dramatic effect. Still, I think there are serious emotional problems in modern Europe, and I'm not satisfied that people are really acknowledging or facing up to them.
I really do have a lot of love and hope for Europe. It just frustrates me I suppose. Perhaps a corollary of meeting primarily younger, party-oriented Europeans?
We have the example of the attempt of a French Silicon Valley [1] while there is no incentive for entrepreneurs to build a company (sure, after some hassle, you can still set up your start-up, but if your idea gets success, your best hope is to be bought by an American company like Google). Another more recent example is the "cloud à la Française" where the government catch the buzzword for cloud-computing and wanted to have its own Amazon super-star company. Basically, what they did is try to make a big company out of thin air [2] while just ignoring all that already existed in the domain.
The current party detaining majority is the Socialist Party (PS) so the idea that innovation comes from the state and individual action is just a burden might be due to this situation, but I doubt it would have been a lot better with the other major party (UMP, more right-wing oriented), who has been in majority most of the time without improving the administrative maze of entrepreneurship.
I don't know about much the other countries of Europe (although I have heard that it was not so much better) but the situation of France is very frustrating.
[1] https://en.wikipedia.org/wiki/Sophia_Antipolis
[2] https://fr.wikipedia.org/wiki/Cloudwatt (fr)