I recently read Sten Tamkivi’s post on TechCrunch that states some reasons why Americans, in Silicon Valley specifically, should be investing in European startups. Tamkivi’s post was echoed by similar sentiments in a post by Union Square Ventures’ Fred Wilson. While there are here are 5 major tech hubs in the US (SF, NYC, Boston, LA, Austin) and a similar number in Europe (Berlin, London, Paris, Stockholm, and Helsinki/Tallinn), I do not equate these groups with each other, for reasons I will outline below. And while I admire both Tamkivi and Wilson, they are both wrong in this instance.
1. Europeans Don’t Want To Put In The Work: In general, and I know this is a stereotype based on my time living in Denmark, Amsterdam, and London, Europeans are just not as hungry for success as Americans. In America, we are often ostracized by Europeans for not having a positive work-life balance. Well, any entrepreneur will tell you, that it’s really difficult to build a company when you’re only working for 7.5 hours per day. (I won’t take low blows on Greece and Spain here, as in America, we have Kentucky and West Virginia to grapple with…) That said, Germans do have a tendency to work hard, as do the Brits (due to the Protestant work ethic I learned about in high school).
2. In Europe, There Is Too Much Regulation: In Europe, everything is slow. Blame the bureaucracy. Blame the welfare state. Blame the aforementioned work ethic, but I found that it took months to do things that would be done in America in days. It’s so simple to hop on a web site and start a Delaware Corporation. (I know, lawyers are still better when starting a business, but it really is easy to do on your own.) Even when you look at the whole micro-entrepreneur food truck boom in America, it happened very quickly. In Europe, there are more food regulations than you can possibly imagine (though the food is certainly tasty over there). Europe’s more complex regulatory system, given how varied countries in the EU are, might be what tears that union apart.
3. Language: In Amurrrrica, we generally speak one language. English. It’s simple. You call your developer in San Francisco and he speaks the same tongue as your sales guy in New York and your CEO in Austin. In Europe, there are so many languages spoken that to attract a substantial and scalable user base for your product, you would have to have it translated into many different tongues.
4. Europeans Stay In School Forever: How many times have you met an Italian dude who’s working on his 3rd Masters Degree at La Sapienza in Rome and still lives with his parents even though he’s 37? Or a Danish guy who is doing his Post-Doctoral research despite being 42 years old? In America, we are surely educated, but in Europe, people are over-educated. I have attended both public and private universities in America, as well as public and private universities in Europe: In America, everything moves more quickly. You have more hours of class per week, and you learn a heckuva lot more. In Europe, how are people going to be starting companies when they finally finish school but also have a family to support? That’s why there are fewer European Mark Zuckerbergs or Evan Spiegels.
5. Security And Privacy: Tamkivi writes that “security and privacy” are great reasons to start companies in Europe. Find me an entrepreneur who doesn’t want to collect people’s data. Data = dollars. Harsh personal privacy laws, while good for consumers, mean less money for most entrepreneurs. There goes the incentive to start a business.
6. “400 Million Customers,” But Many Don’t Spend: Europeans are far more frugal than Americans. In America, we love junk. We love the latest and the greatest. We love to fill our closets with 85 pairs of the latest wears. In Europe, people buy things once, spend decent money on their purchases, and then don’t buy them again for years. Personally, I really like this about Europeans, but if I were a European entrepreneur, it would make me wary. Yes, they may have invented Hermes and Ferraris, but how many Europeans can really afford to buy a Hermes bag and a Ferrari?
7. Europe Is Old: Europe is the oldest continent ever. Medicine and technological breakthroughs will keep these folks living until they’re close to 100. Of those “400 million” consumers, most of them aren’t ideal customers. It’s too bad the healthcare sector is publicly funded in most European societies, as in this area I see room for innovation.
8. Global Skills = Nonsense: Yes, I agree that Europeans travel more frequently than Americans and are thus exposed to different ideas. However, some Americans (like, ahem, me) have traveled frequently and can also be exposed to these ideas. To think that Europeans have better soft skills than those from other places is nonsense. Yes, foreign exchange programs like Erasmus have become ubiquitous in Europe, and this is amazing, but Americans are also now studying abroad at higher rates than ever before. While Americans should surely learn more languages than just English, English has become the de facto business and consumer language of the world.
9. Grants: When you compare how films are funded in America vs. how films are funded in Europe, they are very different from one another. European countries have film commissions that deliver grants to filmmakers. Filmmakers apply for the grants and then wait months or years to learn whether they have been selected. In America, films are made by means of capitalism and Kickstarter: You hustle your brains off or you don’t get your film made. (Kickstarter, however, may further democratize European film production.) That said, my friends Torsten Mueller and Frederik Fischer received money for their startup Tame.it from “the German Ministry of Technology and Economics, the business development and promotion bank of the Federal Land Berlin and from a successful Crowdinvesting campaign on Companisto.de.” In America, our government may give money to occasional startups in the energy/defense sectors, but they sure as heck ain’t giving it to a Twitter context search engine. Plus, Americans are way more likely to use our disposable income for crowdfunding. (That said, in America, we still have nonsense laws that prevent the common man from crowdfunding in exchange for equity, which they have eliminated in Europe.)
In Europe, there’s a higher expectation that the government and regulation will solve problems. Perhaps it’s the inner-Ayn Rand libertarian in many Americans, but we have greater faith in the private sector than in the public sector. In Europe, there is also a more incremental, rather than disruptive, approach to progress. That said, don’t forget that the Dark Ages lasted for nearly 1,000 years.
This isn’t meant to knock European companies. I have many European startup founder friends, and I admire the work they do. I am also a fan of European companies like Skype and Spotify. That said, these companies had to come to America to truly make it.
I don’t think the future of Silicon Valley investors is across the pond. Tamkivi writes, “Yes, stuff is happening in Boston and New York, but not so much that a once-a-month trip can’t cover most of it.” Quite frankly, this is an idiotic statement, as New York specifically has seen its technology sector grow rapidly during the past few years. (I’m surprised that Mr. NYC VC Fred Wilson didn’t call Tamkivi out on this falsehood.) So yes, while Europe is certainly the place to go for wind energy startups (Denmark), architecture firms (the Netherlands), and a whole host of random startups from London to Sweden to Finland to Berlin, my bet is still on America.