Startups and Work: Europe vs the US

Michael Arrington of Techcrunch comments on the US vs Europe in terms of startups:

Joie De Vivre: The Europeans Are Out To Lunch

It’s a pretty rough and coarse-grained view of things, but there’s a grain of truth there.

I’ve written about this a little bit before. It’s something that I feel qualified to talk about, having lived and worked in both the US and Europe (Italy and Austria to be precise), and in that time, generally gravitated towards startups.

Here’s my quick take on a list of what’s good and bad about each. Please note that these are of course not true for everyone, that things are changing, but are still things I think are generally true, even when I could think of several counterexamples for some of them myself. Also, it’s very important to keep in mind how diverse “Europe” is, so most of what I write is really about Italy, and to a much smaller degree, Austria. I’d be very curious to hear your own experiences in the comments.

Europe

Bad

  • Less of a startup culture and mentality. It’s more typical to get a “job for life” and hang on to it for all you’re worth. Many Italians are tremendously creative, industrious, inventive people, but are going to find it more difficult to express that in some form of business.

  • The side effects of this mean that there are fewer people to talk with, and network with, fewer potential employees willing to risk a startup, and so on. For instance, people are at times more suspicious of a new company – both clients and suppliers.

  • As I mentioned in my other article, it takes a lot more money to get started in many European countries – something like 10,000 Euro in Italy. Other places like the UK are cheaper, and apparently Germany is introducing some legislation to ease the burden on new companies. I really hope this changes in Europe because it’s such an easy change to make: don’t extract money from companies until they’re making it.

  • More bureaucracy. I think that higher taxes, once you are profitable, might be worth paying for the social system you get in Europe, but the cost of sorting out paperwork falls inordinately on smaller, newer companies. Big, established firms can hire people to deal with all the rules and regulations, and probably have contacts in the government that can help them out in some cases. Smaller firms are the ones whose time is really going to be wasted running around to different offices trying to figure out what they have to do.

  • Smaller, fragmented markets. Localization is not a lot of fun in some ways, and trying to translate everything into all the languages of the European Union is a huge undertaking. In the US, you get a huge market with just English and the US Dollar. Even beyond language issues, the culture changes less in the US from place to place, meaning that you have a more homogeneous target.

  • Lack of acceptance of failure, both culturally and institutionally. If you go bankrupt in Italy, it’s a very serious problem. Apparently (although this is second hand, I’m not 100% sure of it – maybe someone can confirm whether it’s actually true?), you can even lose the right to vote. Plenty of people in the US try several times before they get it right.

Good

  • Even if your undertaking fails, you still have health care. Likewise, there are other bits and pieces of social support (that change from country to country) that mean you’re probably not going to land quite so hard on your rear if things go wrong.

  • Lots of smart, educated people. I never lacked for plenty of smart people to talk shop with in Padova, and didn’t miss the California bay area at all from that point of view. Open source is really big in Europe – perhaps, in part, because for many people it’s a better avenue for their talents than creating a business, when doing so is difficult and less common.

  • Work/life balance. Sorry Mike, but the amount of people who are truly going to strike it rich is pretty small. If they want to work hard, great, but it’s nice to have some other options, in terms of good, lasting friendships (rather than everything revolving around work), knowing plenty of people from outside your field, people living in and belonging to a community (how many people spend their whole lives in the bay area?). When I moved from San Francisco to Padova in 2000, I went from a world gone mad with money and the dot com craze to one where there were rich and poor, families, young people, old people, and many people who were not working for some dot com. That’s not to say that people don’t work quite hard in Italy – two hour lunches are a thing of the past for most anyone I know.

  • Smaller fragmented markets can be an advantage, too. By the time some valley-based startup finally gets around to noticing that languages other than English exist, it’s possible to capture a smaller market. Ok, so you won’t be the next Google that way, but there’s good money to be had in doing so.

  • In some ways, the staid, established, don’t rock the boat way of doing things in some industries may present big opportunities for outsiders to come in and pull the carpet out from under everyone. This is especially true of internet/web companies that can get started quickly and cheaply.

US

Bad

  • If you’re not careful, you can get completely sucked in to work – your life revolves around it, your friends are mostly work friends, and if something happens to your job, a lot of that goes poof. This is especially true in places like the bay area, where so many people are ‘transients’ – just there for a few years, without any real roots in the area. This is ok if you’ll potentially make a big pile of money, but long term it’s unhealthy.

  • Less of a sense of building for the long term. Personally, I don’t want a “job for life”, but I think there is some value in loyalty (the genuine sort, not the sort created by legally not being able to lose a job) between employer and employee that has been lost in the US. Being able to count on someone growing with your company, and as an employee, knowing that your company will do what it can to help you out even in tough times are things that capture some value. The US seems to be heading towards a “Coasian” world where everyone is a freelancer, and while that efficiency is hard to deny, I wonder what is lost in the process.

  • The competition is tough. Sure, it is in Europe too, but in Europe everyone may compete quite hard during the year, but still all take that one month vacation (although that is becoming a bit less common, especially amongst people my age), whereas in the US almost no one gets that kind of benefit – even if you wanted to take unpaid time off, people would look askance at that kind of behavior. That said, if you need to stay open in, say, August, in Italy, to compete, you are in big trouble, because for many businesses it’s simply impossible because it’s a chain reaction: all your suppliers and clients shut down, so you really have no choice.

Good

  • There are certainly bureaucratic obstacles in the US, but are much more maneageable, and don’t hit smaller/newer companies quite so badly.

  • It’s cheap to get started. As per my other article, the actual state filing fee in Oregon for an LLC is $55, and that’s all you really need.

  • The culture is definitely there, especially in the right places like the Bay Area, but even in plenty of others.

  • You aren’t bound to employees for life, and it’s easy to find freelancers. I know I’m contradicting myself, but I think it’s actually a complex issue, and there are definite advantages to not having people who expect or at least want to find that job for life.

  • A large target market. Go online in one state, and you can, for the most part, deal with customers all over the US, in one language.

  • Things turn around faster. I have more of a sense that when there are problems, they get fixed. Companies (the debacle of the automakers notwithstanding) are more often allowed to fail, or at least put in Chapter 11. Sometimes this means that when things are bad, they get really bad, but also turn around and get better sooner.

Conclusions

An interesting example of all this from my own experience was Linuxcare. The company was, culturally, a Bay Area startup, with the headquarters in San Francisco, founded by very startup oriented guys (one of whom, Dave Sifry, went on to do technorati, and is currently working on yet another venture). However, most of the actual open source talent was in our satellite offices, in Australia, Italy and Canada, places where, perhaps, people were not so distracted by the prospect of “make money fast!!! hurry!!!” that they had time to work, learn, and create some really great open source code.

To be honest, I find myself torn. Business-wise, I prefer the US. However, outside of that, there’s a lot to be said for Europe. I also think that some of what’s good about business in the US is coming to Europe, albeit slowly in some cases, in Europe. People my age here can see what’s going on elsewhere, and try and copy what they like. A lot of what’s good about Europe, though, might be more difficult to import into the US, especially the livability of the cities.

In any case, I can conclude that it’s a complex, difficult topic best discussed over a glass of wine.

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