(This post is based on a discussion at BarCampZurich back in October. The opinions expressed here are mine, not those of my employer or other attendees.)When you ask a random but well-informed person, the only European startup he or she will name is Skype, but when you ask about the US, plenty come to mind: Google, Yahoo, eBay, Youtube, and many more. What's the reason for this disparity?
Many have written about this before, including
Paul Graham,
Xavier Comtesse,
David Heinemeier Hanson, and
David Hornik and I doubt that my thoughts on this are unique.
Still, here's my take on why there aren't many more European web startups:
1.
Lack of Role Models. Even revolutionaries need role models. The fact that others have hit it big before makes startups look like a much more reasonable option. For Europe, there's the aforementioned Skype. In the US, there dozens of very successful entrepreneurs and companies to look up to.
For recent graduates such as myself, going to a big, established company seems like the smartest option. The traditional way of slowly climbing the ladder at a big company is hardwired in our brains.
2.
Lack of Venture Capital. While you can start a business with two guys in a garage and a few of thousand Euros, you may at some point need money to grow and hire employees. This is where Silicon Valley's ecosystem of venture capital comes in. We don't have that here in Europe: Here, good VCs who are willing and able to take risks and give valuable advice seem few and far between.
3.
Lack of Ambition. When Larry and Sergey started Google, they had global domination in mind. After all, organizing the world's information and making it universally accessible and useful seems like an ambitious goal.
In contrast, Many European startups often grow to a comfortable size of 10 to 20 people, and then stop. It's fun to work with your dozen best friends and enjoy a family-like atmosphere: If you grow any bigger, some of the fun melts away. While you can change the world with just a dozen people, I doubt that the 'next Google' will have just twenty or so employees, or grow organically from an existing small business. Europeans need to aim higher.
4.
Attack of the Clones. Many web startups here are rip-offs of existing US companies with established business models. Alando may have started started it all: This Berlin-based company, started by the Samwer brothers in 1998, cloned eBay's functionality and UI in every detail. They sold it to eBay for $43 million after just 6 months, showing that you can win big by simply copying. For today's examples, look at
Sevenload,
Yigg.de, or
Aimido. A little more creativity wouldn't hurt: The potentio upside of doing something truly original is much larger.
5.
Fragmented Markets. The US has a single, relatively homogenous market of 300 million people. Almost everyone speaks English, payment systems are the same everywhere, addresses share the same format, and laws are very similar in all states.
The European Union has a total of almost 500 million people. It is a huge, largely deregulated, but heterogeneous market. This makes it unattractive to web startups: For every language and possibly every culture, you'll need a localized version of your product. You could start with one of the three biggest countries, but you'd still need to localize much sooner.
So what? There are many things that Europe is getting right. We have smart people, good universities, and attractive cities. It's easier for qualified people to get a visa in Switzerland than in the US, it's still possible to IPO without too much overhead, and tax rates are quite nice if you incorporate in the right country.
All Europe needs is a few rebels with great tech skills, original ideas, and good connections to VCs. People who fit this profile will ignore all the difficulties and just go for it.
--
Thanks to Nicolas Berg, Douwe Osinga, Christophe Dessimoz, Alexandru Balut, Philippe Schoen, Keno Albrecht, Florian Walpen, David McCreery, and Corsin Camichel for attending and participating in the discussion.
Labels: barcampzurich, startups
When Corsin and I started organizing BarCampZurich last year, we had lofty ambitions: I remember sitting in an organizers’ meeting in a basement in Chur, Switzerland, explaining to a room of skeptics that we’ll have 50 or more attendees. It worked out pretty well, though: Almost 100 people showed up. (Here's a summary of how BarCampZurich worked out.)
Thanks everyone for coming to BarCampZurich and helping out! I think the unconference was a success: 99 people came in total. At our first planning session in August, I made a bet with Paul H. that more than 50 people would show up. Looks like I won that one.
