[yoran]

It's paradoxical that entrepreneurship is less of a thing in the EU than in the US. After all, Europeans can afford a lot more risk than Americans. There's a strong safety net in the form of social security. Health insurance is not tied to your employer. European university graduates don't start with lives with several $100k in debt, while having gotten an education of similar quality. Maybe the culture is shifting?

[zemvpferreira]

There is no paradox, only innocence. Did you know here in Portugal company directors used to be personally liable for social security payments for a business's employees in case of bankruptcy, until the end of their former contract? That meant for every engineer you hire, you might easily be on the hook for 10K with the government in case you go under. Try failing fast with that.

America was built in part by swindlers and robber-barons in a system who let them get away with it by design. In many of Europe's different legislations, failure in the bankruptcy way has/had serious consequences for the business person responsible. Play fast and loose with your responsibilities like you might in the US, confident that the corporate veil will bail you as long as you don't do anything criminal, and you might find yourself staring down the barrel of a loaded fiscal gun.

[TTPrograms]

If this perspective of "startup failure is a deep moral sin insufficiently penalized by the government" is common in Europe then the lack of entrepreneurship is not very surprising.

[igorkraw]

Startup failure is fine, not being accountable to your employees is what we have a problem with. The concept of the workers council in German law keeps throwing wrenches into the attempts to import the more exploitative business models from the US (N26 and Gorillas are recent cases) and Walmart completely flopped for related reasons. I do admire the business and entrepreneurship culture over the pond, but I think we can import the best bits of that without treating humans like fungible capital and burnout culture. It will just take a lot of time, especially in Germany (my native country), the business culture is still very conservative in the sense of rule based and authority/hierarchy oriented. I think if Germany adopted californias laws on non-competes and employee IP a lot would be gained already.

Notably, Sweden has a very robust social security network and a lot of entrepreneurship as well, the Swedes I talked to explicitly pointed to it as something that eased their way into taking risks.

[TTPrograms]

Are you implying that startup success in America requires exploitation of workers? I don't think most people would consider the management of early employees at successful startups to be "exploitative". Most of them are heavily incentivized.

There are specific issues with the worker models of Uber et al, but that's an orthogonal point to the general formation of startups.

[kevinventullo]

For ultra successful startups, sure everyone gets rich.

I think the issue is with the 95% of startups that have no or moderate success who convince employees that lotto ticket equity and beanbag chairs are worth more than work-life balance, healthcare, and cold hard cash.

[rjtavares]

> Are you implying that startup success in America requires exploitation of workers? I don't think most people would consider the management of early employees at successful startups to be "exploitative". Most of them are heavily incentivized.

This statement perfectly encapsulates the difference in work culture from the US and Europe. Exploitation doesn't happen because successes exist. You can get rich, so everything is allowed.

Having less social nets and having more startups aren't independent: they both result from an inherently risk taker culture.

(of course, all generalizations are limited and may not apply to all cases)

[throaway1990]

He's implying that workers should work hard and give all the earnings and IP to the govt so they can "redistribute" and "rehire" for communal good.

[zemvpferreira]

That's the wrong framing. I suspect the reality is that many 20th century European law-books were written to protect workers and state from exploitative/criminal business owners. Rightly so.

It's an accident that the most important bits of corporate and labor law don't distinguish between a 300-person shoe factory and a 20-person series-A startup. They weren't around when these concepts were codified and written in stone. The systemic and personal consequences are unfortunate but impossible to prevent.

[vletal]

Ltds are a common thing all around the world and work as you'd expect. What OP mentions seems to be specific to Portuguese law.

[PostOnce]

Running a bankrupt ltd means a lot of serious consequences in a lot of countries... like not being allowed to run another one for a long time.

[zemvpferreira]

You'd be surprised. If I'm not mistaken in some central European countries you could be sentenced to jail time after bankruptcy up to the 2000s. My point is precisely that ltds exist but are not the same world-wide. People (like myself) raised on American business folklore can be in for very rude awakenings when things start going badly.

[vletal]

We'll, the claim seemed overly broad. I wanted to point out that these harsh liabilities on the side of company directors are country specific and usually a company can go bankrupt as long as it's not the fault of the director due to them mishandling the company resources without pulling the director down with it.

[zemvpferreira]

Let's put it this way: If anyone is thinking of starting a business, they should spend a couple of hours researching and getting guidance from experts about the laws in their specific country. It's very easy to act cavalierly on advice meant for another jurisdiction without realising it. I have.

Another quick example from Portugal: Did you know businesses or business-like entities (we have those for smaller entrepreneurs) are required to keep a 10-year archive of paper receipts, regardless of having already filed digital copies with the government or of any other common-sense exception? Most people here don't. But they can get serious fines for not being able to produce almost decade-old records they had no clue were mandatory.

The points are: a) that there is no such thing as "europe" to begin with in a regulatory sense; b) but there are structural reasons why entrepreneurs in the area behave like they do, it's not an accident; c) only the paranoid survive, so do your research because there will be a test later and you don't get a do-over.

[TTPrograms]

1) Less upside for entrepreneurs/investors/early employees due to tax policy,

2) greater hiring/firing friction due to stronger employee protections,

3) greater fixed operating costs/overhead all around due to increased incorporation costs/bureaucratic requirements.

I don't think these things are necessarily negative, but in a world with competition between markets with high incorporation friction and low incorporation friction you'd expect entrepreneurship to concentrate in lower friction markets.

[jbay808]

I can't speak for Europe, just for Canada, but I assume that a similar dynamic might exist. "Less upside" for successful founders due to taxes is frequently cited but I seriously doubt it. Instead, less risk appetite in the investment community is far more likely. Investors offer less money, with far more strings attached, and so founders move to the US to seek better investment terms. Taxes are a distant afterthought.

[TTPrograms]

If taxes affect upside for investors (especially in large gain outcomes) then it would definitely reduce rational risk appetite.

Say it's rational for some untaxed investor to take a chance on 1% on no less than $10M return. If after taxes somewhere that turns into a $5M outcome then you would need a 2% chance for equivalent expected value.

[duped]

Framed another way, perhaps the existence of strong social safety nets is evidence of cultures that discourage behavior and ideologies that encourage entrepreneurship.

Even in the United States the conditions for a startup ecosystem to thrive are localized mostly to California, both financially and culturally. Risk intolerance and shortness of ambition is pervasive in our society too, just that a few historical factors have allowed for a business counterculture to thrive in parts of it.

[yoran]

Maybe I'm wrong, but isn't California one of the more progressive states with a stronger social safety net than say Arkansas or Alabama? So isn't that counter to your argument?

[duped]

There is no meaningful safety net in California compared to European nation. They have a few more worker protections and a higher minimum wage, but it's not like they have socialized medicine.

It's better than the states that actively work to harm their citizens but that's not saying much.

[csa]

> Even in the United States the conditions for a startup ecosystem to thrive are localized mostly to California, both financially and culturally.

I largely agree with this, and I (mostly) love California for many of these traits.

That said, I think startup ecosystem 2.0 will be centered around Austin. It will look very different than the California startup scene, but it will be just as transformative (if not moreso) imho.

[908B64B197]

> That said, I think startup ecosystem 2.0 will be centered around Austin. It will look very different than the California startup scene, but it will be just as transformative (if not moreso) imho.

I've heard that before. "look at X, it's the Next Silicon Valley".

Every time, it was someone trying to sell me something [0] and every time the correct move has been to keep investments in the Valley.

Maybe this time it'll be different.

[0] https://en.wikipedia.org/wiki/List_of_technology_centers

[csa]

> I've heard that before. "look at X, it's the Next Silicon Valley".

Yeah. I don’t think it will be the next Silicon Valley. I do think it will be the center of startup ecosystem 2.0.

I personally think the biggest difference in startup ecosystem 2.0 will be the lack of Silicon Valley-style VCs. Whatever money is used to fuel the fly wheel will have a fundamentally different approach to investing, at least in the beginning.

I’m not sure what your investments are, but if SV works for you, then stick with it. The startup ecosystem 2.0 probably will not be a good fit for you or them.

[908B64B197]

> I personally think the biggest difference in startup ecosystem 2.0 will be the lack of Silicon Valley-style VCs. Whatever money is used to fuel the fly wheel will have a fundamentally different approach to investing, at least in the beginning.

Where are they going to get investments from?

[csa]

> Where are they going to get investments from?

Great question.

Probably people and organizations who are not looking for a typical SV portfolio (essentially many strike outs and a few home runs that are determined over a specific and relatively short timeline).

SV VCs started out as financiers that were supplying a lot of capital to start capital-intensive businesses (e.g., chip fabs). They are still largely designed to do that, but many businesses can be started and often grown with relatively small amounts of capital. These cheap-to-start businesses are often not served well by the SV VC model.

Some ideas:

1. The companies that are looking to control a complete market will still go to SV VCs.

2. For the companies whose business model doesn’t match the SV VC model, they will go elsewhere. They are doing it now. Specifically, some companies may be capped at growth due to the market size, the nature of the market, etc. When these companies use SG VC, they usually end up just fizzling out, even though the company could have been viable and stable at a small market cap (specifically, a number that would not move VC overall returns but would be large for most founders).

3. I expect the money will come from people and organizations that are happy with consistent, long-term, above average returns — basically focusing on more singles and doubles rather than home runs (to continue the baseball analogy). This might mean more debt rather than equity (unless a company chooses to go public). This might mean that institutional investors could struggle to find a single place or set of places to park large chunks of their money. This might mean that the investors play a key role in the business (e.g., a payment processor supplying short term loans based on historical cash flow).

4. Some of SV’s largest funders (LPs) may find themselves struggling to have significant access to this market, at least at first. Many of the companies and people who are in the best place to make these investments don’t need their money to participate. This could change — for example, payment processors could open up tranches of debt for companies that use their service, or private equity could end up taking a more proactive role in buying and developing businesses. It’s tough to say.

5. If I had to take a stab at what the “end game” of startup ecosystem 2.0 looks like, I would guess that most of these startups remain founder-led until exit. Exits will be relatively small (9 digits or less, usually less). Startups will be purchased by PE and will be developed and flipped. At some point in the chain, the amount of money involved will be high enough to involve substantial institutional money, and the institutional money will get involved though some sort of PE vehicle.

Note that #5 isn’t exactly original — it’s happening now with some PE firms. The main differences I see is that viable small companies won’t be run into the ground trying to hit home runs, and PE will be much more proactive in business building from a much earlier stage.

To build on my original response… why Austin?

- Plenty of land to expand still. This means affordable housing somewhere near Austin should be possible for a long while.

- A great university with a solid engineering department is nearby.

- No state taxes (big strike against CA).

- Interesting city center that is walkable/bikeable if you choose to live there. Overall metropolitan area is desirable — people have been gravitating there for decades now.

- Moderate weather for most of the year (summers are rough but manageable). Definitely not California good, but definitely not Northeast bad either.

- A relatively quiet tech scene that has been growing for decades that can supply mentorship, contacts, and (if necessary) money.

[yoran]

I don't think many people want to move to Texas, for instance abortion is illegal in the state. I doubt people want to move back to the 1950s, certainly not startup people, who tend to be more progressive. I personally would never want to move to Texas.

[mrep]

Texas was the 3rd fastest growing state in the country according to the recent census [0] so clearly many people are fine moving to Texas. And abortion at the state level is not something I would even consider in my list of priorities when choosing where to live when you can just drive to another state for a once in a lifetime event if you ever actually needed one.

[0]: https://www.aarp.org/politics-society/government-elections/i...

[csa]

> I don't think many people want to move to Texas, for instance abortion is illegal in the state. I doubt people want to move back to the 1950s, certainly not startup people, who tend to be more progressive. I personally would never want to move to Texas.

I’m guessing you’re European based on your business. Do you live in the US?

I’m guessing you don’t know many people who live in Texas, especially Austin. Startup people and companies are flocking to Austin.

Texas politics are weird because the Republicans have gerrymandered the state to a comical level. It’s allowed to persist because none of the bodies that can serve as a check and balance are doing any checking or balancing (failure of US democracy, imho).

I would not consider what is happening there representative of Texas as a whole, and especially not representative of Austin. The overall feeling of the state is moderate with a wide range of perspectives (like most populous states). The elites, however, are very conservative.

A change in Texas politics/politicians will come at some point, and when it comes, it will be swift. I am not convinced that the politicians in Texas are particularly representative of the people, but they are highly representative of the special interests of the state.

[marmaduke]

At least for France, there is less to recommend doing a startup than in the US. The social security regime is worse (than for others eg employees, govt workers), the tax schemes are complex and penalizing at the low end, and the amount a company has to pay an employee is near double what the employee sees in the bank, because near half goes to support the social security net. I’ve been here a decade and wouldn’t start one, even after doing autoentrepreneur unless it was the only choice.

[vkou]

> and the amount a company has to pay an employee is near double what the employee sees in the bank, because near half goes to support the social security net

In dollar values, in the US, that same amount will go to pay for health insurance and benefits and social security and medicare taxes. Combined with lower wages, and your overall payroll expenses will still be much lower in France.

There aren't a lot of senior engineers making north of $300,000 USD/year in France. But there are a lot in SV.

[sokoloff]

If you’re stuck in France, could you not start a company anyway and only hire remote workers from outside of France?

[otikik]

My not-very researched take: entrepreneurship is a game played mostly by people from already wealthy families. Since the % of wealthy people in the US is higher, and their rich are richer, you get more "initially rich" entrepreneurs.

[Axsuul]

Interesting take but how do you explain almost half of all companies being founded by immigrants or their children?

[vkou]

A lot more than half of Americans, if they were born in another country, would not be allowed to immigrate to the US under modern immigration policies.

Most immigrants have to undergo an extremely strong selection filter, before they are allowed in. It would be truly surprising if they weren't more successful on a per-capita basis.

[otikik]

Are those poor immigrants, or rich immigrants?

[andreyk]

I'd guess a lot of it is cultural - I believe much of Europe also has a far less workaholic culture than the US, with more emphasis on living life and whatnot. And I'm sure there are other factors (France's labor laws presumably make things harder, although that's a barely informed guess on my part).

[whizzter]

Like others mention, while you might not be on the hook for huge hospital bills there are other parts of the safety net that are more or less denied to you.

Myself I ran into "problems" when it came to parental leave, parents in Sweden usually gets a combined 480 days of parental leave, of which about 360 are at 80% of your income levels.

Problem is that if you (like me) plan on bootstrapping something then you're not taking out salary during that period, so even if you paid a lot of money in taxes the year before you still get marked down as a zero-earner if you plan to take time off with your kids.

Luckily the Swedish govt realized that this hurts things in the long term so they actually relaxed the rules in this area so you can retain your previous income levels for 3 years if you want to take advantage of parental leave.

(Not entirely sure if they fixed this if you get sick though, regular employees that get sick can retain most of their income for a while but not entirely sure if these 3 years startup grace period applies when getting sick)

[ArtRichards]

In general, as an individual entrepreneur/'business owner'/selbstandiger in germany, and also in the US, its neigh impossible in Germany to perform your own accounting/tax filings; and the idea of an LLC is very difficult to obtain (see how companies like Starbucks structure their limited liability with an 'AG & Co. KG')

Combine this with the lack of 'safety net' for someone who owns the business (you dont qualify the same as if you were a regular non participatory employee) and the lack of angel funding/froth in general... its not as simple as you may imagine, especially for non citizens.

Its possible, but its not as simple :)

Edit typo

[jashmatthews]

Paying private health insurance and pension is, inalmost all cases, better for an internationally mobile founder anyway!

[jorblumesea]

Europe has very progressive policies on some level, but also very regressive or unfriendly policies for business owners. Classic example is bankruptcy. In the US, chapter 11 is done as an almost routine "get me out of debt". This was impossible in Europe until very recently (EU Restructuring Directive, July 2021 was the deadline to implement).

Personal bankruptcy is another good example where Europe just has no equivalent.

[flir]

In the UK personal bankruptcy costs £680 and is normally discharged after twelve months. Is the US less onerous than that?

[brailsafe]

If I didn't have a ton of debt, I'd probably need a particularly intense desire for material wealth or financial independence in order to drive me into business. I don't currently have a ton of debt, just a bit, and I'd like to get rid of it, but beyond that I'm not terribly interested in the bullshit products and crap most people spend all their money on. Therefore, money itself isn't motivating enough to sacrifice so much for it. Likewise, arguments about changing the world are hollow at best most of the time, and overall those claims by previous companies have arguably worsened the world more than helped it.

[jacquesm]

If you push enough people off a cliff some of them will learn to swim. If you don't push people off a cliff only those that think they'll be able to swim may jump.

[leobg]

I‘d argue that it‘s not a paradox . It‘s actually the same thing:

People in Europe seem to be more focused on what is deemed „safe“. Parents don‘t want their kids to become „entrepreneurs“ - they want them to find a „safe job“.

I‘m sure that many parents in the U.S. want that, too, for their children. But the U.S. is a country that was founded by immigrants. By people who, in the very founding of the country, broke with old traditions and with the „normal way“ of doing things.

Another commenter mentioned that many startups seem to be headed by immigrants, or that many of the „big guys“ in Silicon Valley started out as such (PayPal Mafia, Google guys, WhatsApp...). It‘s the same thing: You need to break with tradition to become an entrepreneur.

So, in a sense, you need to be standing a little „outside“ of the society in which you are moving. People who visit Europe from the U.S. often notice that Europeans tend to seem less open to random encounters with strangers, and that they tend to hang out in tight-nit social groups.

This is, of course, a generalization. But having lived both in Germany and in California I see this as an accurate description.

And I would argue that it‘s a lot harder to do a startup when you‘re inside a tight-knit social circle, where you have to explain yourself, where you face embarrassment if you fail, and where people might say „Who do you think you are, founding your own company?“.

It‘s a lot easier to do that if you, as Steve Jobs once famously said, have freed yourself from the concept that you must do what you are told, and should not bump into the walls too much (i.e. the „rules“ according to which society claims to work). After all, a real startup is an entity designed to break some of those rules, and to replace them with new ones.

Also, it seems to me that Europeans and Americans (especially Californians, East Coasters and Austiners) differ in where they seek salvation from their problems:

In Europe, I would argue, it is still very much more the politicians and the state. And I do not think this is the case as much in those areas of the U.S.. Again, the observations of a better social security net on the one hand and a lagging behind in entrepreneurship seem to me not to be a contradiction, but two sides of the same thing.

That idea that you can fix what you see as broken by doing a startup is slowly becoming a lot more mainstream in Europe, for sure. But, I think, for Europeans this is more a learned behavior, something inspired by what they see in Silicon Valley and in entrepreneurship shows as „Dragon‘s Den“, whereas in the U.S., it‘s always been a way of life and a philosophy for at least some substantial part of the population.

Do not forget, also, that many countries in Europe were dictatorships just two generations before. In Germany, half of the country lived in socialism up until my parent‘s generation.

In such an environment, you do not raise your kids to take risks, to put yourself in the spotlight, or to change the lives of others. And these values of „being safe“ and „fitting in“, they filter down, from grandparents, to parents, to children. It takes generations for them to die out. So there‘s that, too.

[b20000]

in europe, you cannot file for personal bankrupcy. you will be stuck with debt forever.

[jacquesm]

This is complete nonsense. I don't know where you picked that up but wherever you did it isn't true.

[b20000]

where i am from and in at least 2 other countries that is the case.

[jacquesm]

That's fine, but then you shouldn't make blanket statements about the whole of the EU, simply state the countries you know this about rather than to extrapolate falsely.

[b20000]

what is this? a phd defense?

[Hglgrd]

This isn't true. For example, France and Germany both have a complete personal bankruptcy legislation

[b20000]

that they have the legislation doesn’t matter. the question is whether you can file and get rid of all debt, and recover fully within a reasonable timeframe of a few years.

[kall]

I don‘t think that is the case across the board. I‘ve certainly heard of Privatinsolvenz. But you might not be able to claim this for business related debts (which should be covered by your limited liability cooperation in theory)?

[b20000]

maybe in germany it is different.

[robin_reala]

That’s categorically not true. For example, in the UK you can file for bankruptcy[1] and in Sweden you can apply through Kronofogden to have personal debts cancelled after a supervised three year period.

[1] https://www.gov.uk/bankruptcy

[whizzter]

Slight correction, In Sweden you can apply for "debt-sanitation" from Kronofogden, it requires you to pay all earned money above an level called "existential minimum" for _5_ years (ie you'll live as a really "poor person").

After that point in time all the old debts are cleared off (although you might still be stuck with bad credit scores).

[b20000]

ok, so not the same thing as in the US.

[whizzter]

Not technically, but that's no surprise since the legal systems are different. In practice though it serves the same purpose of making individuals debt free (even if it forces one to go through dog years).

Iirc Bankruptcy is technically reserved for companies and other legal entities, and always either ends in reconstitution or liquidation depending on if a court appointed lawyer finds that there are funds, income or other means to continue operating, or if liquidation is the only way that creditors will receive anything back.