[JumpCrisscross]

> tons of European startups and scaleups and mittelstands and b2b companies of all sizes that are successful and innovative. They're just not "infinite growth" global behemots

If their business has no economies of scale, no. If it does, they won’t survive without subsidies.

At a certain point, subsidising a low-scale domestic replica of an efficient international option breaks due to (a) the internet and consumer choice or (b) cost.

[sofixa]

If the market was theoretical and all things were absolutely equal, yes, maybe, but that's not how things work in the real world.

For a good example, Walmart failed miserably in Germany because they failed to understand the local market in any way. You can have a successful regional chain of supermarkets without it needing to become Walmart-scale. Just being local, having a strong local presence and understanding of the market, and having local costs can be a massive advantage. A Bulgarian startup has economies of local labour costs that can trump the economies of scale of Google. Spotify are quite successful even if their competitors (Apple, Google, Amazon) are massive. Not to mention there are big market segments where economies of scale across markets simply do not apply. Legalstart, a startup doing "law services online" for small and medium enterprises in France cannot apply pretty much anything to any other country due to the different legal systems. If there was some massive behemoth in that space globally, Legalstart still wouldn't have an "economies of scale" disadvantage.

[bluGill]

There are a lot of businesses that are great for a small shop and will make a lot of money, but they have no potential to grow larger. Those businesses are not a domestic replica of some efficient international option as there never will be an international option. If you to become a billionaire you have to start one of those international businesses, but if you are content with a million you can get that on a much smaller local company and you don't have to deal with investors at all.

Software does lend itself to international options more than other fields as the upfront costs are high and ongoing costs are low. (compare to plumbers where you can start a company with a van and a fittings, but you have to pay the plumbers you hire every year - by the time you pay the plumbers and the office workers to schedule them there isn't much $ left over)

[JumpCrisscross]

> lot of businesses that are great for a small shop and will make a lot of money, but they have no potential to grow larger

You’re describing businesses without economies of scale. They can compete simply by being local.

[johnnyanmac]

Scale seems relative here, no? Scaling to serve a few nearby countries is still some sort of scale, just not worldwide scale.

[JumpCrisscross]

Economies of scale can plateau, yes. In those cases I’d argue there’s a niche for a medium-sized company. (Most law is in this category.) But if there are further economies of scale, the company that seizes the worldwide market will simply have lower costs and more R&D capital to work with.

[sofixa]

> the company that seizes the worldwide market will simply have lower costs

Not necessarily. Let's imagine a company that does budgeting and bank account centralisation, sold as a SaaS. A global company has to work on integrations with banks all around the world, data privacy regulations all around the world, translations including in right to left languages, fun stuff like UPI in India, cash payments to a machine in Japan, currency conversions etc. Meanwhile a Bulgarian startup in that space only needs to interface with the 15 local banks and use EU-mandated APIs that make their lives easier (all integrations are the same), and provide only one language, one currency. They don't need employees policies for 50 different countries, with local HR and legal departments/subcontractors everywhere. Not to mention layers of management to scale.

Do you still think the global company will have lower costs?

[JumpCrisscross]

> A global company has to work on integrations with banks all around the world, data privacy regulations all around the world, translations including in right to left languages, fun stuff like UPI in India, cash payments to a machine in Japan, currency conversions etc. Meanwhile a Bulgarian startup in that space only needs to interface with the 15 local banks and use EU-mandated APIs

You're describing a system with economies of scale, up to a point, followed by negative economies of scale. That's my argument: this is a good business for a European company to dominate.

[grumpymouse]

I would argue that many of the big tech companies have also been subsidised rather than being efficient. It has just been private investors rather than governments (and it feels like we are starting to see the end of that).