🇪🇺 Dear Europe, please wake up – eu/acc

Apr 30, 2024 · 13 min read · 24,972 views

I lived in SF for five years. Started companies in multiple countries in Europe. I invested in more than a hundred companies globally from Brazil to India. At this point I feel like I have a good comparison of different ecosystems.

Europe is special to me as I consider myself a proud European, but damn we need to talk.

I am equally extremely bull-ish on Europe and equally extremely bear-ish.

On one hand I believe we are on our clear path to fall from #1 to #4 in the world. On the other hand, I don't believe we are as doomed as people on US Twitter make us out to be.

Intentionally I don’t want to do Brussels or EU-ranting; I don’t want to do pure stats comparing or making speeches about the importance of robotics or AI, neither do I have the goal of suggesting outlandish changes. We need actionable improvements and fix how we think about Europe.

So, let’s go…

Here my POV:

We started to believe US propaganda about Europe

“Europeans lack the mentality and are risk averse”

“They don’t want to work as hard”

“They favor work life balance”

“They are constantly on vacation”

“…and that’s the reason they are losing”

None of these things are true.

Let me show you what i mean…

“Europeans don’t work hard enough”

Eastern Europeans work harder than Americans. Even Italians work more hours than Americans.

hours worked

And based on my experience in the US, I honestly think that the US numbers are overstated.

US folks love talking about how hard they work. And honestly with service workers and blue collars I believe it. But not in tech.

In SF you frequently hear big tech people talking how hard they work, while they queue 30mins for a coffee at Blue Bottle and chitchatting there for another 20mins. You will get into a discussion in your WeWork about how much grit being a founder requires, an hour later you end up alone at 6pm on your floor. You will hear from founders how many late nights they need to pull, but with late nights, they mean investor dinners.

Do American founders work hard? Yes definitely. But all founders do. That’s their job.

But Americans definitely love talking about how hard they work; way more than we do.

And let’s say for the argument I am wrong and we will believe all the numbers. The numbers aren’t that far off, even when compared to “after 6pm, please don’t talk to this employee or we sue you ja?! Germany”.

“Europeans lack the risk mentality”

Personally, I don’t believe it because I know that 1/5 of all US unicorn founders are European. If they’d want to avoid risk so much why do so many go into so much risk to go to the US?

But this isn’t even my main pet-peeve. My main headache is: Let’s say it’s true. Let’s say Europeans are more risk averse… Why? And more importantly why do we act as if we couldn’t change that?

Mentality isn’t genetic. This isn’t hardwired into our bones or seeded into our water. This is an outcome of a system that favors being more careful.

Failing in the EU has the same downside as in the US, but their upside is way bigger and more importantly the acceleration is way higher.

If we improve the system the mentality improves. Don’t believe me?

Go to India.

The mindset of founders there switched from "i have to leave asap and nothing will ever change here" to "we are going to be one of the top three world powers and everyone should come here to start companies" in literally less than 10 years of strong economic growth and business success stories to follow.

Mentality is an outcome of a system. Let’s change the system. Make success more likely and people will believe that they can be successful.

"They have a too comfortable life… you need hardship to succeed"

If it would be true that you need to come from hardship to succeed then US VCs wouldn’t fund every Stanford grad born with a silver spoon in their mouth.

Americans love their hero-arcs so much that people manage to spin anything into a “coming from nothing story” – even if they got their first investments from their uncle and worked for free in the “garage” of their parents multi-million-dollar house in Palo Alto.

Yes, to start companies you need to grind. You will need to work hard, because if you don't someone else will. But needing the fear of existence over you to succeed is only true if you don't know about survivorship bias.

“The Taxes are too high and people are not motivated because of this”

Have you seen the Californian taxes? The EU isn’t far off. And btw you can easily pay ridiculously low taxes in Europe if you want to optimize for it. If you optimize for it, half the amount of US-taxes are easily doable in multiple European countries. And that’s without crazy optimizations yet.

If this was the only criteria everyone would flock to those tax optimized places in Europe.

“Well SF is better”

I don’t disagree. SF is a unique place. We currently don’t try to get on the level of SF. We are trying not to fall behind China, India and random second- and third-degree hubs in the US.

I highly recommend everyone in tech to move to SF once in their life. Learn and then come back and build their life’s work.

So, here’s my POV: The problem in Europe isn’t taxes or mentality. It’s friction.

What do you need to start a large company? Founders, ideas, customers, investors, etc etc. Sure.

But more importantly…

You need early acceleration. You need momentum towards your goal. You need traction.

You can think of this as customers, product insights, investor interest, networking success, etc.

You need early acceleration to reach escape velocity.

If every day is 1% harder for you than your competitor who will win? Your competitor. And in global markets where frequently 1-2 companies become the dominant player in a market this means you will not be a bit smaller. You will fight for scraps.

This is what’s happening right now in Europe.

The problem is not that regulation 1 or 100 is too much. The problem is that every country has different regulations, creating a mess of complexity if you want to act across a larger consumer market and make it impossible for standard solutions that remove early friction to emerge.

So, what do we need to change

First, we need to stop believing the US meme about Europe. And second, to do this we need a system where they are not true. To get there we need improvements.

I don’t want to write a big speech about robotics, AI, climate, or space-tech. About ambition, tolerance for risk, or people who want to build outlandish ideas.

We’ve got all of that already. We need to help them.

I don’t want solutions that are “one unified Europe under ABC’d rule” or “complete control by Brussels”. I am looking for first steps and pragmatic solutions. Simple things that have impact over time, and more importantly we can build on top of.

Here are my two suggestions – no big speech no big unreachable ideal goal – two simple suggestions as a starting point and if you disagree with those, please really really explain to me why:

1) We need an EU Inc – desperately

The US has its state Delaware as de facto standard for legal entities for startups.

When people say US Inc, they mean Delaware Inc.

This might sound like a small thing, but it has a lot of implications. With one fundament on which you can start establishing other standards on top of it.

Eg you can create standard documents like the YC SAFE or even software like AngelList on top of that.

“Well, we have similar documents for German GmbHs as well…”

Let me stop you right here.

I invest globally.

To invest in the EU I need to understand 30+ legal systems to make sure I am not tricked over by the small print, get lawyers and figure out if i need a notary. After that i need 10-20 emails each funding round to satisfy whatever random fun fact local countries came up now.

In the US I receive an email with a document signing link to a standard SAFE and can sign with one click. I don’t need to check the fine-print. I (and the founder) don’t need to involve lawyers.

“But if the deal is good enough it’s worth the effort…”

That’s not the reality of early stage investing. If someone invests $30k to help you they don’t want to spend another 10-15k on lawyers trying to figure out how legal details in Slovenian OODs work. Fun-fact there are no Slovenian OODs. Those are in Bulgaria, but I bet you knew that. Or was it SRL? BV? SpA? AB? SA? OÜ? UAB? EhF? Geez how different can they be. I mean… we will find out latest when a bigger investor wants to come in, and freak out about local differences right?

“Well then one arrogant investor does not invest… who cares.” A portfolio company of mine had the best EdTech angel onboard. The best. In the world. People joined the round because of him. He jumped out of the round realizing the company is a GmbH and he knew this wouldn’t be done in the 2 weeks before xmas as an American investor. The follow-on investor was good. Would it have been better if they would had played on “internationally best investors approve this” level? Who knows.

Europe is a market of 750 million people, the EU of 450 million. And investing here is as complex as investing in small countries globally with sub 10 million people. Because that’s what it is.

“But there is the SE… which is Europe-wide”

This is my argument not yours. The SE shows that it would be possible, but it’s not meant for startups. It’s not meant to be simple.

“Well, you are just asking for this because you are an investor…”

I gave a talk about this more than 15 (gasp!) years ago while starting my first company. Investors don’t hate this. It limits the options for local founders, it’s overwhelming for people who don’t do it professionally like them, they can make sure they get low valuations and international investors are not used to stealing their deals.

Founders need this. Not investors. Investors make money on that opportunity arbitrage, even if it limits the overall upside.

Here is my Question: Why did we stop with “single market” efforts? Why is there no effort to unify legal entity in Europe?

Investing in companies at an early stage should not involve surprises and friction. Those kill deals.

2) Teach English starting at the earliest school classes

This sounds too simple to be true.

But the reality is dire.

If you go to the south of France – our hope and prayers in the global AI race – and order a coffee there is a chance that the waitress doesn’t understand the word “coffee”, can’t explain you what’s in the salad – happened to me twice. If you meet Italians there is a high chance that they had only 4-5 years of English at school.

I don’t care if you think English should be Europe’s default language or not. Growing up generations in this age without being able to properly speak English limits their job opportunities. It’s a disgrace to those generations and limits them, isolates them.

You don’t lose your culture by creating options for your future generations.

And more importantly you enable proper EU-wide media and networks. When you launch in the US your market pull can come from any part of the US. In Europe we are a mess of patchy networks and no significant media reaches across it.

Teach English. Seriously. Why is this even a discussion.

That’s it.

That’s it. Those are my two suggestions.

No big speeches no big rants. Two simple actionable first goals for politicians to decide if they are against or for it.

Why not a big ask?

Whenever you bring up a discussion about Europe people fear for their cultural identity. Let’s sidestep this. The goal is not one big unified completely homogenous Europe.

The goal is to have one single market for business where you don’t feel like you are expanding into far away foreign lands whenever you do business across your border. A single market where international players compete with local ones to get the best outcomes for everyone involved.

I’m sorry to keep ringing the bell of standards instead of doing a big chant around “bravery” “robotics”, “AI” and “innovation”.

All of those things come automatically if you remove friction and show examples to people.

Regulating vs Standardizing?

The main thinking behind it is a simple one. I want to get away from a mindset of “regulating” to a mindset of “standardization”.

Standards that can become fundaments for further standards. EU-wide solutions for EU-wide problems.

You can productize on top of standards - and we are far behind

I mentioned YC SAFE notes and companies like AngelList above. Those one-click abstractions of legal standards are great. But this isn’t the state of the art.

We are far behind with the state of the art. I highly recommend you learning about India’s DPI (digital public infrastructure) efforts. Nation-wide eKYC (with 1.4B people), cardless commission-free payments with UPI that is already at 1/4 of VISA’s volume, decentralized marketplaces like ODNC that allow small businesses to work with larger customers, nation-wide credit/loan marketplaces with OCEN.

India isn’t only tackling their biggest problems with standardization; they build products on top of it. Products like protocols that entrepreneurs can take and build solutions on-top.

“But india is one country…” Yes but a few years ago you’d have dismissed anything coming from them as being a developing country. Now that it’s working, it’s reframed as easy because they “are one country”

“But we lack the knowhow…” We don’t. Estonia has consulted with India on those projects. We have the knowhow. We lack the willingness to do European-wide solutions.

I got more… but I think this is a start. Intentionally a simple one.

Let me know

Do you disagree?

Should we not have an EU-wide entity that is simple and can be implemented everywhere?

Should we not teach our kids English starting as early as possible in school?

I think those are simple first steps with large systematic impacts over time.

eu/acc - let’s go