Ask HN: Why does Europe not have any big tech companies?
12 comments
I believe it is a combination of things:
* the regulatory environment is tough on businesses: it's hard to start one and follow all the rules. The rules can also be different across EU states.
* poorer local market. Europeans generally don't have as much disposable income as Americans. It's harder to get a good amount of people to pay 20 EUR / month for a SaaS.
* different investor culture: if you failed once, you'll always fail thinking
* corporate and personal taxes are high, so there's little incentive to work like crazy to become a multimillionaire if you have to pay the bulk of it in tax.
* overall tougher social mobility, making it hard for top talent to get to the right people for funding, ideas, mentoring, etc.
* EU spends public money in attempt to create "unicorns". This feeds a certain class of exploitative business people and paper pushers who have optimized to leech off these programs by building useless things that technically check the boxes in rule books and regulations, in order to get even more public money.
* the regulatory environment is tough on businesses: it's hard to start one and follow all the rules. The rules can also be different across EU states.
* poorer local market. Europeans generally don't have as much disposable income as Americans. It's harder to get a good amount of people to pay 20 EUR / month for a SaaS.
* different investor culture: if you failed once, you'll always fail thinking
* corporate and personal taxes are high, so there's little incentive to work like crazy to become a multimillionaire if you have to pay the bulk of it in tax.
* overall tougher social mobility, making it hard for top talent to get to the right people for funding, ideas, mentoring, etc.
* EU spends public money in attempt to create "unicorns". This feeds a certain class of exploitative business people and paper pushers who have optimized to leech off these programs by building useless things that technically check the boxes in rule books and regulations, in order to get even more public money.
As someone who has a small business in the UK I’d disagree with your first point, at least for the UK. The situation may be different depending on the EU state, but the UK has a fantastic regulatory environment. Clearing imports through customs for example is much more frictionless in the UK than the US.
I’d also disagree on the tax situation. They may be slightly higher than the US but then we also get health care included with that. This is amazing if you want to bootstrap a business, especially if you family or an illness. I have private insurance as well with BUPA but that only costs me $80/month with no deductible I believe.
I think your other points are true to varying degrees but for sure things are changing so they’re probably less true than they were ten years ago.
The biggest reason is probably that the US has California and Silicon Valley.
I’d also disagree on the tax situation. They may be slightly higher than the US but then we also get health care included with that. This is amazing if you want to bootstrap a business, especially if you family or an illness. I have private insurance as well with BUPA but that only costs me $80/month with no deductible I believe.
I think your other points are true to varying degrees but for sure things are changing so they’re probably less true than they were ten years ago.
The biggest reason is probably that the US has California and Silicon Valley.
It's more difficult to scale in Europe, because of multi-language, multi-culture and regulations across the countries.
I'd guess, for a large example, military spending.
It's not the only one, but that's one huge investor that drives many others.
In the US, or China, you have one _huge_ budget, compared to what can be compared in terms of integration across european countries (each with their own politics, armies, capabilities, budgets, priorities; even if they do integrate & collaborate with each other).
It's not the only one, but that's one huge investor that drives many others.
In the US, or China, you have one _huge_ budget, compared to what can be compared in terms of integration across european countries (each with their own politics, armies, capabilities, budgets, priorities; even if they do integrate & collaborate with each other).
I got curious about ESET which is European company, from Slovakia, where I live. It could be probably easily unicornized, however the owners aren't interested in selling or IPOing it. A non-silicon-valley way of doing business :)
Source(in Slovak): https://finweb.hnonline.sk/ekonomika/951768-spolumajitel-ese...
Source(in Slovak): https://finweb.hnonline.sk/ekonomika/951768-spolumajitel-ese...
EU Politicians, including Breton, cultivate this objective to build Unicorns and Large companies.
This is dangerous on several levels, from waste of public money to harm to smaller competitors.
This is dangerous on several levels, from waste of public money to harm to smaller competitors.
I guess there isn't such excess of easy money, VC nor govt spending?
ECB recently joined quantitative easing however (printing money), it is buying corporate bonds en masse, so unicorn-scale VC may happen too.
ECB recently joined quantitative easing however (printing money), it is buying corporate bonds en masse, so unicorn-scale VC may happen too.
and ECB just started NIRP (Negative Interest Rates Policy) in order to tax our savings accounts.
Or let's move your savings to your current account.
Or let's move your savings to your current account.
We have small companies who fulfill the needs of the people. In the Netherlands people don't use Google maps for public transport navigation, we use 9292.nl, whose service is much better than that of Google's spotty timetables.
I assumed tax policy had something to do with it, the US taxes profit not revenue so companies like Amazon are financially incentivized to always reinvest in itself and grow. Many European countries have a pretty hefty ~20% VAT.
VAT is usually not paid by companies, only by consumers. The only way it might affect companies is via reduced sales due to higher taxation of private customers.
EU also taxes profits not revenue (I believe only with the exception to non-domestic tech companies, where revenue taxes are now being introduced), but you're right about VAT and that rate is climbing meaning stuff looks more expensive to consumers (prices are almost always shown with VAT included).
Another factor is small tech companies can be bought by US companies easily.
The US tax system allows^H^H^H^H^H^Hencourages that: this is a good use to money that would be taxed if came back to the US.
Instead it comes back as sales, and better market position ;-).
The US tax system allows^H^H^H^H^H^Hencourages that: this is a good use to money that would be taxed if came back to the US.
Instead it comes back as sales, and better market position ;-).
If you look at the most profitable technology companies, you could ask where the US went wrong...
https://fortune.com/global500/search/?non-us-cos-y-n=true&pr...
NB: Interesting that Accenture is counted as an Irish company...
https://fortune.com/global500/search/?non-us-cos-y-n=true&pr...
NB: Interesting that Accenture is counted as an Irish company...
The results explicitly exclude US companies due to "non-us-cos-y-n=true" in the query.
Thomas Philippon argues a large factor is that the USA gave up on having free markets.
https://www.hup.harvard.edu/catalog.php?isbn=9780674237544:
”a leading economist argues that many key problems of the American economy are due not to the flaws of capitalism or the inevitabilities of globalization but to the concentration of corporate power. By lobbying against competition, the biggest firms drive profits higher while depressing wages and limiting opportunities for investment, innovation, and growth.
Why are cell-phone plans so much more expensive in the United States than in Europe? It seems a simple question. But the search for an answer took Thomas Philippon on an unexpected journey through some of the most complex and hotly debated issues in modern economics. Ultimately he reached his surprising conclusion: American markets, once a model for the world, are giving up on healthy competition. Sector after economic sector is more concentrated than it was twenty years ago, dominated by fewer and bigger players who lobby politicians aggressively to protect and expand their profit margins. Across the country, this drives up prices while driving down investment, productivity, growth, and wages, resulting in more inequality. Meanwhile, Europe—long dismissed for competitive sclerosis and weak antitrust—is beating America at its own game.
Philippon, one of the world’s leading economists, did not expect these conclusions in the age of Silicon Valley start-ups and millennial millionaires. But the data from his cutting-edge research proved undeniable. In this compelling tale of economic detective work, we follow him as he works out the basic facts and consequences of industry concentration in the U.S. and Europe, shows how lobbying and campaign contributions have defanged antitrust regulators, and considers what all this means for free trade, technology, and innovation. For the sake of ordinary Americans, he concludes, government needs to return to what it once did best: keeping the playing field level for competition. It’s time to make American markets great—and free—again.”
I know this is controversial, so I looked for negative reviews on this book. I can’t find a convincing one.
https://www.amazon.com/Great-Reversal-America-Gave-Markets/d... has 13 reviews, all 5 stars, and positive.
https://www.goodreads.com/book/show/44326237-the-great-rever... has mostly 4 and 5 ratings, with a single one-star review, but that doesn’t say more than “rated it”.
https://www.washingtonpost.com/opinions/has-america-gone-sof... is the best critique I could find to critique it, which basically says “Is he right? We can’t tell”.
https://www.hup.harvard.edu/catalog.php?isbn=9780674237544:
”a leading economist argues that many key problems of the American economy are due not to the flaws of capitalism or the inevitabilities of globalization but to the concentration of corporate power. By lobbying against competition, the biggest firms drive profits higher while depressing wages and limiting opportunities for investment, innovation, and growth.
Why are cell-phone plans so much more expensive in the United States than in Europe? It seems a simple question. But the search for an answer took Thomas Philippon on an unexpected journey through some of the most complex and hotly debated issues in modern economics. Ultimately he reached his surprising conclusion: American markets, once a model for the world, are giving up on healthy competition. Sector after economic sector is more concentrated than it was twenty years ago, dominated by fewer and bigger players who lobby politicians aggressively to protect and expand their profit margins. Across the country, this drives up prices while driving down investment, productivity, growth, and wages, resulting in more inequality. Meanwhile, Europe—long dismissed for competitive sclerosis and weak antitrust—is beating America at its own game.
Philippon, one of the world’s leading economists, did not expect these conclusions in the age of Silicon Valley start-ups and millennial millionaires. But the data from his cutting-edge research proved undeniable. In this compelling tale of economic detective work, we follow him as he works out the basic facts and consequences of industry concentration in the U.S. and Europe, shows how lobbying and campaign contributions have defanged antitrust regulators, and considers what all this means for free trade, technology, and innovation. For the sake of ordinary Americans, he concludes, government needs to return to what it once did best: keeping the playing field level for competition. It’s time to make American markets great—and free—again.”
I know this is controversial, so I looked for negative reviews on this book. I can’t find a convincing one.
https://www.amazon.com/Great-Reversal-America-Gave-Markets/d... has 13 reviews, all 5 stars, and positive.
https://www.goodreads.com/book/show/44326237-the-great-rever... has mostly 4 and 5 ratings, with a single one-star review, but that doesn’t say more than “rated it”.
https://www.washingtonpost.com/opinions/has-america-gone-sof... is the best critique I could find to critique it, which basically says “Is he right? We can’t tell”.
Isn't that because US has higher median incomes? economies are a mixed bag, some stuff is more expensive in europe (e.g. food) , and europe is very different from east to west, so each country is a different comparison.
European countries are notably absent. Where did Europe go wrong, and is there any way to catch up?