European wise I think we're really failing to build significant homegrown tech companies. I'm not sure of the exact reason although I've heard that startup support it low and too much regulation / diversity of regulation are issues.
America is a single massive low-regulation market. And a wealthy one. Tech products require high fixed cost to write the code/build the product, but then low ongoing cost to provide a service. Less regulation means lower complexity in building a product. A big market without a lot of regulation is a great way to amortize the high cost across a lot of people, while a wealthy market can support a lot of products. And of course a lot of investor cash to push around. Even using a single language and having mostly overlapping customs means that one product works for millions of people.
There are plenty of European customs and views that make developing these companies unpopular (eg data collection and privacy) but the single-massive-market is the economic reason why the US is so powerful.
That's not the only reason in my opinion. It's way easier for European graduates to find a job and cruise on to retirement. The govt takes care of them for life and so the do or die attitude needed to start a company just isn't there in most countries. This is a consequence of the welfare state most of Europe has become.
Actually I think it's more that Americans just have a higher cultural tolerance for risk. It takes a certain unusual kind of person to jump off a cliff and try to assemble a plane on the way down, and for some cultural reason, America generates more of those people.
To even have a shot at getting a successful startup off the ground, you need to a assemble a whole team of those people, which is still much more difficult in Europe (though things may be starting to change).
Also USA gets best of the talent from entire world, USA is almost always the first choice. But rest of the world gets what's behind mostly. So a lot bigger talent pool.
I see this as oversimplification. US Tech faces hard regulations too (fintech, healthcare etc...). Also Regulation is not that big of a bump in EU. GDPR simplified rules across 27 different national laws and forced new innovations in privacy.
Also Spotify, SAP, Adyen all started in small markets, as counterexamples.
The main reasons why USA is ahead I think are the historical advantages (internet, personal computer), the network effects created by the historical advantages and the VC ecosystem. Also the culture for risk tolerance.
Regulation may or may not be that much worse in the EU, but if there are 27 different countries, it adds a lot of uncertainty and legal work as you roll out to each one. GDPR wasn't written until tech winners were already called.
The VC system and network grew out of this existing development in America (of course the capital markets have been there since before tech, as I mentioned). The banking and finance system grew in America for the same reason - a large single-regulator market.
Spotify is basically a US company today - They have huge US offices, and their US subscribers are crucial. It's also a perfect example of a business that doesn't follow the high-fixed-cost-low-ongoing-cost model. They have to pay a license fee for every stream, so they can't amortize their costs across users nearly as well.
SAP is another example of a business that doesn't amortize as well across users - their product is very bespoke per company, and negotiated individually.
Diversity of regulation and different languages/cultures. The US is a single, huge market with a largely shared culture and the same language. By contrast, an app that takes off in Germany has no guarantee of doing so in Italy or Slovakia.
There is just no upside to founding your tech startup in the EU. You'll just be at a disadvantage. And as long as we have a unified US/EU market, this is not something that can be fixed. This has always been the downside of any kind of trade agreement that opened up the markets to foreign competition. Typically, the two parties pick winners and losers. Europeans export cheese and wine and Americans export Google and Facebook.
Overregulation and taxation is the major issue. I can only speak for Germany. Low worker rights in the US make for healthy companies that can grow and shrink as needed. You can't just fire people in Germany, even though you pay horrendous amouns for social security.
It's quite simple actually:
- many different regulatory policies to follow in order to sell accross the EU
- different languages / culture
- risk averse culture in investments and business (Americans go all-in and do not fear to fail fast)
- lot of lobbying from already established compagnies (which are often state-backed which doesn't help)
- no start-up culture basically. Contrary to the US, regulatory entities expect the same from a 10 000 people org and a 15 people start-up. It completely kills most startups.
In the end all these regulations allow Europeans to have access to "safe" products but it kills most of our innovations in favor of the US or China.
Yeah, I agree. However, I can blame them on making things worse when I specifically elected them to make things better. Instead of solving Germany's issues, they are infighting and spending money on social programs and on illegal migrants. Next year, every single tax, healthcare, and social security rate is going up.
Furthermore, the Greens are blocking real progress in the name of NIMBY-ism. The current government is actively killing markets by introducing harmful policies.
