Wednesday, June 14, 2006

Starting a startup in the US and in Europe.

Yesterday, I was told about an interesting article on the recipe for Startups and on how to reproduce Silicon Valley in another country. It is rather long but of particular interest for our blog as it draws a comparison between Europe and the US.

First the article reminds us of something most Europeans tend to forget when they talk about the United-States – its great diversity. (Palo Alto is not Miami).

But in addition to regional differences, there are also some common points that have made America very attractive for Startups. Of course, there are flexible employment laws as well as tax laws that encourage growth. Those are the things that can be a hard sell in Europe, and in case despite what the writer, Paul Graham may say, I am not convinced there are necessarily good things in their own right (i.e. not necessarily the best for the Common Good). But it is also quite clear that most European leaders are leaning in this direction – even the French socialists. (Hence their party crisis).

However, Graham also made some points that Europe is going to have to address urgently. One of them is the university system.

We all know that American universities are the most attractive ones in the world. The main reason is obviously that they have more money because they are (mostly) privately funded. Graham goes as far as saying that America’s lousy public schools have a hidden advantage: they’re so bad that you can’t make a choice for your career in high-school which forces people to keep an open mind.

That is true in part. The French system, for instance tends to be too rigid. On the other hand, this may be true for smart students only – those who will eventually do well academically or those who will shave what it takes to start a startup. I think it’s a minority of students though. Good for startups for sure, not necessarily for the nation as a whole.

As Graham rightly pointed out, one of the major differences between the US and the rest of the industrialised world is that whereas there are bad high schools and good universities in the US, there are good high schools and bad universities in Europe. Graham’s idea is that all in all, the US system is better because it’s better to make everyone feel like a late bloomer than a failed child prodigy. An interesting idea. It assumes you will eventually bloom. Again, not everyone does.

Ideally, it would be best to have a system that works both for late bloomers and child prodigies. That would be my dreal anyway.

What is even more interesting is that it is true that the French for instance do have a less dynamic approach of careers:

The European approach reflects the old idea that each person has a single, definite occupation-- which is not far from the idea that each person has a natural "station" in life. If this were true, the most efficient plan would be to discover each person's station as early as possible, so they could receive the training appropriate to it.

For example, in America people often don't decide to go to medical school till they've finished college. In Europe they generally decide in high school.

I do believe this has more to do with a different mindset than with the educational system itself. As he pointed out with regard to the commonly-held idea that Europeans are less entrepreneurial and ambitious, this may be partly due to the history of Europe in the 20th century. (Think of how unchecked ambitions led to nationalism, two World Wars and majoy colonial conflicts). To expand on this, I’d say that after nearly destroying itself, Europe also needed to emphasize security above everything else. Hence the socialist oriented economic choices after WWII. There may be inverse correlation between performance and job security but if you look at France for instance, there is a trend toward less job security than there used to be (Hence the current crisis).

With regard to starting startups, Graham also raises the interesting question of exemplarity. European students probably need different role models who reflect, for instance, an entrepreneurial spirit. The reason why most of them are afraid is not simply unemployment, it is also because you feel a lot of pressure to keep the course and work in the same domain for the rest of your life. You don’t switch careers as easily. That has to do with high unemployment of course, but also with the lack of positive feedback with regard to changing careers. I have personally experienced that in a small sort of way. However, it seems to me that this is also changing simply because the new economic model is making people reconsider their view of work.

Graham was also good at pointing the great advantages of Europe when it comes to offering an alternative to the US for startups. Among those are good infrastructures (including good public transportation), a more flexible immigration policy and a large domestic market (the European Union) with a common language – English. And as a teacher of English in France, I couldn’t agree more:

However, for better or worse it looks as if Europe will in a few decades speak a single language. Now all educated people seem to be expected to speak English and Europeans do not like to seem uneducated. This is presumably a taboo subject, but if present trends continue, French and German will eventually go the way of Irish and Luxembourgish: they'll be spoken in homes and by eccentric nationalists.

In this post 9-11 world, Europe has a chance to become more attractive than even America. Already the new stricter immigration laws in the US have forced lots of brains from poor countries to come to Europe. European engineers are also less expensive than their American counterparts.

One last advantage of Europe – this time over India or China - is that European countries are not police states and thus allow people to think more out of the box. Technology is not a threat to democratic governments as it is to autocratic ones like China. A good illustration is that a lot of firms that outsourced their staff a few years back are now coming back to the West precisely because there is only so much that can be done in Third-World countries.

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