Zombie Startups in Europe | Hacker News Reader

Zombie Startups in Europe

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96 pointsseapunk31 comments

I got to pt4 with my solo startup/project

`The first step is inevitably to raise money from dumb/ignorant investors who couldn't care less about your startup: that would be the government / unemployment benefits in France / tax-incentivized angel investors in the UK.

It buys you 12-18 months of runway.`

After it I realised it has no market and no interest from anyone.

Now I am in a mixed bag of thinking that I did well in stopping it at an early stage and dealing with the feelings of having failed/wasted a lot by pouring 2 years in it.

Such is life :/

To live life to the fullest means striving, not “succeeding.” Those years were anything but wasted.

Who are these tax incentivised angels in the UK??

The UK has two tax-efficient schemes for investing in startups: SEIS and EIS. For some perspective, if an 'additional rate taxpayer' invested £10,000 into your startup, they are only actually risking £2,750 due to tax relief (source: https://www.crowdcube.com/pg/seis-tax-relief-42). They get additional relief on capital gains tax.

Basically anyone with high income, making more than (a few) £100k per year.

I have a friend who has done a couple of SEIS investment deals that turned out ok-ish (only breakeven, but profitable considering the tax rebate mechanism).

Nicolas Colin :

   everyone knows them in town because they're spending
   their time speaking about entrepreneurship to ignorant
   people gathered in salons

Well isn't that what TheFamily is ? https://www.thefamily.co/about/nicolas-colin

The problem is not the salon itself. Rather it's zombie entrepreneurs being all over it, and non-zombie entrepreneurs wasting time in it trying to catch up.

Neither is happening at The Family: our portfolio entrepreneurs are busy working on their product/their customers and are on stage only when it makes sense from their roadmap's perspective.

As for the zombie "entrepreneurs de salon", they are not allowed as speakers at The Family.

From TFA:

> ... there were zombie startups all over the place. Mine eventually became one.

basically, yes. but it's fine, it's an economy model based on waste. A redistribution from the rich to the rich.

This is brutally true in Spain as well. I used to love everything I read about startups, being lean, iterating, etc. But seeing Valencia/Spanish startup ecosystem... yikes

I have only seen up close one startup (out of dozens) with actual profit that could sustain itself if VC money was to withdraw. From my University friend who I always though he could do it.

It's not just in Europe, it's mostly the same everywhere, with very minor modifications. I'd even risk saying that most startups are like this, i.e. at one of the stages described in the article - only a small minority are actually successful.

Unsuccessful startups, for me, are not the problem. The problem is:

a) venture capital coming from government which have very low incentives to not waste money (their goal is usually only to have X amount of start ups) - which leads that capital and talent is diverted to this bad startups

b) since they are zombies, they don't die quickly enough, the resources waste keeps going on (capital, talent, office space, bandwidth, etc.)

Governments have secondary returns -- VC coming from government generally has restrictions (i.e. the money has to be spent on employees). Employees pay taxes. Those people spend their money mostly locally. Even if every euro invested is lost, it'll still be profitable in most cases (because everything eventually flows back into the local economy).

This sounds eerily like the broken windows fallacy.

Yet this is how these things are set up. I know a VC fund manager solo managing a €50m fund, of which €20m came from the European Investment Bank, and €20m came from the local government. He put in €200k. Just €9.8m came from HNWIs.

So he's getting 2% on €50m for 7 years, to invest €40m government money with pretty much no expectation of any return. Not bad, not bad at all. I'm sure "the people" would be outraged if they knew. But they don't.

Yes that is the proper way to frame it :-) Being unsuccessful is part of the startup life. Being a Zombie is not!

So glad people are talking about the deceptive strategies EU companies uses to mimic those in the US. It's as if there's a deep cultural force against acting like US startups here in the EU, which I frankly don't like and would like to see some push against, and I think all parties will be happier once we've gone through the phase shift.

I don't think this is a special EU force.

Only the fact that most people can't deliver.

Sometimes it's the dev and you end up with crap instead of a product.

Sometimes it's the CEO and you end up with a consultancy instead of a product business.

And sometimes it works.

There are a lot of zombie startups in the USA too. Look at how many valley firms never make a cent yet somehow go for years without dying.

"The first step is inevitably to raise money from dumb/ignorant investors who couldn't care less about your startup: that would be the government / unemployment benefits in France / tax-incentivized angel investors in the UK."

I have seen many entrepreneurs who just kept repeating step #1 for years. They would hop from one startup accelerator to another, joining as many government grant programs as possible (Startup Chile et al.) without ever really building an actual business.

There's one particular case I know of someone who managed to get more than $300,000 in grants in just a couple of years.

This is so true of the Austrian startup scene, I had to double-check that it wasn't written by someone I know.

IMHO, the worst thing a startup can do in Austria is get involved with AWS funding .. state funding of tech. Its just so deflating, it removes the incentive to actually be productive and work on the needs of the end-user; the customer. This is not something Austrians, at least the startup generation, get right .. and I feel very strongly that its a consequence of the welfare generation, who equate "got free money from the government" with 'success'.

I'd love to see the funding dry up in the scene. There are so many innovative groups here in Austria, but they're just not hungry enough. They don't have the drive, or the motivation, to launch in their markets and do what needs to be done to service people. Service is not a part of Austrian culture. But, I feel, it never will be for as long as state welfare is the first handout expected by founders.

This is cargo culting, is it not? Going for the form, but not the essence.

All startups go through a cargo cult phase. What differentiates the successful ones from the non-successful/zombie ones is that it is recognised as a phase, and people work damn hard to get out of the cargo-cult zone.

When you have a handout to keep you fat, this isn't really conducive to recognising the cargo cult fallacy. It 'feels' like you're successful at your cult, because after all: money is there, and people have given it to you, i.e. the planes arrived and cargo fell out of the sky.

But this is so deceptive. The only way to escape the cargo cult phase is to actually build the real things which real people - strangers, beyond the horizon - actually want. Not, those things your local government bureaucrat wants but rather the things that non-native, out-of-scope real customers want.

Recognising the cargo cultism takes real balls. Not a lot of people have the balls for it, alas.

Hey ! I live in Paris and I went to some presentations at The Family some years ago. I heard Sam Altman speaking there, thanks for organizing it.

Regarding the state of software startups in France, how could you compare it to the Silicon Valley? I guess the same phenomenon is happening in the USA.

Startups arent only about softwares, entrepreneurship already existed in other sectors. Correct me if I'm wrong, but The Family is exclusively about softwares.

[Note that nobody has paid for a product yet.]

If you don't have "paying customers" in some fashion, you aren't really in business. The rest is just window dressing, basically.

An even longer runway!

There's your "Universal Basic Income" right there: Money for nothing (and your chicks for free, no doubt). See, also, Duke Nukem Forever, where they basically didn't ship until they had to because they were running out of money.

I think an essential source of friction in the world of business is there are two ways to make money:

1. Add real value such that if someone pays for your product, you both walk away better off. The world is enhanced by the existence of your company/product.

2. Milk people for money in some social/commercial variation of strip mining where you extract resources for yourself and don't really make the world a better place. There are externalized costs of some sort where the world is, in the aggregate, worse off because you got your needs met in the short term.

Real startups are the first thing. Zombie startups are the second thing. And friction over "Yes, but am I paying for something that genuinely makes life, the universe and everything better or am I paying for some blood-sucking piece of shit?" is the essence of a lot of criticisms of business, capitalism, etc.

Ended up spending 30 minutes of my life for reading https://en.wikipedia.org/wiki/Development_of_Duke_Nukem_Fore...

This seems like a good place to ask: What does it mean for a startup to go into a Series A, B ,C? Is it like some kind of IPO? I have never understood how all the finances around startups work

It usually means that they raised a new significant round of investment from a new group of investors at a new valuation.

All true! but "the healthier the ecosystem" should read "the richer the ecosystem / the more money there is in the system", which is different than "health".

On a completely unrelated note, why does this website have to change the way my scroll works, making it unbearably slow? I wonder, what is the motivation behind this decision?

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