Now "successful" European startups want in on the money.
YC's "most successful startups" routinely lose hundreds of millions of dollars every year: https://news.ycombinator.com/item?id=27485360
The YC data is clear about one thing: if you remove the need to travel to the US , a lot more europeans flock to YC. We 've become a terribly sclerotic continent and it's very visible now. I believe things will get a lot better after we hit rock bottom.
And that money is mostly a complete waste. EU money comes with so many strings and baggage that you are either big enough and have the resources to deal with it (and thus you don't actually need it), or you are small and make it your entire business model to live off EU funds and not produce anything of value ever.
I have found the strings to be bureaucratic, not material, which has turned many small european businesses to paperwork factories.
Aren't successful companies supposed to, you know, earn money and turn a profit? Or is superiority is strictly in the amount of money thrown at unbelievably unprofitable companies?
I feel we could use a little more easy capital in double-digit million € range, but retain or even improve the friction above low triple-digit million €. Basically: experimentation is good. Unchecked growth from zero to multinational behemoth is not always so good.
There are two hard problems though:
1. At the lower end, it's very hard to distinguish a legit experimentation from a scam. We already have too many fly-by-night small businesses preying on the population. I'm not sure how to fuel more legit startups without making the latter problem worse - as we can tell from the EU grants, adding more strings tends to kill good businesses faster than bad ones.
2. At the upper end, big corporations are geopolitical weapons. Nations and blocs like EU are always in conflict with others; currently, it's mostly economical warfare. This means that any country or bloc tends to be happy if they can spawn a billion-dollar company.
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[0] - Where by "useful innovation" I mean one that's ultimately yielding a net positive value for the society, and is not purely a business model innovation like it's common with so many hot tech companies these days.
> The vast majority is fuelled by litrerally endless investor money with only two modes of operation: corner the market (that is, outlive other competitors who don't have such an unlimited amount of money) or get sold.
Yes that is the business model and business is good. As opposed to EU which is a wasteland where nothing grows. Lots of businesses are built to be sold to larger businesses. It makes sense and there is nothing wrong with this model. As for investing in money losing enterprises, so what? If investors are willing to do it let them.
Not necessarily. A "wasteland where nothing grows" is obviously bad, but... there's a reason we don't let nature to optimize crops for growth, nor do we do it ourselves. We grow crops for food. We literally care about the fruits of their labor. And so is with businesses - the social value of a business is in the prosperity it creates for the people.
The SV growth model, at the extreme, is overfitting the "growth -> acquisition" path - often creating negative value for the society, by disrupting an existing market with an offering that's too good to be true, subsidized by infinite investor money, and then leaving a gaping void after burning out or getting acquired. This would be like a crop plant that first releases poison into the soil, killing competing crop species, then sucks out all nutrients and dies without producing edible fruit. It's not something you'd like to grow on your field either.
Endlessly burning through infinite cash isn't a good business model. And it ultimately results in a significantly worse wasteland than the perceived wasteland of Europe.
Where in Europe you have lots of companies in lots of different markets, in the US you have continuous price dumping that drives away any and all competition (unless that competition has more infinite money), and preys on people.
For example, the explosive growth of gig economy is the direct result of this "good business model". And who woulda thunk it, but predators like Doordash are predictably a "YC Top Company".
In Europe you have lots of companies in lots of limited local markets unable to grow out of them because they have no funding options available to them.
First, you have to compare EU today with US of the 00s when there were actual new ideas in the market and profitable companies. The current US startup market may have been taken over by grubby marketers who market themselves as entrepreneurs, they may be buying their way to user growth, and may fail, but it doesnt matter. Because the big guys have cornered and monopolized every fundamental infrastructure , are already bringing in tons and tons of cash, and basically guarantee the cash flow towards that ecosystem ... forever. Whatever money is burnt in AWS ends up back in the same SV ecosystem. That's sustainable.
Now, take for example the EU's H2020 system that funds partnerships between academia and industry. There are a lot of fancy proposals in there, with fancy names and fancy-sounding tech. And most of them deliver exactly what they describe in the proposal. If you look closely, most of the projects are minimum and viable, but they are not products. And when the project ends, there isn't a push to continue the project if the partners don't want to, even the bureaucrat in charge of it may be a different person at that time. While on the other hand , a VC acts as a permanent point of reference who has long-term-interest and investment in seeing the idea bear fruit.
You do realize that most of the innovation the US pride itself about was in fact directly funded by the state through DARPA, the NSF, NASA and military contracts: Fairchild Semiconductor, the internet, Google, Space X, Moderna...
Actually I do think it's very relevant to point that most of the most valuable US innovations were state funded as a reply to someone asserting the absolute superiority of private VC funding. The USA is very interventionist for a country promoting free markets as close to a religion.
I am not entirely sure what this has to do with Europe however.
Show me any subsidy in the EU that supports a business losing 500 million dollars a year for 10 years.
> We 've become a terribly sclerotic continent
No. The US has become reckless with money, and the concept of a successful business has been entirely substituted by "but this unbelievably unprofitable company with no chance of ever earning money has an imaginary market cap of 50 billion dollars".
That assumes that those startups get investment from outside YC , which is not what i m talking about. Also, the EU just approved a giant stimulus package which will be used to support a lot of failing companies, just take a look at the air carrier subsidies around the continent.
It's true that US is subsidizing unsustainable businesses, probably in the hopes that something good will come out of them regardless. But that doesnt change the fact europe is repelling entrepreneurs.
Yes, they do. And that's the main difference between the EU and the US. Especially with YC startups expect to get significant investments after the incubator.
> Also, the EU just approved a giant stimulus package which will be used to support a lot of failing companies
You do realize there have been two years of pandemic?
> But that doesnt change the fact europe is repelling entrepreneurs.
What's your definition of entrepreneurs? A company that always loses money "in the hopes that something good will come out of them"?
The EU is a complex multi-lingual multi-cultural market unlike the uniform US market flooded with unlimited investor money. All of the "successful" incubators, investors, startups would fail miserably here, outside their near-ideal conditions.