This sounds eerily similar to the so-called startupscene in Denmark.
The events revolve around bankers, bureaucrats, lawyers and consultants trying to make a buck off the entrepreneurs. This is an evil spiral since nobody knows what the heck they're talking about, and drain the few startups of the money and resources they've got. The result is that there are very few startups that succeed, thus fuelling more of the same bullshit with the state giving grants to entrepreneurship events and programs that are promtly sweeped up by aforementioned consultants and lawyers.
And the state keeps pouring money into the black hole not understanding why the new Google doesn't emerge.
Two years ago Ernst and Young's highly publizised entrepreneur of the year in Denmark managed to give the first prize to a company which two days after the event was exposed as one of the biggest frauds in Danish history. A few years earlier the prize was given to a company with 500 employees that was founded in 1956.
I stopped going to these events years ago - they're a total waste of time.
It's a structural problem - if there aren't any successful entrepreneurs there's noone to turn for for guidance, no capable investors and no role models. Which of course leads to even less successful entrepreneurs.
I think so. Some Europeans don't like to be thrown into the "Europe" pot ("but we're so diverse!") but it seems we're pretty united on this point of entrepreneurial un-culture. All across the continent, business plans, consulting companies, etc. are mistaken for entrepreneurialism. Everywhere I look, governments think the solution is throwing ever more complex grant programmes and sponsored bullshit events at the problem. The established players and the lawyers egg them on of course, as they're only the ones who can afford to benefit from all this stuff.
Personally, I think the best thing the government could do is to get the hell out of my face. I'm discriminated against (in Austria) for healthcare compared to the employed and the unemployed. (I have to pay for insurance and social security whether I made any money that quarter or not; I then have to pay 20% of my healthcare bills. Employees pay a percentage of their monthly salary and nothing else; of course they also get paid sick leave) I pay more income tax (employee bonuses are taxed at 6% - my lowest tax rate is 36.5%; it's tradition, and in some cases law, for employees to get 2 months' salary as a bonus). I'm forced into paid membership of useless interest groups which are just extensions of the political parties.
Sure, I could try to apply for grants. Except for startups the main expense is the cost of living of founders (most of which turns out to be taxes...). And guess what, that's not considered a valid expense for tax relief. Plus, the grant wouldn't cover the lawyers' fees anyway, let alone the amount of time I'd spend chasing after it.
Hiring people is super difficult and very expensive for startups. Most seem to employ their staff as perpetual freelancers because the rules (and taxes) are so arcane. I'd guess that doesn't exactly make them attractive to potential hires, so you're losing out on talent.
It's better in the UK to a degree. (shame about the weather...) The bureaucracy is much less (there's a reason UK Limited Companies are popular in the rest of the EU). Still, at my (UK) university, we still had all the bullshit business plan competitions. But they seem to have those at Harvard, too...
The funny thing about business plan competitions is how often the "failures" turn out to be massive successes. The one I know of best is Raising Cane's chicken fingers. The business plan was given a C- and then the founders went fishing in Alaska to make the money for the downpayment.
I was once told (in 1987) that the business plan for FedEx had been developed for a class, and it got a C because the professor believed nobody needed overnight delivery.
Summary: The rough idea of using centralized switching for parcel routing was in a paper for a class, but not much else.
Key quote: "in a 2002 interview Smith acknowledged that "I don't really remember what grade I got. I probably didn't get a very good one, though, because it wasn't a well-thought-out paper.""
As I said on the blog comments too, I would argue this is much more wide spread than just Europe. Take many Asian countries. A lot of governments are trying to artificially create entrepreneur driven markets / spaces with diverse levels of success. As I said today to a friend, it's not about the money, but about where you allocate it. And to do that, you need people that truly understand the problem, not outsiders with nothing more to do but to play "investor".
I'm quite willing to believe it; I just didn't mention it as I have zero exposure to the situation in Asia.
I doubt the investment situation will improve until those who succeed aren't (effectively) chased out of the country for one reason or another before they do succeed. I'm pretty sure you need a home-grown feedback loop.
It's better in the UK to a degree. (shame about the weather...
Maybe worth trying out Portugal. (nice weather) and
Except for startups the main expense is the cost of living of founders (most of which turns out to be taxes...).
Portugal has a new tax regime for non-habitual tax residents. Which is a a flat tax rate of 20%. You can apply for the regime if you have not lived in Portugal for the last 5 years, and your job consists of a high-value-added activity of a scientific, technological or artistic nature. And the benefit lasts for 10 years. See: http://www.ibc-madeira.com/Tax_Regime_for_Non-habitual_Resid...
The main expense is the cost of living of founders
The cost of living in Portugal is lower than that of the UK, or Austria.
If you're right that it's a cultural thing of the investors, what keeps American VC's from going and investing in European startups? (That's an honest question.)
Mostly distance. To manage your portfolio, most of the times you need to do introductions, personal meetings, lunches, etc. That's hard when u have an ocean in between. That being said, each day that goes by there are more US investors setting up shop in EU, which is appreciated :) I wonder though, who runs those shops, Americans or Europeans.
The author makes a lot of good points. Its true that a lot of the officials who claim to be attempting to help entrepreneurs don't have any entrepreneurial experience themselves and that hurts their ability to help.
Unfortunately, the random bolding of words really detracts from the content of the author's writing.
ah damn, my bad, hehe well, I know a lot of people that do fast reading and having it in bold makes this easier, but yeah, maybe this time I over exceeded myself :P
Could you clarify what you mean by "fast reading"? I read very quickly and it was like speedbumps for my eyes. If the article hadn't been short enough to fit on one screen I think I would have been annoyed enough to not finish it.
Not that I used that, but I'm a diagonal reader myself and I do appreciate the bold parts. But as I said before, there are 2 things that don't work too well, which is, the current blog theme isn't great and too much bold parts on my side.
Interesting, thank you. It got me thinking about and paying attention to how I read things, and that I will read them very differently depending on the source.
Articles linked from HN fall into the 'fast but linear' category. Maybe if I'd ran across your article form a source I give less weight to the bold wouldn't have bothered me ...
Same deal with folks who introduce themselves as professional startup advisors. Be wary! The best ones seem to have tons of interesting stuff going in their lives already and just enjoy helping out young companies when they're in a position to do so.
True. There are people who invest a lot of time proclaiming their entrepreneurial advocacy in public forums. I have a hard time distinguishing this advocacy from a routine lead generation strategy, where the entrepreneur is a sales prospect.
This reminds me of 'TiE' (the Indus Entrepreneurs - http://www.tie.org/homepage )events in India. They have nothing to do with Entrepreneurs - just businessmen talking to each other about PR, boasting of some personal numbers and such.
If you see entrepreneurs meeting - it's exciting, energetic and people want to make things happen. While TiE events are lame, lifeless and hopeless.
Most of what they say - opposite of that is true for entrepreneurs. One dude was obsessed with his numbers - and suggested that so should every entrepreneur, his words went something like - your numbers are the value you add to your customers. Pathetic.
The scene is full of people who don't know anything about real entrepreneurship and that do this things because of the State subventions on these matters...
Oh and don't forget about the social media profets that focus more on buzz that on building things and the banks with abusive credits.
This country is really bad, specially for technology startups. The philosophy here is 'Can't touch it, no money'. That's why we got the real state bubble, that's why the government cuts the subventions on I+D, and that's why founding any kind of enterprise takes much money, time and useless paperwork.
Subvention => The government gives you free money if they believe that your startup is "good". In practice, there is some corruption (example: I will grant you a 2 million euros subvention if you casually happen to subcontract all the work to mi niece's company for 1.9 million). Even if you find honest people, there is A LOT of bureaucratic stuff to do to be eligible.
It's close enough, I figured out from the context that I (Invention? Latin inventus -> Spanish invención or English invention) was our R and that subvention had to be something about transferring money.
And some of the problems you and Vargas relate are hardly unknown in the entrepreneurial backwaters of the US although it's only in some particularly obnoxious very political cities where the local governments can really get in your way. Which of course lends itself to obvious solutions given how mobile our society is.
It's really unfortunate, but I think this is the reality in most places. Startups and entrepreneurship are now so visible on the internet that everyone is trying to get a piece. You have wannabe entrepreneurs everywhere now, and so there is also a cottage industry of snake-oil salesmen and unscrupulous "VC" operations that spring up to take advantage of the hype.
One of the beautiful things about being in silicon valley (having been here for 3 out of 12 years of my professional life) is that you inevitably run into people who know what they're doing and are happy to share their experiences with you. Once you get a little bit of this under your belt you can spot the posers and wannabes a mile off.
Even if you aren't in the valley, you can get still get enough information on the web now to really hit the ground running with a startup. Of course if you don't know what you're looking for, it's still a crapshoot to understand who's giving good advice and who's full of shit, but it's a far cry from 20 years ago, where if you were outside of silicon valley you might not even realize it was possible to start a tech company from scratch.
I found the situation to be similar in north america too (ontario, canada and michigan to be specific). There are people that show up to these events and sit on panels and have access to all sorts of funding. They say they can help entrepreneurs without having a single startup under their belt.
This tracks very well with Andrew's Mixergy interview of Spanish entrepreneur Juan Dominguez (http://mixergy.com/redcpa-viajar-juan-dominguez/), where Juan mentions that there are really no VCs in Spain, and the money sources there offer atrocious terms.
Couldn't agree more. Recently I gave a talk about startup financing where I had to explain some of the most crude clauses of term sheets that "were" used in the US 10 years ago, but that "are" used by VCs in Spain currently :(
The events revolve around bankers, bureaucrats, lawyers and consultants trying to make a buck off the entrepreneurs. This is an evil spiral since nobody knows what the heck they're talking about, and drain the few startups of the money and resources they've got. The result is that there are very few startups that succeed, thus fuelling more of the same bullshit with the state giving grants to entrepreneurship events and programs that are promtly sweeped up by aforementioned consultants and lawyers.
And the state keeps pouring money into the black hole not understanding why the new Google doesn't emerge.
Two years ago Ernst and Young's highly publizised entrepreneur of the year in Denmark managed to give the first prize to a company which two days after the event was exposed as one of the biggest frauds in Danish history. A few years earlier the prize was given to a company with 500 employees that was founded in 1956.
I stopped going to these events years ago - they're a total waste of time.
It's a structural problem - if there aren't any successful entrepreneurs there's noone to turn for for guidance, no capable investors and no role models. Which of course leads to even less successful entrepreneurs.
Maybe this is a European problem?