Europe, I love You
"Differences are opportunities, they are virgin lands waiting to be discovered, developed and enhanced. A startup begins as a simple solution to a very local problem that eventually proves to be useful in many other locations and for way more people. Do things your way, with your style, according to your environment. If no one has cracked the European market yet, that’s not because it’s impossible, that’s because it’s still waiting to be done. Your culture is a strong barrier to entry.
Let’s make those differences become advantages."
Too many startup founders I meet are obsessed with copying what goes on outside of Europe. We forget our strengths. The things that give us incredible unfair advantages. An unfair advantage is anything you can use in your favor, making such a difference, that it seems to be unfair.
Break down these geographic barriers.
One example of this is geography. I’m always surprised by how many Europeans don’t take advantage of this. We live in a place where any major city can be reached, by plane or train, in about 2 hours. More or less. London, Paris, Berlin, Barcelona, there are cheap flights and good access to these places. But people still live inside their geography.
In my case, people are always surprised when I explain that I live in London and Paris. If I take the Eurostar from Paris to London, it only takes me two hours. If there’s an event to attend in Paris, I’m there. Same in London. But people can’t wrap their head around the idea. If someone tells you he lives in the suburbs, and it takes an hour and a half to get into the city center, you won’t be surprised when he comes into Paris to have dinner. It’s more or less the same amount of time involved, to go to London from Paris or to come into Paris from the suburbs.
It might be expensive to travel. But as an entrepreneur, it is much cheaper to travel, than it is to deal with the problems that exist where you live. That’s why Skype has their engineering team in Estonia, and their headquarters in London. They built their organization by putting each part in the place that made the most sense. They didn’t get caught up in the idea of borders.
So why think about these debates, will Paris or Berlin be the next startup capital, all of that? Why should that be a question?
First of all, none of us will really get anywhere without the others. We need to have a European mindset. That doesn’t mean that it’s not complicated. It’s complicated to have multiple locations, and to open operations in multiple countries. There are local problems that come up. Right now, we opened up our office in Barcelona, and we’re still waiting for the paperwork to go through the system. So you definitely add in some challenges. But it’s worth it. It’s worth it to overcome those problems, because it gives you a larger footprint, a larger pool of potential employees, a larger pool of customers.
And you don’t have to be as big as Skype to do this. We have one startup who came to us and said, “oh, yeah, we set up our bank account in Germany. It was really easy, it’s all online, we went and met them one day, it took us 10 minutes.” Now, there is not a single startup that I know in France that doesn’t complain about banking. In France, there are so many problems that come with trying to open an account. But you’re not obliged to stay in France to do your banking. So why do it? Why not take advantage of the possibilities that exist in other European countries?
If you look at all the countries in Europe, you’ll find things that work really well, and things that are terrible. For example, a lot of countries in Europe have horrible corporate law systems. Investing in a company in France is a mountain of paperwork, it’s diabolical. And it’s like that in a lot of European countries. But not in the UK. In London, the rules and the procedures are so simple, it’s the best designed corporate law in Europe, in my opinion. So why would anyone want to open a purely local company? This is the same reason why every corporation in the United States is incorporated in Delaware. And we can do the same sort of thing in Europe.
Now, there are tax implications and all sorts of other things to think about — but that’s ok, you pay your tax where you live, it’s part of the deal. But just because you pay your taxes in France or Spain, doesn’t mean that you have to do everything in that country.
That geographic element is very underused right now in Europe. It will keep getting more common, but we really need to change our mindset about that. Right now, we don’t live with the idea of Europe as a business opportunity. It’s just some fictional thing floating in the sky. We need to see Europe as a concrete thing that we can use.
Get comfortable with the fact that your team and your market aren’t in the same place.
Another thing that we forget is how we can find B2B clients. People in Spain hate trying to work with their corporations, in Italy, same, Romania, same, France maybe a little less, but still. Depending on what you’re selling, you’re not restricted to your local market. If you’re developing software, take a wider look. When we have a SaaS company come into TheFamily, we tell them to build their team locally, and look towards the rest of Europe, toward North America, towards the world to build their market.
Use data to figure out where you want to go into. If that’s the US, great. If your data says you should go into Poland, hey, that’s the best place. And maybe expansion isn’t even a matter of geography. Be willing to launch into the Internet Nation. The Internet Nation is that portion of the population, in France, in Europe, worldwide, that is into the world of entrepreneurship online, and speaks English. It’s an active group that you can reach out to, without any real barriers, and that can significantly widen your available market.
So the point is that we need to recognize our advantages, especially what we might take for granted or what we see as a disadvantage. Another quick example: what’s the biggest perk right now in Silicon Valley? It’s the amount of vacation days that they’re giving to their employees. In the US, the standard is 2 weeks, and tech companies are now competing and they’re giving somewhere between 6 and 8 weeks of vacation. Now, take the example of France. In France, we already have a standard of about 6 weeks of vacation. But as Europeans, we see that vacation time as a given, or even a sign of weakness. We see it as something that is preventing us from working hard. There is a difference between being productive and being stupid. Working all day and not getting anything done, that’s stupid. You may not work all day, or take your vacation, but you get things done well, that’s being productive. So if we push ourselves to really be productive, the European system of time off, compared to the American one, can already largely be seen as an advantage.
B2B sales are forever.
One comment that came up a few weeks ago was “As a B2B company, we’ve found that selling in Europe is harder at first, but once you’ve sold once, they stay with you.” I liked this because it really expressed something that is true: in the United States it’s easier to get a sale, but it’s harder to keep your position. In Europe, it’s harder to get a sale, but because the rate of change and innovation is slower, it’s easier to keep your position for a long time.
At the same time, you have to be very careful with this, because it has the tendency to make the market weak. You can fall into the mindset of the “no need to change anything”. But if you combine the advantage of maintaining your enterprise client base relatively easily, with avoiding the disadvantage of complacency, you create a magical thing that can be a home run. You can get a big win from understanding both sides of this aspect of European markets.
There is a desire in Europe for the Robin Hood type figure.
The solution that comes sweeping in, taking away from the older, established interests and giving advantages to the consumer. And it’s no secret that we in Europe are in a part of the world where there is a lot of tradition, conservatism, bla bla bla. One of the reasons behind that is that the countries in Europe are oftentimes so small, that it’s easy for a big company to lobby for specific advantages and privileges. There’s always such a proximity between people who run the government and people who run big companies. But it develops big gaps between what people want and what companies are delivering. As an entrepreneur, that gives you a lot of opportunities to focus on what customers really want. You can move into the market and provide a much better experience, if you’re able to survive the backlash of regulation and vested interests. You can create new market segments, and you’ll be able to do it with the help of the people.
Captain Train, CityMapper, these are examples of companies that are able to do that. They’re doing the service better than the old service providers were doing, and they’re having success. These are great product teams focused on the consumer, and that’s the key.
Save the consumer!
The number of problems we’re facing could potentially lead to a lot of solutions. In Europe, that sense of facing many problems often ends up in pessimism. And I think that this pessimism is actually a huge opportunity. In Silicon Valley, there’s almost the opposite problem, in that there is so much optimism that it can be hard to pick an idea and run with it. In Europe, though, everyone tries to understand why you’re going to fail. If you’re able to overcome that mindset, you can be in an extremely strong position as an entrepreneur.
This is the same situation as when, if you’re going to start running, you should practice running on sand. Because running on sand is hard, and if you practice doing that all the time, when you’re finally not stuck in the sand anymore, you’re able to run very fast. Building a startup in Europe is exactly that, you’re running on sand. If you push through, you’ll find that your company is well-trained and able to face a great deal of challenges.
That pessimism can also help you to figure out where the real problems are. We’re always repeating that founders should find a problem to solve, rather than a brilliant idea. It’s easier to see a problem in a pessimistic environment.
European entrepreneurs become very efficient with capital.
It’s not so easy to raise a lot of money in Europe. Plus, the market for employees is currently unbalanced to the point that there is much more supply than demand. So when you start a company in Europe you get used to not spending much money. And that’s important because capital cycles go up and down. When the fast money runs out, many entrepreneurs in the US aren’t prepared to not have money. Meanwhile, people look at European companies like BlaBlaCar and they can’t understand how they’re doing so well and how they’re growing so much without spending much money. They look at Save and can’t believe how much revenue growth Save has compared to their capital burn. Don’t see a lower amount of capital as a problem, see it as a benefit that will make you and your company stronger.
Leading the way of lifestyle.
People who are not from Europe look at France, Italy, Austria, Sweden… they see a certain lifestyle. Let’s take that perception seriously enough. This isn’t just a question of luxury, either. You can make a good living in the luxury industry, everything’s pretty, there are businesses that you can develop. But I’m not sure it’s really what entrepreneurship is about, since we believe that entrepreneurship is ultimately about providing exceptional service at scale. If you want to truly scale, luxury isn’t really what you’re aiming at.
The idea of a lifestyle doesn’t have to mean luxury. All over Europe, you can find a sense of detail and service that is exceptional. As a startup, you can take advantage of that. You don’t have to just copy and paste the things that you see coming out of Silicon Valley, where things are much more robotic, there’s less soul there. There’s a reason that Airbnb, when they saw how their team in Paris was able to handle the customer experience both in terms of hosts and guests, had that team start teaching their other teams all around the world. The sense of delicacy and attention in their Paris office was the best, and so that was the model that Airbnb spread throughout their company.
Capitan Train is a good example of this as well. They aren’t providing a luxury service. But their customer support team is focused on basically being exactly like Ralph Fiennes’s character in The Grand Budapest Hotel, this old-school concierge who looks after every need of the guest. That’s how they see their relationship with the client. That doesn’t mean that their service is a luxury service. They’re just trying to apply those rules of care and detail within their startup. And it makes them stand out, to customers and to other companies.
That question of lifestyle doesn’t end with your business, it also has to do with your happiness.
Many people will ask me, where should I start my company. And the answer is wherever you want to live. That’s the most important thing, the business questions can be worked out, but the type of life you want is something that you have to listen to carefully. Motivation is your drive. Depending on who you are and what it takes to make you happy, motivation will be affected by where you live. We had a debate whether or not it was a good thing as an entrepreneur to be on unemployment and paid, and use that time and money for your startup. Some people said that unemployment benefits were a good thing, since it gives you some measure of freedom and security, others said it was better to have a job and work on a startup, others said that it would be better to have nothing and be desperate and really push yourself to succeed with your company. And my answer, like with where to work, is that it’s not that simple. Each of those situations has its benefits. For me, personally, I like the desperation of having to do something, because if not, there are checks coming due next month that won’t get paid. For me, that’s a motivator and it is exciting and it makes me more efficient. But not everyone is like that. I can definitely say that I’ve seen many people take their time on unemployment, and acted like a tourist for 18 months. But you can have a story that shows how someone has used that time and that security to actually build something too.
Are you aware enough to figure out how to build the infrastructure that will get the most out of you?
That infrastructure is extremely personal. One infrastructure isn’t objectively better than another one. Maybe unemployment isn’t a good motivator for you as an entrepreneur, but maybe it’s an advantage for your employees. Maybe, since your potential employees have European unemployment benefits, you can offer your early employees equity rather than a salary. That’s just one idea. It’s an example of how you can look at a situation and not ask whether it’s good or bad, but how can you turn it to your advantage.
Europeans have found other ways to entertain themselves. For example, in France, do you know how many writers have published a book in the last 20 years? It’s incredible. In a country of about 65 million people, 3 million people have published a book. Maybe no one reads it, ok, sure — but writing the book might have given those people something to do, it gave them a purpose. And we see this going even further, with blogs, social networks, etc.
As we move toward what is called “a jobless future”, these questions of what we do when we’re not working become bigger.
And in Europe, we can have an unfair advantage in that we’ve been thinking about those questions for much longer than, say, the Americans have been. America isn’t ready to lose 80 million jobs to technology in the next 10 years. But that might well be what happens. And then what are they going to do? They’re going to turn to Europe and ask, hey, what do you guys do all day?
So use all of these advantages. Every city in Europe has its fans, there are people who love Berlin, who love Paris, who love Rome. Just take a look at the list of films by Woody Allen, and you’ll get it. No one loves Palo Alto, I promise. People love the people they meet in Palo Alto, they love the work, they love what is going on there, but no one is ever going to say, oh, I love strolling through Palo Alto. In Europe, there are people who dream of our cities. All sorts of people would love the opportunity to be working in our cities. And that can become a worldwide advantage in terms of hiring talent, if you know how to use it correctly.
We are underutilizing our European infrastructures. Many of the barriers that we think we see, if we really look closely, we can see that there are ways around them, and or that they aren’t actually barriers at all. And the best is when we see how the things that other people see as barriers can actually be unfair advantages for us. That’s how you play the big game, and that’s how you build big companies.
So look around, be honest with yourself, and stay cool.
We should be proud to be Europeans and grab the opportunities that provides. Here’s how.
Start where you want to liveDo not move only for business reasons. Choose where you want to live based on your personal life before thinking about where you want to start your business.
Copy smartlyCopying a foreign startup is often a good idea as a first experience, but do it the smart way. First, do your homework: don’t trust the press, do your own research, apply for a job, go to the interview and ask all your questions. Second, be careful to adapt to your local environment: the market, the legal constraints, the existing infrastructures... Finally, remember that copying is always temporary: if you win against your competitors, you will have to innovate and build your own path.
Do not get caught by bordersEurope is much more united in terms of culture than the US. The language barrier is not a problem anymore: translation is cheap and multilingual employees are easier and easier to find, such as in customer support, which is always a touchy issue when you scale. Expand your horizon: travelling in Europe is easy, cheap and fast. You can build a pretty useful network in just a few years, which will be a true unfair advantage.
Our specificities are opportunitiesWe are used to uncompetitive markets and monopolies. European customers are eager for disruption. Even pessimism is an opportunity: you will be the one bringing water in the desert. And what’s more, don’t underestimate our lifestyle: it is an argument that can attract talent, so don’t hesitate to use it and market it well.
Take the best of every country: decentralizeLet’s face it: for the moment every European city sucks as a whole. But each of them has its own advantages and you should capitalize on them. Skype for instance has its engineers teams in Estonia, its social headquarters in Luxembourg, its corporate headquarters in London and its Accountancy Department in Switzerland.
Think of Europe as a whole: optimizeLocal operations should never be launched by local people. Uber has a launching team who launches every city around the world: they are specialized and have a strong know-how. As a first step, you can have specialized teams based in a particular country that operate for all of Europe in Sales, Customer Support or Engineering. Even on the longer term, your team does not need to be where your market is. It’s not easy, it’s not perfect, you may have to over-invest in your internal communications, but you have to adapt to your constraints.
Stop being obsessed by the American marketLaunching in the US as the second move after launching in your mother country does not make any sense in 80% of the cases. On the contrary, becoming pan-European is an opportunity: take strong positions to fight against your US competitor when it does arrive.
Let data guide youDo not launch randomly - trust the data. Communicate in every language and see where it lands best, see where your early users are, and then launch.
Meet the Internet nationA new country is born, a transversal one, with citizens who speak English and share a digital culture. It could be the first country to launch your product.
Be ambitiousBeing smaller means we need to be more ambitious than average, not less. Small things are not ok in Europe: think big.
Articles to go deeper
Nicolas Colin, “The Power of the Tongue: English in the Digital Economy”
TheFamily Papers, January 2016
Steven Carpenter, “Let’s Talk About Scale”
Accel Partners, November 2015
Nicolas Colin, “The Digital World Is Not a Flat Circle”
TheFamily Papers, October 2015
Eddie Yoon, “The Mistake Companies Make When Marketing to Different Cultures”
Harvard Business Review, February 2015
Tanguy Peers, “5 things US startups need to understand to succeed in the EU”
The Next Web, July 2014
Kim-Mai Cutler, “Tech’s Toughest Battle Is Regulatory”
Techcrunch, June 2014
Sten Tamkivi, “Why Silicon Valley Can’t Find Europe”
Techcrunch, January 2014
Philipp Freise & Lucian Schoenefelder, “Digitization in Europe – Unlocking Europe’s Entrepreneurial Potential”
KKR Global Institute, November 2013
Balaji Srinivasan, “Software is Reorganizing the World”
Wired, November 2013
Paul DeJoe, “To What Extent Can A Startup Work Without An Office?”
Forbes, October 2012
John O’Farrell, “Building the Global Startup”
Andreessen-Horowitz, June 2011
We told you, they lived it!
Taavet Hinrikus, CEO @ Transferwise
Taavet Hinrikus was Skype’s 1st employee. He moved from Estonia to London and met his cofounder Kristo Kaarmann. They had to transfer money and discovered a real pain point: they were losing way too much to the bank. In 2010, they started TransferWise to make transactions fair. Transferwise has managed $3b in transactions since launching, employs 400 people and has offices in 5 countries. They have raised almost $100m from investors such as Andreessen Horowitz, SV Angel, Kima and Richard Branson.