The Continental Europe Toxicity
Europe isn’t Silicon Valley - don’t be fooled by the number of accelerators, incubators and other things aiming to help startups across Europe. But any entrepreneur from a European country who recognizes the weaknesses and strengths of the local environment can push forward.
You just need to filter the knowledge and stories from successful Silicon Valley-based startups, put it into your context and adapt it. That’s the best way to know what to apply to your life and your company, and what isn’t applicable to the European reality.
When The Family was just 24 hours old, we were making a pitch deck to introduce ourself to the world. If you go back and look at that pitch deck today, you’ll see that almost nothing in it actually happened. But one thing has stayed there from the beginning, and that was on the very first slide, which asked, “Why are we opening The Family?” And the answer was because France is toxic. Now I can say, after traveling around, launching in Berlin and London, that in truth Europe is toxic. There’s something so specific about our environment and its relationship with innovation that makes it very difficult to be an entrepreneur.
Because when we talk about an ecosystem, it is everything around us: air, water, buildings, ideas, developers, investors, and entrepreneurs.
When we live in the European world of new ideas and entrepreneurship, toxicity can be found all around us. When we complain about bureaucracy, when we complain about public money, when we say there is no hope, when we are surrounded by pessimism, when there are no role models to be found or when the role models give bad advice…that’s toxicity. Toxicity puts people in a mindset where things aren’t possible, where if something hasn’t happened before, it’s never going to happen. That’s ok when you’re already big and people doubt you. But when you’re little and you’re hunting for growth and confidence and money, it’s hard to fight that toxicity. It makes you question yourself.
Don’t get the wrong idea — a toxic ecosystem doesn’t mean that nothing can survive.
The entrepreneur that recognizes the weaknesses and strengths of their environment can push forward, and some can even overcome challenges that only become more critical as time goes on — they may be few in number, but those that do emerge from a toxic ecosystem are even stronger than you’d ever imagine.
Some might not believe me, asking how toxic can things be — after all, there are accelerators across Europe, France is full of incubators, there’s news coverage, there’s this startup out of Bulgaria that just raised 2 million, everybody’s a software engineer, hell, in some countries, everybody’s a CEO!
But that’s the difference between hype, which is useless, and hope, which is useful. In Europe, our perspective on hype can get even worse when we look out at what’s happening in the United States. If you rely on TechCrunch and Medium to give you hints on how to be an entrepreneur, you risk three things: the first is that you believe it’s all true. The job of any good entrepreneur is to sell a good story. Nobody sells you the horrible things going on with the company (at least not until after the company is well on its way to being dead). The second is that you miss critical information filters that can help you understand which parts of that information are useful in your context — because it is not the same ecosystem. The third risk is that you start to think it’s easy. Looking at the US from Europe, you think that it’s easy to raise money, that you can find a market for your idea, that growth is just a matter of deciding when it’s the right time.
The reality is that all of these comparisons fall apart as you start to truly evaluate Europe’s context and Silicon Valley’s context. Tech content itself can be useful and fun to read. But we need to filter it, put it into our context and adapt it to our reality. If you hear that a seed round is usually at a valuation of $5 million, you need to understand that a seed round in the United States is usually at a valuation of $5 million. I haven’t seen a valuation in Europe at that valuation since the tech bubble of 2000! Having this implicit localization filter will help you know what to apply and what isn’t quite yet the case.
So what to do if you ignore the hype and choose hope?
You have two choices: the first is that you move — go to the Valley, go play the game that is happening there. But if you choose to stay in Europe, you have to play within the European ecosystem in order to have success. Realize that the local challenges of your ecosystem require creativity. Don’t try to simply apply other people’s solutions to your problems. Be aggressive in building something new that’s linked to your ecosystem, not constrained by it.
This means that you can’t just complain, instead you have to master the system. Don’t rely on it to change, because the ecosystem is not going to adapt itself to your needs. And remember that no one in Europe is forced to stay in their local ecosystem. Europe’s freedom of movement allows you to move, to adapt, to hunt down the best conditions for each part of your project.
Don’t fall into easy traps when thinking about how to defeat a toxic environment. Toxicity is not simply a lack of resources. A toxic ecosystem does not necessarily lack capital. A lot of toxicity is invisible, with dangers hidden even in things that seem positive (like chasing after public funding, for example). It’s the invisible toxicity that is the hard part. If you can see the problem and people are talking about it, you can overcome it. The real problems comes with all the toxic things that you don’t see.
The common factor is that all toxicity encourages you to waste your time. That’s what a toxic ecosystem is, a machine for wasting time. That’s why interior discipline becomes huge, since your use of time is the number one thing that you can control.
In Europe, we like to waste time. We say that we manage time differently, but really, we waste it. We take a long lunch, we reflect, we love to debate. With companies at The Family, one of the biggest things that we have to teach them is to avoid debates. If you are having a ton of debates in your startup, things aren’t working. This is also why you will see stupid entrepreneurs who succeed — they don’t sit around debating every aspect of an issue. They just act without thinking. They’re acting quickly, making mistakes quickly, and doing something else to find what works.
As an entrepreneur, there are three things that you need: capital, talent, and time.
Money and people are needed to make any project work, but they are replaceable: there’s always someone willing to write another check, and there’s always someone who you can find to take over a particular job.
But you can’t get back time. A bunch of people sitting around, saying that they’re working, talking about new projects every two months, focusing on getting a grant rather than getting a sale, those are people in a toxic ecosystem who are just wasting time. Luckily, you have 100% control: you choose what tasks you prioritize and what distractions you ignore.
So discipline yourself for radical solutions. Anything that will only achieve a partial result is a complete waste of time. Aim for the complete solution, the one that will give you back a 100% return on your time, and don’t settle for anything less. Focus your ambition on what you can do today, and make sure that you do it to the best of your ability.
Ambition isn’t about having unrealistic goals. Ambition is about pushing everything to be better every day. And it’s about not giving up on those goals. In Europe, what oftentimes happens is that people just keep lowering and lowering and lowering their ambition and their goals, until there’s nothing left from what you originally wanted to do. And by doing that, you end up with nothing.
Instead, start with what you can do. Start building in your neighborhood, get a monopoly there. Then push out to your entire city. Then push out to the whole country, and then to the world. If it works, great. If not, don’t sit there readjusting your goals and pulling down your ambition. Be disciplined with your ambition.
That becomes a question of focus.
Where are those 20% of tasks that are going to provide 80% of the results? Learn to recognize fake work — anything that doesn’t bring you closer to more customers, that doesn’t bring you closer to a better product, that doesn’t put people in contact with your solutions. Applying for public money, going to conferences, taking meetings, this is fake work that doesn’t help you with your business model, doesn’t identify problems and solutions, doesn’t show you the actual goals that you have to achieve in order to have success. Real work does all of those things.
And as long as what you’re doing is real work, don’t worry about making a mistake. So many people get frozen in fear of making a mistake. Let me give you a very rational piece of advice about mistakes: nobody cares. You will make mistakes, and trying to avoid them is a waste of time. Entrepreneurship is a field that’s absolute: if you’re right, you make money. If you’re wrong, you lose money. And that money you lose is the price of learning. You lose money one day, you are wrong, you learn from it, now you know something new. You make money, you are right, you know something new and you’ve got more money, which is good. Reaching that mindset is necessary as an entrepreneur, because it’s liberating. It frees you and allows you to breathe. If you don’t have that mindset, you try to avoid mistakes. And believe me, trying to avoid mistakes is exhausting and it will eat up all of your time.
You have to realize that if your ecosystem were healthy for startups, they would already be there. They’d be all around. Once you realize that the culture isn’t sustainable for startups, don’t spend your time trying to change it — fight back against it. And find productive ways to do it. What is productive? Make your own money — find clients, not backers.
Building your revenue stream is the single most freeing thing that you can do.
At the beginning, when you are able to keep costs very low, that’s your opportunity to be profitable. This isn’t big-corporation profitable. I’m talking about what Paul Graham called ramen profitable, maybe in Europe we can call it pasta profitable. This is being profitable in a way that allows you to make enough money to control your own destiny.
You don’t need a business model to do that. You can make money and be opportunistic in terms of finding revenue streams without having a business model. If you can make money, you’ll have time to figure out the right business model. You won’t have to rely on investors who don’t understand your goals. You won’t have to rely on finding an exit before anyone realizes that finding the exit was easier than actually building your revenue stream.
In Europe, many people will go out and fundraise with whoever will give them money rather than thinking about trying to hack their revenue stream. They won’t take advantage of all of the opportunities. And that’s bad, because it’s much harder in Europe to find good investors. Finding bad investors can be worse than having none at all, because letting someone in to your company as an investor is like letting them into your DNA. They’re going to have an effect. So giving yourself the opportunity to be free is one of the best things that you can do. That revenue, that freedom, they help you survive.
Making money also allows you to keep your ambitions high. That’s important, because all kinds of things can kill ambition — your family who wants you to succeed but doesn’t see how this idea can possibly work; your early employees who start looking for some stability and reduced risk; you run into a skeptical group of supposed experts. External pressures can kill your ambition. Don’t let them. Being right just once can make up for 1,000 mistakes. That’s why in entrepreneurship it’s actually a larger risk to not be bold and ambitious. We know that only a fraction of companies survive, which means two things. One, it’s better to be ambitious, lose, and be dead sooner rather than later. And two, it’s better to win something big than something small — especially considering the amount of time involved.
Sustain yourself by connecting with people who have the same ambitious ethos, who are facing similar pressures and who refuse to back down.
Create a strong environment around you that encourages you to focus on your goal. Look around to see if you can connect with others who have faced those pressures before and succeeded. And it’s better for this group to be small, particularly at the beginning. It may grow larger with time, but keep it small at first.
That means don’t run around looking for role models! I promise, like investors, having a bad role model is worse than having no role model at all. Just because someone is successful does not mean that they are able to give you good advice. Finding someone who can help you is great, but don’t lose sight of the real goal. Focus your energies, and you can end up becoming a role model for someone else.
Let’s be clear: toxicity is not only a problem, it can be an opportunity. When you are able to achieve success in this type of environment, it is a symbol of strength. What advantages can toxicity bring? For one, European entrepreneurs show a great deal of discipline in both raising and spending money. Toxic environments discourage expenditures, and teach you how to maximize every dollar and every day. This type of capital efficiency is a huge key to achieving true and lasting success at the highest level.
European entrepreneurs also show an amazing ability to exploit the beneficial aspects of their home communities even while focusing on different markets. That’s why we’re building out the local The Family offices, as an Unfair Advantage for entrepreneurs. Algolia, one of our most successful startups, has exploited its initial presence in Paris to build a world-class technical team there, attracting the best talent thanks to the founders’ personal connections in the best engineering networks. Yet as a cloud-based search engine operated as a Web service, Algolia seeks customers not primarily in France, but all over the world. It’s the same model that The Family uses to help its Fellows rely on their base at home, but also launch their operations wherever there is a need, enabling us to be market-driven, not nationality-driven.
In the end, toxicity pushes you to work harder and to be more clear in your thinking. You can’t fool yourself in a toxic environment. You see the results, or the lack of results, and you have to act.
Acting sometimes takes the form of helping others — the pay it forward mindset.
This is not just about networking, this is not about collecting a stack of telephone numbers that you can call when you decide the time is right. Pay it forward is about giving as a matter of discipline, even if you get the feeling that it will never pay off. This may seem a bit mystical, but you can push to create an environment where so many people are helping others, that it will eventually come back to you. You don’t have to know how exactly, you can’t plan it, but it will be there. And there’s a more immediate benefit as well — helping others creates positivity, it helps you to feel better, it breeds success. It’s one of the ways that you can push a toxic ecosystem in the direction that you want it to go.
But that’s all without ever losing sight of the fact that you cannot change the ecosystem, you can only fight back against it. That means your ultimate responsibility is not to anyone else, it is not to the ecosystem as a whole, it is only to yourself. We can do more to help the ecosystem by creating value in Europe and creating the next 100 European billionaires than in fighting for some political solution that claims to help entrepreneurs. Do not count on anyone else saving you — you must save yourself. Ask yourself, what do I need? What does my business need? Focus on these questions, and you can overcome the toxicity around you. You can survive, and you can thrive.
Checklist: toxicityThe Family
Europe is a toxic environment for entrepreneurshipThat does not mean that it’s impossible to be an entrepreneur, it means that in general it is much harder in France and in Europe than elsewhere. This is revealed in many small things: paperwork, labor codes, social pressure, and an overall mindset with widespread pessimism, skepticism, distrust, etc.
To survive in this toxicity, you need to get strongerYou need to get in shape just like an athlete, but here it’s your perspective that you need to build up: construct an ambition filter that lets you analyze and sort out what you are hearing (and toss it out when necessary).
Beware of the startup hypeEntrepreneurship is becoming trendy. The media tell the stories that people want to hear, not the truth: do not get fooled by fantastic acquisitions and extraordinary fundraising rounds, things that you read that make it seem so easy. It is not easy. But that doesn’t mean that you shouldn’t read the content: tech is the only sector where top minds take the time to share their thoughts and experiences in blogs.
Beware of the Silicon Valley hypeLet’s kill the myth: you won’t fundraise easily just because you go to the US. Competition is huge precisely because everyone who is trying to fundraise goes there, including the best startups in the world. And that’s without mentioning the fact that you don’t know the system or anyone who lives there, making you into just another immigrant, like all the others :)
If you’re still dreaming of Silicon Valley, just book a fucking ticketSpend 3 months there and find out if it is where you want to live. If it is your dream, nothing should stop you: never play the “what if” game in your mind.
If you stay, understand and accept the local gameIf you are in Europe, play European, not American. You’ll have to deal with toxicity and remember, the less obvious it is, the harder it is to fight. Obvious difficulties are openly discussed and there are even startups that launch to try and solve those problems. Invisible toxicity is the most dangerous.
Never forget that time is preciousIn Europe, we like to take our time. Endless brainstorming, meetings and debates are the sign that something is wrong with your startup. Morons make successful entrepreneurs: they don’t think too much and they act fast. No one plans for indecision, but indecision is where you can easily end up. If you have enough users, A/B test - don’t debate. If you don’t have the users, make a random decision, flip a coin. Spend time acting instead of thinking and talking. An entrepreneur needs 3 things: Capital, People and Time. Only the first two are replaceable.
Be radical: never settle for lessAdopt the “upward push” attitude: always ask yourself, “What can I do, today, with my means, that would be at the highest level of ambition?” At the beginning, those things may be relatively simple: ambition does not mean contemplating unrealistic steps, it means getting better every day. It also means having the courage to stop and restart something new from scratch instead of continuing a downgraded project, just so that you don’t have to admit you failed. Get big or go home.
Focus on real workAlways ask yourself “Is this fake work or real work?”: real work is what brings growth for your startup, and fake work is what only brings you pleasure. Public grant? Fake work: if you don’t prove your business model, you will have money but no idea how to use it. Worse, you’ll feel happy with what you’ve accomplished, which is never a good thing for an entrepreneur. Pitching competition? Fake work: without a specific goal, it is a waste of time. Building the next feature? That comes down to the potential impact of that feature on your Life Metric (for the vast majority of startups it is their revenue): if your life metric is growing, you are alive, if not, you are the walking dead.
Don’t be scared of making mistakesFirst, nobody cares. Second, thinking about the next mistake you want to avoid is a waste of time, while making a mistake is never a waste as long as you learn something. In entrepreneurship, there is an absolute criteria of truth: if you are right, you make money; if you are wrong, you lose money; and the amount of money you lose is always the right price for the right lesson. Losing money is something you need to learn very fast. And remember: you only need to be right once.
Dare to fight backIt is not about changing the toxic culture, it is about preventing the culture from infecting you. In Europe, we define each other by who we are (our background, family, studies) and not what we are doing (that’s one reason why we have a big problem with failure). Fight back, especially with yourself, because the important thing is what you think, not anybody else.
Don’t be part of the zooEntrepreneurs are hyped and in great demand, especially from people who cannot bring them anything. Before doing something, always ask yourself: “Is this useful or not?” Be very disciplined. In a toxic environment, every single tiny breach in discipline can cost you the victory.
Make your own moneyBe opportunistic to become profitable ASAP, and stay independent from investors, as they are the first cause of toxicity. You don’t need to be really profitable, that takes years - but be “ramen profitable,” get to a point where you’re surviving. An entrepreneur is someone who does things without resources. You do not need a business model to make money, as that is just a methodology to provide value at scale.
Connect with othersFind people who have the same mindset than you, who are living the same things. Enjoy yourself: being disciplined does not mean that you can’t have a life outside your work.
Pay it forwardGive before receiving and at some point you will be repaid. If everyone in the community does that, it will be the real antidote against toxicity. Force yourself to give everyday.
Save yourselfNo one is strong enough to save a country or an ecosystem. At The Family we fight to save the 200 best companies in Europe. Save yourself: be disciplined enough to grow, good enough to take people with you, work hard, focus, build amazing things and everything else will follow.
Articles to go deeper
Nicolas Colin, “Entrepreneurship Is the New Politics”
The Family Papers, January 2016
Laetitia Vitaud, “Save: How to Build a Service Empire At Lightning Speed”
Kima Ventures, January 2016
Nicolas Colin, “What Makes an Entrepreneurial Ecosystem”
The Family Papers, October 2015
Adam Davidson, “Welcome To The Failure Age!”
The New York Times, November 2014
Marc Andreessen, “What It Will Take to Create the Next Great Silicon Valleys, Plural”
Andreessen-Horowitz, June 2014
Vivek Wadhwa, “Silicon Valley Can’t Be Copied”
MIT Technology Review, July 2013
Babak Nivi, “The Entrepreneurial Age”
Venture Hacks, February 2013
Erik Brynjolfsson & Andrew McAfee, “The Big Data Boom is the Innovation Story of Our Time”
The Atlantic, November 2011
Paul Graham, “Cities and Ambition”
Essays, May 2008
Paul Graham, “How To Be Silicon Valley”
Essays, May 2006
Paul Graham, “How To Make Wealth”
Essays, May 2004
We told you, they lived it!
Philippe Gelis, CEO @ Kantox
Philippe started in finance, working at Deloitte. He met his cofounder at a Startup Weekend and cofounded Kantox back in 2011, in Barcelona. Kantox is a peer-to-peer foreign currency exchange for businesses. It has today over 1,600 clients in more than 50 countries and totalize over than $2 billion in transactions. Kantox raised $11m in 2014.