There are buildings in Europe that are older than the United States. That is one reason why it is not surprising that the U.S. currently leads in startups — the entire country is basically a startup compared to Europe.
But, while the U.S. startup scene features a full speed ahead mindset, European startups are more deliberate, patient and adaptable. These startups progress in an incremental but sustainable manner.
U.S. startups have been sprinting far ahead of international competitors for decades, but European endurance has been closing the gap the past few years. Featuring success stories such as Sweden’s Spotify, here are three reasons why the European startup scene is catching up to the U.S.
One of the biggest hurdles European startups face is the fact that Europe is a grouping of 50 countries, each with individual regulations, markets, languages and cultures. Across the Atlantic Ocean, the U.S. has 50 states with open borders, a common language and shared history.
The concept of taking a new product to national levels is completely different when comparing Europe to the U.S. A German startup reaching a national audience will have its product or service in the hands of 82 million people. In the U.S., the population is almost four times that size at 327 million. If European startups want to compete with those in the U.S., there is no choice but to find ways to expand reach across country borders.
“As the U.S. market is massive in size, American startups tend to be very U.S.-specific with their products and targeting. While there are slight regional differences, the U.S. represents one consistent culture across the entire country, whereas European countries are smaller and more connected,” Sophie Knowles, founder of London-based PDF Pro, told me in an email. “European startups know that for growth, they must adapt their products and services to meet the needs of other markets. Due to the close relationship of European countries, they hold greater knowledge than U.S. startups on cultural variances and how to effectively meet the needs of each market.”
Successful European startups learn early on how to adapt products and presence toward the various countries throughout Europe. This means translating services, navigating local legislation and adapting marketing strategies. All of this can be slow and time-consuming work, but European entrepreneurs must master these skills to grow. Furthermore, they create pre-defined, repeatable processes for entering new markets.
Belgian-based invoicing, customer relationship management and project planning software startup Teamleader has done great work focusing its growth across Europe. The team has not only translated the website, they have also foreseen integrations with products that are typically used by European companies such as local postal services. These efforts have enabled Teamleader to stay competitive despite the fact it is in a niche dominated by large U.S. players such as Salesforce.
There is perhaps no greater example of a startup imploding than the story of Lucas Duplan, the 22-year-old who continually secured tens of millions from investors for his secretive payments company Clinkle. And there is perhaps no greater imagery for what happened to Duplan’s startup than when he and Virgin Group founder Richard Branson burned $10,000 worth of fake $100 bills. Though the initial goal of this photo op was to show how the startup would eventually make paper money obsolete, it more accurately foreshadowed the business’s fate.
This story represents a common outlook in the U.S. — growth at any cost. And that growth frequently proves to cost a lot without returning much.
In contrast, European startups focus efforts toward achieving profitability over unsustainable growth. While U.S. startups have more access to capital and venture funds, European entrepreneurs have become better at creating business models that are more incremental in nature but sustainable long-term.
“For a company like DeployBot, there are two possible business strategies: We can either look for investors, gather venture capital and sell our brand piece by piece until our reputation has hit its peak, or we can develop a sustainable model that is profitable in the long run and whose research and development is self-sustained,” John Baker, chief technology officer of the Cologne, Germany-based business, said when I reached out to him. “European startups have, by and large, chosen the latter. When ‘bootstrapping,’ it is important to work efficiently and employ a lean startup methodology. In our own business model, this slow burn mindset has highly influenced our thinking and our product, and ultimately, our success.”
While the temptation exists to grow quickly, European startups define success as profitability first.
The typical U.S. startup employee is innovative, savvy, hardworking … and burnt out.
According to the U.S. Travel Association’s Project: Time Off campaign, U.S. workers took an average of 17.2 days of vacation in 2017, which is actually the highest in seven years. The study also noted that 52 percent of the workforce had vacation time that went unused in 2017 and 24 percent even said they took no paid leave in more than a year.
The U.S. is the only developed country that does not have a single required paid vacation day, while the countries of the European Union legally require at least four work weeks of paid vacation. But, Patrick Whatman, content marketing manager at Mention, notes that European startup employees work just as hard as those in the U.S.
“As a French company, we do have a generous number of legislated vacation days. It’s not unlimited, but we are required to take them,” Whatman said via email. “Compared with my American friends and what I’ve read about Silicon Valley, I’d say we do very well for vacations. And of course, the culture and the expectation is that we will actually take advantage of these. When we’re in the office, we work hard, we have lofty targets and we often stay late. But, when we leave the office (especially on vacation), most of the time we’re expected to be fully switched off.”
According to Psychology Today, U.S. employees are not the only ones who suffer losses from lack of vacation days — the businesses also take a financial hit because of lowered productivity and burnout. The publication also notes that working too much without taking a break causes stress that can result in health issues and strained relationships.
European startup founders and CEOs are better at making sure their employees work hard while at the office while recognizing the importance of completely disconnecting when workers leave.
The U.S. might be the current leader in terms of successful startups, but Europe is no longer lagging far behind Silicon Valley. U.S. startups tend to speed ahead with American-centric mindsets, growing before many can properly sustain that growth and working employees to exhaustion. Meanwhile, startups in Europe are gaining ground with a willingness to diversify services toward various regions, focusing on profitability over growth and giving employees time to disconnect so they can return refreshed and ready to take the European startup scene to the next level.
By: Stefan Debois
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