Although there are many similarities between the startup ecosystem in the US and Europe, we can’t deny that there are some significant differences. Nowadays, when digital nomads are willing to relocate anywhere in order to start a new business, it’s a good idea to discuss these differences and compare the state of entrepreneurship and startup culture in the two biggest and most important marketplaces.
It’s quite clear that in the US, startups are at the core of all innovation, and wildly successful startups like Airbnb, Uber, or HubSpot have all originated on the American side of the pond. Although in Europe the startup culture is on the rise, it’s the US that dominates in the startup world. Here are the main reasons why this is so.
Funding opportunities
Put simply, startups in the US have much more funding opportunities, mainly because there are many venture capital companies as well as angel investors willing to support new ideas. It’s true that there are angel investors in Europe too, but many startups still struggle to obtain money at the seed as well as the growth stage. Crowdfunding options offer funding opportunities to entrepreneurs all around the world, but things still need a great deal of improvement in Europe.
Free flow of capital and people across the EU borders will undoubtedly make it easier for startups to find investors, and in time the gap between the US and Europe in terms of financial investments will be bridged, but at the moment, the US is still a mecca for prospective startup owners. Keep in mind that if you are outside of Europe and wish to trade with other businesses in the EU, you may need an LEI.
But, European startups can still find their place under the US sun, if they promote themselves well, which is why search engine rankings play an important role in the success of a startup. Taking advantage of New York SEO services and hiring an agency which understands the US marketplace and knows a couple of tricks of the trade can significantly improve a startup’s chances of success.
Risk-taking
According to some recent data, 75% of venture-backed startups fail. The willingness to take risks is something that characterizes entrepreneurs in the US. Namely, they’re more likely to invest their time and money in a business venture even if they’re not completely sure about the outcome. Of course, this doesn’t mean that they tend to rush into making business decisions without any plan or research. They’re simply more open to trying out new things and playing it safe isn’t something that they’re inclined to.
Instead of that, they prefer taking risks in order to achieve and earn more. On the other hand, in Europe, people generally prefer the safety of their regular salary, and leaving that comfort zone for the sake of starting a new business isn’t something too common.
When it comes to starting a business, Europeans mainly rely on self-funding as well as funding by family and friends. Basically, this business model rests on sharing responsibility and equity, meaning that the risk of falling into a debt is minimized, while everyone involved will benefit if the business becomes successful.
Intellectual capital
6 out of the top 10 universities in the world are in the US, and what’s even more important, the majority of them are situated around Silicon Valley – Stanford, Berkeley, and Caltech all recruit bright minds and educate them while instilling that already mentioned entrepreneurial spirit in them. The close proximity of multi-billion companies and cooperation with them allows universities to encourage students to take risks and pursue their ideas.
Silicon Valley companies also provide mentorship options and maintain a strong presence on campuses. Steve Job’s Stanford commencement address from 2005 is still fresh in our minds, and it’s a perfect example of how entrepreneurship is nurtured in the US. On the other hand, some of the oldest and most prestigious universities are situated in Europe, and although they offer superb education, their connections with the corporate world aren’t strong enough. Their traditional approach doesn’t stimulate entrepreneurship, and that’s one of the most important differences between the two regions.
Formal education is something that still bears a significant importance in Europe, which is why a university degree is a must. Interestingly, some of the most successful and powerful entrepreneurs in the US are college dropouts, and the fact that they don’t have a degree wasn’t an obstacle when they launched Facebook or Apple.
Revenue first or growth first?
This is another key difference between the US and Europe startup cultures. Namely, in the US, startups rely on heavy marketing coverage and VCs which pump large amounts of cash into the development of their products and services. Their focus is to grow and obtain as many users as possible, while they don’t expect to generate revenue within the first 3 years. That’s why there are many startups whose values are in the vicinity of 1B while their revenues don’t reflect this.
Due to better and more accessible funding options, it’s possible to operate this way, as they don’t need to establish steady cash flow until later in the process. As we have already said, in Europe startup owners lack later-stage funding, which is why they’re more revenue-oriented as that’s the only way for them to survive. An upside of this situation is that European startup owners are more independent and autonomous, while the speed at which they generate revenue proves that they have achieved product-market fit early on.
These differences, although they seem skin-deep, are actually crucial for creating an effective startup strategy in any of the two marketplaces.
