In the People chapter (06.2), we explored a number of the business-related motivations behind why founders set up their companies where they did. We also wanted to explore the personal side of this decision. In a European tech ecosystem where there are so many emerging tech hubs and where people mobility is so significant, what are the personal factors that shape the decision to start a company in one city versus the next?
Clearly there is way more international talent in French startups than a few years ago. This is for two reasons. First, President Macron has clearly projected a very pro-business image of France, which wasn't necessarily the case before. It's not just political blabla; the quality of the startups here is also attracting this talent. But part of it is also that entrepreneurs and startup employees are looking for new locations different from some of the other, more traditionally sought-after ecosystems. For example, I don't hear as many entrepreneurs getting hyped up to move to Silicon Valley.
But staying in Europe does not mean settling for proximity. European tech founders have international ambition and build companies with this mindset.
Being a European company is one thing, being a Belgian company is another. Personally I believe that the biggest challenge for scaling in Europe is Europe's fragmented marketplace. When you go to market with a product in Europe, you aren't going to market in Europe as much as you are going to market country by country.
Every country has their own identities, languages, cultures, laws, channels,… which means that - all else being equal - a dollar (or euro) spent in a US go-to-market goes a lot further than one distributed over the different geographies in Europe. If you then look at orders of magnitude, Belgium has 10M+ people, Germany 80M+, France 65M+, the UK 66M+, ... whereas the US has 330M+ people. This means that when you go to market in your own local market you have a different scale that you are working against, which translates into the availability (or lack thereof) of experienced talent you can find when you need to scale up.
For a European tech company, the challenge is always around paths to expansion. As a continent, we are made up of many different markets, with separate cultures and languages. For a startup in China or the US, their initial markets are much, much larger. European startups, on the other hand, have to think global from day one. This can be their strength, of course, but to succeed they have to be absolutely ruthless about product market fit. The flip side is that we are much more diverse as a continent, have some of the best universities in the world (especially for deep tech) and are more open to regulation.
The latter is something I think will only become more important. Fintech is a good example of this already in action — London became the world leader because the regulators have been engaging with the technology, not because it has been left alone to do its own thing. As consumers are more and more aware that tech is changing their lives, this conversation between governments and tech is only going to become more crucial.
There are a number of challenges facing the tech ecosystem in Spain. However, the biggest issue by far is a lack of real support for the tech companies here, especially when compared with France or Portugal.
While it's fair to say that policymakers around the world are wrestling with how to effectively regulate disruptive technologies, the vast majority are trying to do so without reigning in or stifling innovation. In Spain, the impact of regulators so far suggests a determination to hold back new technologies and new ways of working in favour of maintaining the traditional industries' status quo. From our point of view, Spain is the only country (out of the 26 in which we operate globally) where we haven't been able to open a constructive dialogue with local regulators around the labour market rules for startup workers. When you couple this with rising taxes, and a tax system not adapted to providing share-based incentives to employees, it can be difficult for tech companies to gain a foothold in the Spanish market without quickly becoming embattled.
In terms of its strengths, Spain has so much to offer the global tech community. It's easy to attract top talent, especially to Barcelona, and there are many good universities here. The high quality of life and low living cost also make it much more affordable than other big European tech hubs, such as London, to set up and launch a business. And the country's geographical position makes expansion in Europe easy and gives it a distinct advantage in Latin America, due to the cultural ties with that region.