Comparing Startup Ecosystems & Culture: US vs Europe

In 2019-2020; I had the chance to be in Silicon Valley for a year. Working for startup accelerator, biotech incubator and go to around 130 conferences / meetup. I met VCs, Academics from Stanford, Berkeley, Serial Entrepreneurs, Tech Workers working for Google, IBM, Amazon, Scientists working for Genentech, Pfizer, Bayer, Merck and more. I could clearly see the insane difference in terms of culture and what success looks like. Being an entrepreneur there and building company is everything while is Europe it is just starting. I grow up in France, then studied in France, Germany, Switzerland, Mexico worked and lived in Düsseldorf and now Berlin. With Diana Joseph, I also interviewed ecosystem players in 15 different location to understand how they are building their innovation ecosystem. Now let’s dive in, and understand the biggest WHY; differences and what is coming next.

The 2022 StartupBlink report reveals that the US maintains its dominance in the startup economy with a score four times greater than that of the UK, the second-ranked country. Sweden tops the list of successful startup ecosystems in Europe, followed by Germany and France. Despite being ranked as the 9th best startup ecosystem globally, France’s output is only 1/10 that of the US. Meanwhile, Japan lags behind at 20th place in the report.

One may ask what causes the disparity between the number of startups in the US versus Europe. Despite having a similar economy size ($20 trillion) and an equal or larger number of software developers, why does the US have more startups?

Let’s first dive in into some data

FACTS TO KNOW: RESEARCH & IP

The McKinsey Article “Building the European Biotech Sector with World-Class Science and Innovation.” highlights the strengths and weaknesses of Europe:

“Europe is a powerhouse in scientific publishing with roughly twice the output of the United States and three times that of China…Despite Europe’s strength in science and innovation, translation remains the biggest challenge. Translation of science into companies is stagnant. The distribution of newly funded biotechs remains unchanged across geographies over the last six years, and Europe accounts for only 25 percent of new biotechs. Future success will depend on improving the translation of research into new companies, raising more capital, and building entrepreneurial talent.”

The impact of scientific papers or intellectual property on society is limited. What is crucial is how ideas are transformed and applied in practice.

As another McKinsey articles cities it:

“The fact that Europe did not keep pace with the United States in the first technology wave centered on the internet and software now means that Europe is in a weakened position in transversal technologies across sectors.

Translation: Europe falls behind in this aspect. This is going to change as Europe is putting his biggest bet on universities; and spint out companies: Germany Expects to have and additional 1350 startups coming out right from universities. Especially, they could be very competitive by focusing on two: Next-Gen Material and the future of cleantech. Universities being a key location for their discoveries.

A Major difference: Density of a Startup Ecosystem

A key differentiation, is a amount of startups emerging from ”superhubs”. Silicon Valley and New York City, known as “superhubs,” have significantly impacted the success of US startups due to their concentration of entrepreneurs, tech talent, and investors. Although London, Paris, Berlin, and Stockholm lead in Europe, they have not reached the same level of capital, knowledge, and talent concentration. Thus, only 30% of European startups have their headquarters in a tech superhub where they can potentially gain more talent and funding, compared to almost half of US startups

Capital

As observed on the “Ecosystem Show: Berlin”, Europe faces a unique challenge in funding. There is ample support for pure research through university funding, but the transition to commercialization lacks adequate funding. After leaving the university, there is a sudden drop in funding.

Getting funded in Europe is very different than in the US. Public funds are much more involved than in the US; which means the petites to grow faster is much different. Companies coming out of universities are also favored vs in the US.

Public Opinion & Media

While a new the startup culture is next level in the US; some people questioned me. But why? so I went through many articles and books but this one stood out to me, of course. Public Opinion: do we get recognized for the work we do?

39% vs 17%

Kim Baroundy & Co studied it, and found out that media analysis revealed a disparity in positive portrayal of entrepreneurship: 17% in Germany compared to 39% in the US. As a startup success is not deeply recognized in the european culture; many are not motivated to take the major risks entrepreneurs should take

Mindset

According to Markus Berger-de León & Co; Only 5 percent of the population in Germany have plans to start a company. The main reasons expert cite is:

lack of an entrepreneurial mindset.
obstacles in the funding process, such as the fear of financial insecurity or the absence of entrepreneurial knowledge.

As Reid Hoffman says it; “Silicon Valley is not a location, it’s a Mindset” or

Peter Diamandis:

“What was the most important thing in making Steve Jobs and Elon Musk? What made them successful? Was it the money they had? The technology they had? The network they had? Or was it their mindset? You take away everything, but you retain their mindset. They would regain some level of their success. And so if your mindset is the most important thing you have, what mindset do you have? What mindset do you want? And how are you going to shape it? Most of us get a mindset that we inherit from our parents, parents that we inherit from the people we hang out with. But we don’t take the time to shape our active mindset.”

Conclusion

Europe biggest problem is our culture, values and knowledge about the process of building companies. Our mindset gets in the way of impactful innovation. We need more success stories to inspire the next generation! We need more people to embrace entrepreneurship’s values, such as taking risks and thinking long-term.

If we want more talented individuals to build and launch companies, we will need to teach and educate them to have a mindset enabling them to tap into the power of networks and ecosystems. Those will allow them to build confidence and resilience by diminishing risks and distribution values across the ecosystem value chain. It seems that Europe’s biggest startup potential will come out of universities but that to happen, we will need to a lot of change such as bringing EIR (Entrepreneur in Residence); Professors interested in Translation Science, reforming the politic and policies of tech transfer offices as well as making the ecosystem work together and form alliances. A great example of the transformation of the Academic Hub of Boston; you can learn about it >> here <<

Source:

https://www.mckinsey.de/industries/technology-media-and-telecommunications/our-insights/europes-start-up-ecosystem-heating-up-but-still-facing-challenges

mckinsey.com/industries/technology-media-and-telecommunications/our-insights/what-makes-the-difference-for-europes-top-start-ups

https://www.startupblink.com/startupecosystemreport

https://ecosystemshow.buzzsprout.com/

https://www.instagram.com/reel/Cn77nqfLxqm/?utm_source=ig_web_copy_link

https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/entrepreneurship-zeitgeist-2030

https://www.mckinsey.com/industries/life-sciences/our-insights/infographic-building-the-european-biotech-sector-with-world-class-science-and-innovation

https://www.azquotes.com/quote/1025033