3 Things U.S. Startups Do Better Than European Startups
It's no real surprise U.S. companies dominate the list of top startups.
The excitement of potential defines startup culture. The hope for success pulses through newly rented offices like electricity, charging everyone to hustle so that potential turns into results. However, the fear of failure is also there, lurking right out of eyesight, but always a looming presence.
Numerous factors contribute to the success -- or failure -- of a startup. Circumstances ranging from access to funding to company culture can, and will, make or break a startup with a good idea and a solid business plan.
The actual percentage of startups that fail has been contested. Entrepreneurs tout the popular 90 percent statistic, while Fortune columnist Erin Griffith argues that the true statistic is 60 percent based off of data from Cambridge Associates. Either way, most startups do fail. But, how do startups in the United States fare against those in Europe?
The number of successful startups has increased throughout the years in Europe, but the U.S. is still markedly the leader of the pack. This can be seen by Startup Ranking's chart showing the top startups worldwide. While Europe has a prominent presence, the U.S. dominates the list, claiming 45 spots out of the total 100.
How does the U.S. stay on top? Here are three things U.S. startups do better than European startups.
U.S. startups aim to conquer the world from Day One.
Think about the technology most people use each day. They email with Gmail or MailChimp. They communicate with their team through Slack. They search for new lunch spots with Yelp.
Once startups, the businesses listed above are now global powerhouses. U.S. startups do have natural advantages such as more access to capital and talent, but the leaders also have a different mindset from the beginning. Entrepreneurs in the U.S. build their businesses with every intention of going global whereas European startups are more apt to target growth incrementally.
When reached for comment, Funnel.io Co-Founder and CEO Fredrik Skantze attributed this to the fact that European companies focus more on their home market at first.
"This is especially true in the larger European countries where the home market can often be quite large," said Skantze, whose company has offices in both Stockholm and Boston. "When they eventually decide to enter a second country, they are often surprised to learn that it is much harder than their home market as it is a different language, different culture and they don't have a brand or local presence in that market. Focusing globally from the start allows a company to build this into their DNA and act globally from Day One, and we certainly see a lot of U.S. companies doing this well."
During Survey Anyplace's outreach initiatives, I have found that U.S. businesses are more likely to target guest posts on popular websites with high authority throughout the world whereas European startups are more likely to focus their efforts locally, even if it means the websites have less authority.
Startups with a global mindset better communicate their intentions, garnering confidence and loyalty across audiences and within the business.
U.S. startups talk to competitors.
I recently met with another startup founder in a restaurant, where he insisted we sit at a table far from any other guests. Like many other European startup founders, he feared others would hear our conversation about our businesses. We had no reason to think this was the case, but he wanted to be cautious so guests at the restaurant would not hear the sensitive information we discussed.
Across the ocean, the United States does not harness the same fear of competitors. Instead, U.S. businesses are more likely to enter into mutually beneficial relationships with competitors.
Apple and IBM have been in a partnership since 2014, initially to enable Apple to use IBM's data and analytics in iPhones and iPads. Four years later, that partnership has only expanded, benefiting both companies.
Frank Maene, CEO at Volta Ventures, told us this attitude is one of the reasons U.S. startups remain at the forefront.
"Americans know their competition and know everything about them. They also know in which situation they are likely to win or lose a deal. It all depends on the specifics of the customer, his [or her] needs and to which extent your product is the best solution," said Maene. "Americans have no qualms in talking to their competitors. How else do you have all the info needed to claim that you 'are the number one in (fill in the blanks)'?"
A quick scan of most U.S. startup blogs shows how open the majority of businesses are to share strategies even when competitors are watching. For example, this blog post on SEO software and consulting website CanIRank features several other SEO consultants sharing their expertise, opinions and strategies.
While the hostile competitor mindset has slowly been evolving into a more productive one, European startups have historically looked at competitors with resentment. Until this attitude is adjusted, Europe will continue trailing the U.S.
U.S. startups provide stock options to employees.
That's what Neil Rimer, founding partner at Index Ventures, told Business Insider. Research from an Index Ventures study, Rewarding Talent, argues that to reach the next level, European startups must retain talent by offering stock options.
According to the study, U.S. employees own 20 percent of late-stage startups whereas that percentage is cut in half in Europe. The study also showed that more than 60 percent of stock options are saved for executive level staff in Europe. In the U.S., two-thirds of stock options are reserved for employees outside the executive bubble.
Stock provides potential for money outside of employees' salaries. As of now, Europeans are more apt to prefer immediate funds such as higher salaries instead of stock options. One reason for this is because stocks come with a level of risk. Another reason is that companies and employees are taxed on stock in Europe at an "unfair" amount, according to Rimer.
Owning stock options not only attracts talent, it makes employees more vested in the success of the business. It creates a sense of ownership of the business and increases the likelihood that employees will not only join startups, but that they will stay.
With companies such as Spotify gaining in popularity, Europe is emerging as a leader in startups. But, to compete with the U.S., entrepreneurs must get into the global mindset from the beginning, see competitors as assets instead of enemies and retain talent by offering stock options. Until then, the United States will continue to lead the pack.