We Need to Change How We Think About Failure in Europe There's no shame in failing, and entrepreneurs shouldn't be unduly punished if a business idea doesn't work out.
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We have to agree that no entrepreneur starts her business wishing for it to fail. Instead, we go through a journey of ups and downs until we realize that the overnight success tale doesn't really exist. Building a business is not only a test of resilience but a way to learn deeply about ourselves, our strengths and if, in fact, we were really crazy about the industry we chose in the first place. Quite often people discover that they were not that excited anymore about that "brownie box" app, or that food truck business is just too much to handle, but guess what? That is absolutely fine.
Well, unless you are in Europe. Here, things are still a bit different when it comes to "failing," and it's about time it starts to change.
According to a European Commission report, 50 percent of new companies fail within five years. However, across Europe, while under one common market, where you set up your business can mean the difference between a short effective closing of a company (such as the U.K., Germany or Finland) or a long, drawn out process in countries such as Hungry and Malta. In other countries like Italy, it is not uncommon to see companies taking up to 10 years to close while they are tied up in bureaucracy, having a detrimental effect on all stakeholders. Not to mention the cultural stigma that failure entails in a number of these countries.
Conflicting regulations can contribute to making European entrepreneurs feel punished for "failing" or afraid to even try. It's about time we take a different approach to business, maybe learning a lesson or two from the ecosystem our friends in America have created, including where the government will give companies life support through frameworks such as Chapter 11. This saved the U.S. motor industry after the global financial crisis of 2008.
The American psyche is also one where failure is culturally embraced so when you close a business you're encouraged to go and start another one straight away. And why not? The same European Commission report also states that those businesses that are not created by first-time founders have a statistically higher chance of success.
When we delve deeper into the U.S., we only have to look at Silicon Valley as an example to show the success of the ecosystem that America has created. While reduced in recent years, a CB Insights report showed that over 40 percent of the worlds privately owned "unicorn" startups are based in the U.S., home to a population of approximately 325 million people. Of the other 107 unicorns globally outside of the U.S., only 25 are from Europe -- which has a population more than double that of the U.S. with over 741 million people. Put another way, for every unicorn created from Europe almost four are created in the United States. This cannot be simple chance.
In addition, we have not considered those Europeans who have left to set up unicorn companies in the U.S. A perfect example being that of John and Patrick Collison, who left Ireland and created one of the world's leading payment processing companies Stripe, which is currently valued in excess of $9 billion. Could they have done the same If the right ecosystem was in Europe? I guess we will never know, but it's a thought worth thinking about.
The beauty of entrepreneurship consists of learning from our mistakes and giving people the chance to change their own lives which consequently contributing to the growth of their community. When laws punish entrepreneurs for failing, we are not only stopping the dream of one person but the opportunity of creating future jobs and contributing to a wealthier Europe in general.
The solution? Our business representatives should lobby for more startup friendly laws and aspiring entrepreneurs should feel safe knowing that it's OK to change your mind after starting, it's OK to fail and start over again even if your government doesn't encourage this. Why not join or even start a "failed business" lobby group and hopefully influence European governments to encourage entrepreneurs through improving legislation, instead of punishing them.