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Why Startups Condense in America 565

bariswheel writes "The controversial genius developer/writer/entertainer Paul Graham writes an insightful piece on Why Startups Condense in America. Here's the skinny: "The US allows immigration, it is a rich country, it is not (yet) a police state, the universities are better, you can fire people, work is less identified with employment, it is not too fussy, it has a large domestic market, it has venture funding, and it has dynamic typing for careers. Inquire for details within."
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Why Startups Condense in America

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  • by morie ( 227571 ) on Monday June 12, 2006 @08:55AM (#15516261) Homepage
    I used to work for a european university. We had quite an impressive standing in europe, but were nowhere near the top of the list woldwide, which is dominated by US universities. This was a non-US list based on the opinion of academic peers. The list of most funded universities is almost exclusively US and UK universities.

    So, as much as I hate chaufinism (either US or otherwise), this is not it but just a basic truth.
  • by CastrTroy ( 595695 ) on Monday June 12, 2006 @08:59AM (#15516280) Homepage
    The thing is, there are some really good schools in the US. Harvard, Yale, MIT. There are also some really bad schools. The elite ones are really good, I think the state run universities are the ones that give the entire country a bad reputation. On average, the schools aren't that good. But companies don't pay attention to those schools. They pay attention to the top schools.
  • by cerberusss ( 660701 ) on Monday June 12, 2006 @09:07AM (#15516305) Homepage Journal
    US has fewer bureaucratic barriers

    Actually, here in the Netherlands, I have spoken to a few businessmen which deal or have dealt with the US. They all find dealing with the Americans an enormously bureaucratic process. Also note that lots of rules come from overseas from our point of view, Sarbanes-Oxley comes to mind.

    To start a company in the Netherlands, you do two things:

    • visit the local Chamber of Commerce and spend 10 minutes to tell your new business its name
    • Fill in one (1) form and send it to the (equivalent of the) IRS for a VAT-number
    That's it. How unbureaucrative can you get?
  • by moranar ( 632206 ) on Monday June 12, 2006 @09:29AM (#15516400) Homepage Journal
    Public universities here in Italy cost money too. I'm paying 1200 a year, for example, for a Software Eng. course.
  • by Pink Tinkletini ( 978889 ) on Monday June 12, 2006 @09:43AM (#15516465) Homepage
    I question the validity of lists like these, but Shanghai Jiao Tong University's annual Academic Ranking of World Universities []--originally compiled in order to help improve China's own system of higher education--is very well-regarded and frequently cited among international liberal arts and sciences academics.

    Glancing casually through the list, it looks like the majority of the "best" are from the US, including Harvard, Columbia, Stanford, etc. Methodology and other goodies here [].
  • by gowen ( 141411 ) <> on Monday June 12, 2006 @10:12AM (#15516640) Homepage Journal
    Even more "fortuitously" (for want of a better word), just as the unrestrained laissez-fair US economy of 1900-1920 was beginning to eat itself into a Great Depression, along came a really big war to justify the government intervention deficit expenditure, which helped win the war and artificially stimulate the economy at precisely the time that it needed it.
  • by forgotten_my_nick ( 802929 ) on Monday June 12, 2006 @10:21AM (#15516697)
    >4. American Universities Are Better.

    They had a program on Channel 4 called "God's next Army". It was about a university that was built just to churn out Christian fundies into government/law/media so that they can change the US to thier beliefs.

    I would of taken it with a pinch of salt except that quite a few people from this school have made it into the US Government (some in key places) and the school had serious backing by major far-right Christians/groups. It's just an example it seems.

    What was interesting is that they take Creationism to the extreme. They don't teach science at all, so for example layers in the earth were created by Noahs floods.

    Based on what they have accomplished so far I'd say in 10-20 years (if your lucky) American Universities will be teaching along the levels of the middle ages.

  • by Pendersempai ( 625351 ) on Monday June 12, 2006 @10:56AM (#15516885)
    It's the same process here except that you don't need to visit the Chamber of Commerce. I founded a non-profit corporation once, and it involved filling out just one form. Later, when the time came to dissolve it, it again took only one form.

    It's true that Sarbanes-Oxley complicates things, but that's mostly for large businesses. It has all kinds of exemptions for small businesses and startups, and even most labor laws don't apply to companies below a certain size. If I had to guess, I'd say your friend from the Netherlands found his experience with American companies to be bureaucratic for two reasons:

    (1) He was dealing with large American companies, to which all of these laws and regulations do apply, and
    (2) he had to work an interface *between* two countries, which is always harder than working within either one exclusively.

    Especially with regard to this second point, America has a huge advantage simply because its domestic market is big enough to obviate the need for a startup to cross national boundaries with its business.
  • Startups in US? (Score:1, Informative)

    by Anonymous Coward on Monday June 12, 2006 @11:12AM (#15516982)
    1. Immigration. Nah, I don't think that immigration has anything to do with it other than a fair percentage of people in the "good" universities in technical programs ARE aliens. I feel that it has much for to do with general culture, i.e. Japan is EXTREMELY conservative, while less so Taiwan doesn't do too bad of a job of R&D even if they aren't really up to snuff technically, similarly Europe is also highly conservative(but not nearly as much so as Japan) and would be a MUCH more likely place to see similar areas to Silicon Valley spring up especially in some of the city-states or possibly Eastern European countries AND they should be at a nearly equal technical level although they haven't done much in quite some time. Actually now that I think of it Canada should be even closer than Europe if it wasn't for their f'ed up tax system. (I'm really surprised in a way that ATI & Bioware stay there, but then again, they probably make enough that the taxes don't seem that bad, plus I imagine that the Canadian gov't gives them special breaks to make sure that they stay, just like M$ was threatening... agricultural related industries also get MASSIVE subsidies, goodies, and tax breaks as well, which I know of as my bro-in-law is Canadian and owns a nursery(plants)... still bitches like hell about hte taxes though...)

    2. India doubt it, not for centuries at least anyways.

    3. China, hard to get much more police state than that unless you consider Iran or North Korea...

    4. Universities: Actually when I was considering completing a Ph.D. in engineering a CS professor(Korean) suggested Switzerland as they had: a) money(lots), b) spoke english, and c) good Universities. Additionally the chairman of our department while have done his BS & MS in the US completed his Ph.D. at Cambridge(his advisor took a position there and several of his students went along for the ride) Lastly, I met a post-doc (CS) from France out our University and a friend of his from France(Ph.D. EE prof) they both ccompleted their Ph.D. at Grenoble and seemed to be as good as the regular engineering department staff(the other guy now works as an EE prof at a university on Corse IIRC). Japanese Universities are supposedly pretty good too, esp the University of Tokyo, although there is a bit of a language barrier there so analysis is somewhat difficult(and I don't know any Japanese with decent English AND who have technical degrees to say much). Now universities from other parts of the world, e.g. India, Pakistan, etc. the university ALWAYS made them finish a BS here until recently as they have sub-par programs in the VAST majority of their universities.

    5. You CAN fire people in Canada too, and also in Eastern European countries, and Western European countries are changing. Technically you can do it in Japan as well, but again their arch-conservatism and not doing so by tradition, which is also slowly changing... Also in the U.S. it is VERY difficult to fire some types of people, and I have seen the extremes that companies go through when they wish to fire those types of people.

    6. Not really a good thing IMHO. It leads to massive instability. Workers will tend to feel little to no loyalty to their employer and hence won't hesitate much, if at all, to steal or otherwise sell company secrets, etc. Also in the U.S. it NEVER went as far as it is in Europe or Japan.

    7. I don't have any experience with that other than when companies here are in "garages" they usually only have a couple to a few people working for the "company". Would this really be noticed elsewhere, would people really care?

    8. Canada is right next door, and it is fairly easy to cross the border with produced items. Europe, in theory, has a lrge market although you have to contend with the multiplicity of regional languages which in most cases would limit initial markets to England, Ireland, Scotland, France, Germany, Austria, and Switzerland.

    9. VC isn't such a great thing as the real people behind new ideas tend t
  • Immigration ? (Score:5, Informative)

    by Builder ( 103701 ) on Monday June 12, 2006 @11:14AM (#15516992)
    Mr Graham states that one driver of startups is the fact that America allows immigration. That's at odds with my own story.

    When I was growing up, all I ever wanted to do was move to the USA. When I finished school, my parents could not afford to send me to university, so I had to start work straight out of school. I spent 5 years working my way from cable laying guy to networks guy to Unix guy, and then tried to move to the USA. After 2 years of trying, I gave up and moved to the UK.

    Next year, I will _finally_ be eligible to apply for an H1B visa, but I won't be. Because I don't have a degree, I need 12 years work experience. The first 8 years of that experience are no longer technically relevant to anything I do today. Sure, it taught me a lot about dealing with people and integrating into the 'real world', but I don't see how that is relevant since I would have been eligible for entry fresh out of university with none of that experience.

    Even if I did want to apply, I would have no guarantee of permanent settlement. I would have to 'emmigrate' to the USA knowing that if the company I was working for went under, or declared a loss for a number of years running, or laid off too many other people, I would have to pack my life back into boxes and go home. 30 is too damn old to be taking that kind of chance.

    I took that chance coming to the UK at 25, and even then I was almost guaranteed permanent settlement when I moved here. It was certainly never tied to the company that I moved here to work for. At 25, I could take those risks, but not anymore.

    So instead of adding to the US economy, I've got a successful life adding to the UK economy. Overall, the US immigration policy is NOWHERE near as friendly as many places in Europe.
  • From an European... (Score:3, Informative)

    by orzetto ( 545509 ) on Monday June 12, 2006 @12:40PM (#15517652)

    I am an European, born and grown up in Italy and living in Norway.

    The US Allows Immigration

    In my experience I have not seen any country being so fiendish at visitors as the US. The mega-fence on the border with Mexico is one example. The continuous controls for what-the-hell-they-are-looking for at airports is another. Then again I have not been to Uzbekistan or Iran.

    The US Is a Rich Country

    Comes down on how you define "rich". I was definitely not impressed (in fact, a bit disappointed) by American infrastructure. In 2004 I could not even call Europe from a public phone in Chicago airport (maybe I hit a streak of broken phones). The same year, a conference I attended in Austin, TX had 5,000 participants and not a single Internet connection available. Then again, Italy is worse, but America is not really so impressive.

    The US Is Not (Yet) a Police State

    See above for the requests of fingerprints, the queues when entering the country and the like. They gathered so much data about me they probably know me better than my mother.

    You Can Fire People in America

    That's why I am staying here, thanks. I prefer to be able to plan my life beyond this week. Of course you can fire people in Europe, only you cannot fire at a whim. If you don't have a good reasons you can get sued, which happens way more often in the US than in Italy (about 10 cases a year for 58 million people; not sure about the US but I suspect it's way higher).

    America Is Not Too Fussy

    Who said it is illegal to work in your garage? What laws should prevent it? Why would that swiss lady report to the police the start-up in the garage? Have you Americans this sort of laws? For I am totally unaware of such laws in Italy, Norway or elsewhere. Of course, if the start-up is a mechanic workshop that keeps the neighbourhood up all night, people have a right to protest, but it does not seem to be the case discussed in TFA.

    However, for better or worse it looks as if Europe will in a few decades speak a single language

    This is the most ludicrous claim ever. Italy has been under foreign domination for 1,500 years (Ostrogoths, Byzantines, Franks, French, Northmen, Arabs, Spaniards, French, Germans, and a bunch of others I cannot remember), and we got at most a few words. Thinking that a country can shift language as often as a geek changes his underwear is patently insane. And changing for what, English? Wake up, you will all soon have to learn Chinese!

    A friend of mine started a company in Germany in the early 90s, and was shocked to discover, among many other regulations, that you needed $20,000 in capital to incorporate.

    I do not know American or German law in much detail, but in Italy (and presumably in Germany as well) there are different levels of incorporation. To start a SpA ("shareholder society") you need about 100,000 euros in capital; if you cannot make it, you have to limit yourself to a Srl (limited-responsibility company). The difference is in practice small; the friend probably looked at the GmbH level in Germany and thought it was the minimum threshold; instead, that threshold is meant for investors to be sure they are investing in a company that actually has capital, and not an Enron of some sort. Then again, I am not much in the details.

  • Re:biz in Europe (Score:3, Informative)

    by vidarh ( 309115 ) <> on Monday June 12, 2006 @01:57PM (#15518163) Homepage Journal
    #1 reason: Government is an obstacle rather than help or even better: JUST DON'T MESSING TOO MUCH. Bussinesses in Europe has to comply with municipal, state, country and european community regulation. Municipal laws are often vary a lot whithin even the same province. The local government has to give permission and get taxes (not cheap) just to open the company's door. Also the nation's government. And guess what? They are not exactly very fast nor cheap. The high costs of starting a bussiness make it very difficult for people who is not already rich or other bussiness who have already a lot of money! Paradox of social-democracy? Government as reverse Robin-Hood?

    I don't know what weird alternate dimension you live in, but setting up a company in Europe can be done over the web in a few hours, for a couple of hundred dollars. There are various restrictions on the types of companies you can set up at a reasonable cost.

    - the "progressive" taxes system doesnt award personal effort and risk. The taxes for businesses are as high as 30% or 35% of profits, even higher for wealthy individuals (Social Security not included). Where does this force capital to go? Easy question: any other place.

    Tax planning in Europe is trivially easy once you get to the kind of company size where it makes a difference.

    - Public workers are impossible to fire. Once they pass their exams they can even just not go to work and they will keep their salary and benefits forever. Not the best to stimulate efficiency and speed. They also have higher salaries than private companies employees. Young people here dream about working for the government.

    In some European countries that might be true, but in many European countries public workers are underpaid and the positions are considered low status - hardly the kind of thing that attracts youth that would otherwise have been likely to form successfull startups.

    - Trade unions degenerated to political parties. Their leaders and representants are too busy doing nothing and helping #1 in their labor to increase regulation.

    They are busy increasing regulation to safeguard employees, yes, because that is what most European employees want. I was shocked at the low degree of protection here in the UK when I first moved here, and it's still far better than in the US.

    - We spend about 40% of the E.U budget subsidizing the low-margin, low-innovation, low-tech agricultural sector. This money should be better in their legitimate propietaries' pockets thus lowering the high tax pressure on business and individuals. As a side effect we screw up emerging economies with our protectionism (OK, maybe also the USA)

    I do agree the agriculture subsidies are a bad thing. However the US is nearly as bad in that respect...

    - We have literally dozens of different languages. I dont think this is necessarily wrong, it's just a consecuence of our history. But the really stupid thing is the politicians are very busy trying to revitalize dead or semi-dead languages and dialects like galician, basque and catalan to have another more justification to fight with other regions, get local privileges, and keeping their positions. Of course these languages are studied in schools, diminishing the time young people should rather use studying maths, literature, economics, english or whatever. Mix this with governmet regulation and you get a lot more overhead for business.

    This is a problem, but also an opportunity. Any emerging European business knows from early on how to deal with internationalisation, multiple languages and multiple cultures. Most American companies don't.

    - We dont fight strong enough against terrorism, instead we let the terrorists (convicted killers included) form political parties and negotiate with our governmets as equals. Shame on us. Insecurity scares the capital who tends to go away.

    This is the weakest of your arguments. Despite the IRA and ETA bombing campaigns, I've never ever heard either being even considered as an issue, mainly because they never were a big deal compared to other risks.

  • Re:Bay Area-centric (Score:4, Informative)

    by superdude72 ( 322167 ) on Monday June 12, 2006 @03:22PM (#15518862)
    Silicon Valley ceased being an engine of significant economic growth after the dotcom bust.


    VC Funding by region, Q1 2006 []

    Silicon Valley startups still receive more VC funding than the next four largest regions combined. Why is this? Stanford and UC Berkeley nearby? The pretty scenery? The affordable housing? In part. But mostly, it's because tens of billions of dollars in VC money resides within a few blocks on Sand Hill Road. And for the most part, VCs don't have any reason to leave the area in search of investments. The Web browser was invented in Illinois, but when it came time to found Netscape, the founders moved West because this is where the VC money lives. That hasn't changed.
  • by mallardtheduck ( 760315 ) <.stuartbrockman. .at.> on Monday June 12, 2006 @04:32PM (#15519360)
    But as a born-and-bred UK citizen, the maximum (until this year) was UKP 1150 per year tuition.
    However, if you are from a low-income household, you get PAID UKP 1000 per year to go to university. Can't beat that.
  • by Anonymous Coward on Tuesday June 13, 2006 @02:52AM (#15522231)
    ".even when the estate taxes don't kick in until the estate is worth $1mil."

    It was about $1.5 million. It was recently changed to around $7 million.

The only function of economic forecasting is to make astrology look respectable. -- John Kenneth Galbraith