Index Ventures, one of Europe’s biggest venture capital firms, is leading a lobbying effort to persuade European governments to make it easier for startups to reward their employees with stock options.
They argue that Europe is losing the tech battle since companies are facing a talent deficit because of how stock options are regulated.
They have a point, but it’d be naive to ignore the rest.
First, the United States has way more access to capital than Europe. Even though. A quick Crunchbase search for throws VCs active in the past year who had led at least one funding round to be 478. In the US, that’s 751. Same when you do it with active Angels in the past year.
This might change. The same way the Google IPO created thousands of angel investors in the Valley willing to give back to the community, the recent IPOs in Europe can change the game for early stage startups. But for now, riskophilia and venture capital money is low in the Old Continent.
Second, the lack of easy capital drives companies to go for profitability, and not growth. When trying to build a healthy business, that’s what you should do, and countless success stories like Zapier, Buffer, Mailchimp and Basecamp show it. But sometimes, when you are trying to go after a big, fragmented market, you need to leave carefulness aside and be willing to pour in that rocket fuel.
Third, yes, talent. Stock options play a big part here but they are not the sole reason why the US and China are ahead in the game. A pointer can be salaries: Europe and the United States value tech talent in a completely different light.
According to Payscale, Average Entry-Level Software Engineer Salary in Chicago is $75,985 (or €66.785). Average Software Engineer Salary in Paris is €41,445. That’s 61% higher. Now guess which city is consistently listed among the most expensive in the world?
You guessed it, Paris. Oh, la, la. There’s a reason why European startups like Front, Stripe or Algolia move (at least, partly) to the US.
Finally, it’s a lot harder to open and operate a company in Europe, as this reddit conversation points out. In France, you need €4,000 just to open a bank account. In the US, you can use Stripe Atlas.
Stock options is only one of the problems dragging Europe. But now is the time for Europe to take over. Talent mobility is higher than ever, America’s borders are closer than ever, and China’s cultural barrier might be too much.
Europe offers a combination of livability, work-life balance and that you can’t find anywhere else. The EU should copy Estonia.