European Commission: Make Europe Great Again... for startups The European Commission (EC) has kicked off a scheme to make Europe a better place to nurture global technology businesses, providing support throughout their lifecycle, from startup through to maturity. Escaping a birdcage in the clouds AWS claims 50% of Azure workloads would jump ship if licensing costs allowed READ MORE …
I remember reading variour reports ten years ago about the last big drive to "complete the Single Market". And also to get the Capital Markets union going as well - in the aftermath of the Eurozone crisis. Apparently US banks only provide something like 30% of US business finance. The rest is from corporate bonds, share sales or VCs. Whereas in the EU it was the other way round, with the banks providing 70%. The problem with this is that banks are much more cautious than VCs - because of course they're not getting equity profits from the companies that take off big - so all they stand to gain is the interest on their loans - against the risk of the capital they loan out. This not only makes it hard for highly speculative tech start-ups to get funded - but also means that come a recession, the banks start calling in all their loans and risking bankrupting even the lower growth businesses that are profitable from an early stage in their lives.
That tends to make recessions worse, and recoveries slower, because banks get extra cautious during (and just after) recessions and then lend too much during booms.
European banks were of course being even more cautious, because of the ongoing credit risk from the Eurocrisis. And the fact that loads of the banks couldn't be re-capitalised after the crash, becasue their governments couldn't afford to bail them out, and the only way to get them bailed out at a Eurozone level required all the bond-holders and even some savers to be bailed-in - making doing it politically unacceptable.
Worse some of the state-controlled banks that were part of the success story of European recovery from WWII in the 50s and 60s (the German Landesbank and Spanish Cajas) had basically bankrupted themselves in the boom through mismanagement and so weren't available to do their job of financing mid-sized corporations.
It's hard to fix a lot of this. Another thing I remember reading was that in the UK and Scandinavia you could set up a limited company online in an hour, but in Italy it took an average of 300 days to get the paperwork approved. And that in Italy, going to court to collect a business debt takes an average of 3 years - so big companies can just stiff small ones and they'll have gone bust before they ever have to pay them.
Great points! Another spect of this is that those same European govs and admin are buying foreign tech. If you are a startup it is very difficult to sell to them. Startups are left with a consumer market which is fragmented, not like in US with one language and similar regulatory interface.
One thing that startups get from AWS et all is cheap cloud computing, specifically targeting startups' needs. But given that the American government requires American companies to give access to all data they hold, anywhere, which surely the EU and national governments don't want, the EU should be loudly and urgently building cloud infrastructure, or funding it with long term contracts.
That Microsoft seems to have disabled the email of an EU-based ICC judge this week only makes it more urgent to have EU based infrastructure out of the American's hands.
GDPR compliance & data sovereignty is already a key selling point for the EU cloud providers (OVH, Scaleway, Hetzner, ..). It's hard to compare apples to apples but the prices don't look uncompetitive to me. Way less features than AWS, but then AWS undeniably has far too many features.
I presume the hyper-scalers win so much business because of various network effects. It's easier to recruit someone who knows their way around AWS. It's easier to expand your online business to say, Malaysia, should you ever wish too. You can worry less about your cloud provider going bankrupt. It is also a pain in the ass linking services between cloud providers, so easier to stick everything on one big one. And maybe, just maybe you'll need one of those newfangled features, like Amazon's 12th different way of reimagining databases. You won't, but it's better to be safe than sorry, right?
One reason my little start-up isn't initially going to operate in the EU is that you're immediately dealing with 27 different tax regimes and regulatory frameworks and as the VAT MOSS carnage revealed, that can create real problems for anyone trying to sell there (sales taxes specifically are also horrible in the US, but the EU seems even more inscrutable).
I wonder whether there might be a way the EU could help smooth that out for businesses - either negotiating shared rates for businesses below a certain turnover or setting up some centralised services that make it very easy to calculate and pay what you owe without having to go through hundreds of hoops or retain an expensive specialist service to do that work for you.
The more they can smooth out the process of running a business that serves multiple member countries, the more likely they are to enable start-ups that survive.
breakfast,
It's very hard to fix the VAT problem - seeing as each member state has its own VAT rate with its own traditional exemptions and oddities. Unless you want to argue for the EU making the next step to becoming a nation state - because it's quite hard to harmonise taxes across the whole EU without electing the government that's settting your tax rates. That's going to be one of the last powers that governments are going to give up - and plenty of revolutions and civil wars have been fought over who sets the tax rates - not just boring old constitutional crises.
Surely the EU's 30-odd VAT systems are way less complex than the US virtually infinite combination of local sales tax rates? Or is it just that online companies routinely ignore sales tax, with the fiction that US customers will declare the sales tax due on their out of state purchases on their tax return... Honest!
The problem is that member states are generally reluctant to devolve power to European institutions. That VAT exemption to protect your pet artisan cheese industry? The cheese industry whose union worked so hard to bring you votes? The VAT exemption that you so carefully crafted to make it evade state-aid legislation? EU-level fiscal policy would take it out overnight. There must be thousands of similar situations across the EU.
And campaigning against EU integration is really easy. Campaigning for the status quo generally is, because you don't have to explain what world you want, as it's the one we already have. So just draw up some memes and mockeries, never explain anything, and you're good. Campaigning for change is difficult.
Just remember the 28 different tax regimes of the Single Market, the UK left, was way ahead of anything the WTO had achieved and was much simpler to navigate than the EEC the UK joined in 1973.
As others have noted, about the only way to massively simplify matters is for the EU to become more integrated, which naturally, means an enlarged role for the Commission, EU Parliament etc. and reduction in the “sovereignty” of the member nation states… We chose Brexit, so we have to embrace the complexity that entails.
Operating a UK based business from within the EU was surprisingly straightforward-forward, yes the VAT returns were slightly more complex, but nothing really to get overly excited about. Dealing with US sales taxes was (prior to 2018) was also straight-forward: don’t have a physical presence and ship from the UK. Obviously, now with sales largely being taxed on the location of the buyer things are more complicated. However, as a small business, it may be easier to join a market platform and let the platform determine the correct level of tax.
As there are so many areas that US Tech companies have become prolific.
Office productivity, Operating Systems, Team communications, cell phones, cloud and any as a Service stuff as examples, Social media BS etc etc.
Also, the US is extremely aggressive at both sales and marketing to get its products into the right areas.
What are the alternatives that Europe can come up with?
Open standards is one thing, having interoperable options so the user can make choices that benefit them, not the mega corporations bottom line.
I look at the suite of tools given to me in the workplace from our vendor lock in, I probably don't use more than 5 or 10% of what is being offered, so I don't think moving away from some of these vendors can or should be that hard surely?
The problem with some of the US tech company's products is that they have become the "standard" in the office and that's going to be hard to convince non-technical manglement we have alternatives.
With Trump attacking higher education, it's an open goal to suggest smart people come over here. And what do we have from our government... absolutely nothing.
Most of this announcement looks like hot air. "Reducing regulation" is an empty phrase when the business environment is fragmented (see the idiotic complexity of VAT across Europe), and the region actively introduces large regulatory frameworks that over-burden small businesses and dissuade innovation - see the last decade of rules around drones, data management, manufacturing and waste and all the rest.
It is infinitely easier to import a dodgy gadget from China than to actually make one in Europe to sell. Seriously, try it. It's not a focus of The Register, but the overhead on making a simple device and complying with all of the necessary sales, tax, safety, waste and security directives turns a two week job into a six month slog - and six months of an engineering team's time makes nearly any device economically unviable unless you happen to be Samsung. Not so much move fast and break things as please can you fill form 56B-II in triplicate?
Then add on the fact that local engineering has been crushed, and your 'made in Europe' project involves most of it being made in China (which has the expertise), and sourced from America (hello Digikey!) and Taiwan.
So, we can't afford to design, manufacture or sell here... what else? It turns out our Universities aren't connected to any technological manufacturing hubs (Silicon Valley, Taiwan, Singapore, China), so what they teach is the theory of how other people build things.
And as for finance, no-one in Europe wants to be seen backing a loser, so money is largely unavailable for early stage startups ("please prove you're wildly successful first"), and most of the innovation funds prefer projects with academic output that doesn't have to be judged by any commercial measure of success. Studies on smarter cities, academic work on theoretical improvements to other people's technology and tail wagging the dog work on projects to make the rest of the world's work a bit more environmentally friendly. All washed down with endless form-filling busywork so there's a long paper trail to show how deeply engaged the innovation centre is.
This applies both to Europe and the UK - which had gone so far down the European development route over the last few decades that Brexit has done nothing to change attitudes even if it's decimated budgets. We (the UK) have no serious representation for technology and engineering in government, apart from Nick F***ing Clegg, who wants to destroy copyright because an American company believes it deserves all of our intellectual property. If your most scientific representative is Nick Clegg, you are in serious trouble.
There is a way forward, but the corporate lobbying in the UK and Europe, a symbiotic (in the Alien face-hugger sense) dependency on American corporations in the UK and a general lack of drive across all of our public sectors means that innovation is driven overseas, or just drowned in apathy.
Any company wanting to sell in the EU needs to comply with all EU regulations. Including the long list of environmental and product safety regulations. Asia has a better supply chain for raw material and semi finished goods as well as a good infrastructure to test product according EU standards. Thats is why lot of small western startup setup a small rep office in China.
A big problem is that most EU regulations apply to any size of company without relaxations, needing about the same number of staff and resources to handle all the paperwork, no matter an SMB or enterprise. This is a huge entry barrier unless having a lot of funding to spend on such paperwork and mostly non added value work. Larger companies have economies of scale to digest such expenses. Indeed you can design a product in a month and then spend a year or more to setup all the by-processes
"Any company wanting to sell in the EU needs to comply with all EU regulations."
Not the ones around employment, taxation, health and safety, working hours, fair hiring practises, environmental and waste management.... this isn't just the imposition of CE marking (which China has industrialised, while Europe treats it as a cash cow), but the whole state burden being placed on businesses regardless of their size and function.
Is that laws are based on "intent" rather than the letter of the law. It is a lot easier to invest if you KNOW what the exact laws and regulations are. Yes they can be changed, but they have too much where companies meet the letter of the law and they get dinged because they didn't meet the "intent" of the law. That's a recipe for disinvestment.
Now EU residents could rightly say "yeah but we don't want to be like the US" in stuff like privacy but the reason the US has terrible consumer privacy is that there are almost no laws about it. If laws were passed yes big tech companies like Google and Facebook would loudly complain, but they could read the law and know that if they meet the letter of the law they are in the clear. That's why you see US companies having so much trouble "complying" with your new tech laws - they feel they are meeting the letter of the law and aren't used to a system where they can be told that's not good enough. They don't know how to respond to that - they aren't told what they need to do they're just told "fix it" and get fined again if the powers that be don't think their "fix" was good enough.
Europe should base its laws and regulations for corporations on the letter of the law, and if companies find a way to avoid complying with the spirit of your laws while following them to the letter, you can always fix the letter of the law. That's what tends not to happen in the US, because once companies are profiting from the absence of laws (like our absence of privacy laws) they can lobby/bribe lawmakers. The EU doesn't have nearly the problem with money infecting its lawmaking process as the US does so as long as you preserve that part of your system you don't have to worry about the same regulatory capture we have over here.
Can you imagine if the laws that apply to individuals worked that way? "True the light wasn't red when you passed through that intersection but I didn't see you looking at the light as you went through it so it could have turned red and you wouldn't have known"
IMO this is one of the really bad developments of US law. "A jury shall decide the facts of the case" - what does it mean when the fact is established with calibrated sensing devices? What is the jury deciding? whether the calibration certificate has the right date?
Instead, the law was always meant to be vague: let a jury decide whether something is a *problem*, according to reasonable people of the community. Let a jury decide whether someone is acting criminally, regardless of whether they dotted the i on the proper form. It's about conforming to community standards, and being a "decent" (or at least, non-horrible) member of society. Sadly, it requires the community is actually capable of allowing for some outside-the-box-ism (which doesn't exist now-adays, because 'the law says you have to--').
This would allow some of the issues of pipeline blowouts causing environmental damage, because seriously, it's not 100% preventable. It would result in the Deepwater Horizon blowout, and the environmental fallout destroying the Gulf of Mexico, being illegal -- to a reasonable community, it was 100% preventable. So: because the laws are written specifically, instead of vaguely, you have organizations that are clearly acting contrary to the community interest, contrary to the law, even, but they dotted an i and crossed a t and so everything is kosher. Examples, predatory lending, the 2008 housing crisis, pump-and-dump bitcoin schemes that go unenforced (how would an individual get that person to court? what law was violated?) etc.
The problem with the alternative is that it makes everything a random guess and the only important factor is PR. Break a dozen laws in egregious ways? If you can convince people that this was actually totally fine because the people accusing you of doing that are nasty, untrustworthy people, you are free to continue as you wish. Did nothing wrong, but your opposition painted you as evil? There will be consequences even though nothing happened to cause them. Laws have to be specific and courts have to stick to them, or they basically don't exist. To some extent, there is some leeway in both directions when this breaks down, with juries able to "nullify" if they consider the case wrong or with judges happily smacking down attempts to use nonexistent loopholes based on stupid interpretations of grammatical concepts. I'm not sure anyone would like the results if we made it applicable on the whim of a random person.
For example, you've mentioned the global financial crisis. If you have a specific person and a specific crime, you can charge them with it. If, instead, you want to charge anyone who worked in finance because "that was bad and we didn't like it", there's a very good reason that isn't what we want to happen: maybe that particular finance person actually didn't do anything wrong, and it's on us to prove that they did. There are plenty of financial crimes on the books that people can be charged with if they break them, and sometimes, there isn't as much enforcement as we need. In that case, the solution is more enforcement, not changing the basic nature of laws.
Those issues like the 2008 financial crisis were foreseen by more than a few people (some even got rich off it) and were mostly caused by deregulation efforts a decade earlier that passed with a bipartisan vote. Why? Because the bank lobby donates heavily to congressional campaigns. Money is the problem, and stuff like Musk trying to buy the Wisconsin Supreme Court election just shows how much worse it has become.
Average people regardless of political persuasion don't like it. But you can't get the votes to change the constitution because one party will always feel advantaged by it. Currently the republican party sees it as to their advantage, so they would not support a change to the constitution that restricted donations. However things change over time and if a few billionaires got together and outspent Musk and his ilk then suddenly republicans might be all for reigning in campaign finance. But now democrats who would be 100% behind it today would suddenly come up with excuses why such a constitutional amendment is a bad idea.
If the US had something like many states do where you can get something put on the ballot as a constitutional amendment and if it passes some threshold it is approved I have no doubt that an amendment to reign in campaign finance would pass with not only 50% but easily 60% (with most of those voting against not doing so because they personally thought it was bad but because Trump, Musk and others who benefit from the current system doing everything they could to brainwash their voters into opposing it) but unfortunately we'll never see that because the powers that be would be terrified of putting people in charge instead of the moneyed elites.
The EU is lucky it doesn't suffer from the same issues, despite Musk getting pissed and whining about "free speech" when he isn't allowed to spend unlimited amounts of money to bring Nazis back in power in Germany, etc.
This, it's one of those irreversible changes in a state, once money creeps it, you can't go back.
DT reportedly now has warchest of funds to threaten anyone by funding their primary opponent.
This kind of blatant bribery (money should not affect politics) is anathem in a lot of countries, and for very good reasons.
I'm not sure that litigating the financial crisis is going to help with this discussion. The core point, that you have to prove what someone did wrong in order to imprison them, applies here as well as anyone else. I didn't say, nor do I believe, that the financial crisis just showed up out of nowhere one day and nobody could have known it was coming. I did say and believe that there were people working in finance who weren't to blame at all because they did unrelated things and there were people who worked in the area but were still not to blame. If we lived in a society where we don't need to prove fault, many of those people would have been punished just to take out our displeasure at the situation on someone the ill-informed incorrectly believe was responsible.
And when there were people who did something actively wrong, I still believe that we need to make what they did illegal. If it was already illegal, then we should charge them for it. That way, people know not to do it next time. The original suggestion was essentially to discard the rule of law and replace it with the rule of whether some random people like you. The attempts to do this of which I'm aware are universally nasty.
The issue is more about the fundamental basis of the laws: In Europe much is not allowed unless it is explicitly allowed, whereas in the UK and US the laws are more permissive, namely: it’s allowed unless explicitly not allowed. It’s thus more of a mindset issue; which requires a little effort…
One thing the EU could do a lot better is give universities the capability and encouragement to create incubators.
Some do, where grad students with a good idea get paired with legal and financial experts for 6-12 months, if the idea works out, it's a company, if not, chalk it up to experience.
But legal and accounting costs can be prohibitive for fresh grads trying to start a company (patent filing is ~ 50K, and then you have one region, so need multiple).
Quite a few EU unis have this kind of incubators, but it's still not the norm, if the EU gave funding (or tax breaks) to unis or other organizations to create these environments, you'd get much higher rates of viability.
Yes, regulation is a thing, but that's where lawyers come in.
They'll either be defending you against frivolous lawsuits or hostile takeovers (wild west) or having equally protacted discussions with regulators, but in both cases no startup makes it without legal and accounting.
Everyones trying to avoid recessions, by "printing" money (stupido house (asset) prices anyone)
But its exactly whats needed for the natural cycle to proceed
"No more boom and bust" hubristic moron, its the natural order of things, keeps everything fresh and stops the never ending, more innovative ways of exploitation and destruction of natural resources to the detriment of future generations
"we've never had it so good" .... but the regular reminders have gone
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