I have been to Europe several times and attended startup events there to see what they have to offer. There are clear similarities, and there are eye-opening differences. What are they, and why should you want to know about it?
First, the similarities. For starters, Europe offers the same co-working spaces and incubation leadership, although the emphases may be slightly different. Then again, here in the United States, different incubators offer different leadership and focus. But, for the most part, the general structure of creating a space for startups to germinate is the same between the two continents. The funding for European spaces may be partially contributed by the government, which wouldn't seem odd, given that Europe feels they have to play catch-up with the US, and a democratic socialist country would be all in favor for such social investments.
Another odd and unexpected similarity is that English is the de facto language. Now, I haven't been to all co-working spaces in all of Europe or met with all startups. But, the several I have visited, and the events held there were all conducted in English. If not explicitly in English, it's clear that an intimate working knowledge of English is required.
Lastly, both European and American startups have an excessive fascination and hunger for investment funding. I caution all startups to refrain from being overly dependent on investment funding. The key to a successful startup is always the customers. Bring in customers, and funding will follow.
That said, what are the key differences? Let me explain first the mindset of American based startups. The strange thing is that this mindset is true regardless of whether the startup is founded by US born citizens or ex-pats from any other part of the world. I've met native born citizen founders, and founders from other countries with barely passable English, but when they're here in the San Francisco/Silicon Valley region, they follow a particular mindset.
The mindset is as follows: find out a problem that you (the founder) have that really vexes you. Throw everything including the kitchen sink at it to solve that problem. There are ample examples of successful startups that grew out of solving immediate problems. Travis Kalanick's problem with getting a taxi spurred his creation of Uber. Brian Chesky and Joe Gebbia created Airbnb because they were short on funds and thought it would be a quick and dirty way to earn some money by renting out an airbed in their living room. This mindset is not new. American inventors and entrepreneurs have utilized this nuclear option to solving problems since the Wright Brothers worked on the first airplane, since Edison sweated 99% to create the light bulb and even before.
In the modern world, however, startup founders from wealthier families don't have real, pressing problems. They live a stress-free life and their problems are rather First World. What are such problems? Living in San Francisco, the primary problem, even for kids of wealthy families, is paying rent. So variations on how to make Airbnb-ish business work abound. There are many startups that work on extending the Airbnb concept to associated businesses. Second problem is finding food when needed. So, here in San Francisco, there are a plethora of startups working on delivering food. And not just any cheapie pizza-quality food, too; it would include locally grown, hand-cultivated arugula and endive salads, dry-air cured salumi and organic honey covered chocolate... You get the idea. They also want to get laid, so that's why there are three bazillion dating apps, each claiming to solve the problem because "it worked for me." Lastly is a relatively new craze, the social validation app. These are apps that allow the user to alert friends of one's whereabouts and goings on. For the alpha among the group, it's a way to validate the alpha-ness of the person, as well as deciding who gets to be in the messaging. For the beta among the group, it's a way to find out where the friends are so they one can go there to meet up. I can see the social need to be included, but I can't fathom how a business model can be created to monetize personal vanity.
European startups – at least the ones I've encountered – approach the problem-solution model in a different way. It appears to me that what these European startups do is take an ordinary technology and ask, "Suppose we take this ordinary technology, and throw in some newer technology to jazz it up. What novel problems could it solve?" It follows two of the three R's of environmental sustainability: repurpose and recycle. Reduce, the third R, comes along for the ride because by recycling existing technology and repurposing it to solve other problems will have the effect of reducing energy, costs, inefficiency, and so on.
What Euro startups do is take an ordinary technology, say the regular radio. Throw in some new technology into it, and voila, use radio to transmit WiFi signals. Or, take an old locomotive diesel engine. Throw some new technology into it, and voila, a new portable motor to lift items to upper floors. (These examples are purely out of my head; they are not actual startup ideas I've encountered.) The key themes are, 1) repurpose old technology or device by adding something new (have the interface be an iPad), 2) solve a problem that most people don't realize is a problem (that is, people are accustomed to a certain level of service, but when the new technology is applied to the service, it becomes so much better for everyone).
In order to make this successful, it requires seeing with a new set of eyes. One has to see the ordinary everyday processes as ripe for transformation. At the same time, one has to look at existing technologies and envision applying a novel twist via technology to vastly improve the process. As one real-life example, several European (specifically, Finnish) startups are working on sleep. What's the current expectation? Sleep is sometimes difficult, but eh, that's what we expect. But no. They take some existing products, radio, thermostat, heaters; add some new technology, haptic feedback systems, devices with accelerometers and gyroscopic orientation (e.g., smartphones), and create a device that will help make sleep so much better.
The difference is particularly of interest to investors. While the US mindset create paradigm shifting disruptors like Uber and Airbnb, finding the winning startup is akin to finding the needle in a haystack. For every problem, there are thousands of startups trying to be the one that makes it happen. As an investor, which startup will you bet on? For every Airbnb, there are thousands of others that never got past Series A. For investors, the US model results in low odds of finding the winner, but the pay-out is a doozy.
The European mindset says to look at unconventional problems; problems that people don't realize are problems. Solve that for them, and make bundles of money. Here, the players are fewer, so the ocean is not bloody red. However, it could be hard to convince customers that here is the product or service that can really help them, because the customers are not aware they are in need of help. Also, the customer base, especially for B2B type startups, is smaller because the solution could be very specific to a few businesses. For investors, the odds of success are high, but the potential level of return may only be a modest amount.