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Entrepreneurism in Europe vs USA

Entrepreneurism in Europe Vs U.S.

Why the “American Dream” is still Best for International Entrepreneurs

America is seen as the entrepreneur capital of the world. From global corporations with their roots in the start-up culture to smaller businesses just starting out, America is viewed as having the edge over other markets, including Europe.

Why is America so special when it comes to entrepreneurship? In this page, we’ll explore the key differences between being an entrepreneur in America and in Europe.

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Book an Expert Consultation on Building Your Business in the US, US Taxes and Moving to the US

The American Dream and Entrepreneurship  

America has built a reputation both at home and abroad for valuing the “American Dream”. This is the idea that anyone with the talent, ability and will to achieve success can get there – with hard work. It’s an ethos that’s embedded into the psyche of American society, and entrepreneurship is one of the key ways that people understand they can achieve the American Dream.

The development of the American entrepreneurial economy is based on its historical roots. The U.S. as we know it was founded and settled by risk-takers and innovative explorers who were looking for new opportunities and greater freedom. Children in America are raised on a diet of world-famous entrepreneurs and inventors like Benjamin Franklin, Henry Ford, and Thomas Edison. They are seen as role models for children, who internalize the idea that success is always possible when you take a chance.

In today’s business world this spirit of “thinking big” has translated to several successful global businesses like Google, Apple, and Microsoft who have continued to reinforce entrepreneurship as a valuable goal for a huge range of business owners and investors.

While Europe also has an entrepreneur industry, it is much smaller than America’s. Since 1980 only 5% of European start-ups made it onto the list of the 1,000 biggest EU companies by market capitalization. In contrast, the figure from America is 22%.

There are big differences between how entrepreneurship is viewed, as well as how it works in practice between the U.S. and Europe, and these differences make the U.S. much more competitive on the whole when it comes to being an entrepreneur.

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Key Difference #1 – Labor Laws  

If you’re used to the complexities of navigating labor rules and laws in Europe, the American entrepreneurial differences can feel huge. In the U.S., on the whole, there are much fewer restrictive pieces of legislation or business norms that can limit growth.

For example, there are far fewer rules about who you can hire or fire and the circumstances surrounding those decisions. In Europe, there are many labor unions and pieces of legislation that make it a lengthy and difficult process to fire employees who you no longer want – sometimes with large severance packages and long notice periods. This can hamper your ability to change your workforce quickly, as well as increasing employment costs.

In Europe, the Working Time Directive can also severely limit the amount of hours employees can or will put in each week. There is also a much higher mandatory holiday allowance for most Europeans – four (paid) weeks each year, as opposed to two weeks (or less) for Americans.

Another aspect to American entrepreneurism is the culture of informality amongst many start-ups that doesn’t exist in the same way in Europe. It’s also much easier to recover from bankruptcy in America should a business not work out (taking around a year in the U.S. as opposed to several in many European counties). Because of higher taxation in Europe, added to the risks of business failure, European entrepreneurs generally have more to lose and less to gain than American entrepreneurs.

This can help add to the American spirit of risk-taking and being more prepared to experiment with business ideas and creativity than many of their European counterparts. New employees in American start-ups are often more than aware that they are taking a risk, but are prepared to do so in exchange for benefits such as stock options.

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Key Difference #2 – Financing and Venture Capital  

Because of America’s long history with, and value of, entrepreneurship, it’s much easier to get venture capital for a start-up than it is in Europe. Risk-capital is always needed to successfully grow a business, and American investors are on the whole more prepared to take risks when it comes to financing.

In Europe however, since the bubble burst in the early 2000s, institutional investors have seen venture capital as a bad asset class. This makes European financers more wary of investing in start-ups.

By contrast, in the U.S. the venture-capital industry is much more robust. Their first venture fund, The American Research and Development Corporation was founded back in 1946 and companies have continued to invest in businesses in the years since. In 2005, companies that were once backed by venture capitalists accounted for nearly 17% of America’s GDP. The U.S. also has educational and support programs for budding entrepreneurs with huge financial resources. The Kauffman Foundation spends over $90 million per year to support academic research into entrepreneurship and train new entrepreneurs, including the sponsorship of “Global Entrepreneurship Week.”

Venture capital companies can help not only with funding but with mentoring, strategic guidance and networking, and are used to investing in high-risk, innovative companies. They are aware that most investments are highly speculative, but if they succeed can be very lucrative. After a study into VC, Stanford School of Business found that “Of the currently public U.S. companies we have founding dates for, approximately 1,330 were founded between 1979 and 2013. Of those, 574, or 43%, are VC-backed. These companies comprise 57% of the market capitalization and 38% of the employees of all such “new” public companies. Moreover, their R&D expenditure constitutes an overwhelming 82% of the total R&D of new public companies.”

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Key Difference #3 – Education & Talent  

When it comes to education and getting the right people for your project there is some key difference between Europe and America. On the whole, education in Europe means there are a huge number of skilled workers, many of whom are happy to move between countries within the EU. Therefore, you can draw your pool of talent from multiple different countries.

This comes with its own challenges as language and cultural barriers within Europe can make it difficult for people from different countries to work together unless their language skills are excellent. In some cases, countries in Europe might think more insularly and within their own country rather than Europe or worldwide. The nature of EU being made up of so many counties and unique cultures can also make the business market feel fragmented.

In the U.S. on the other hand, while access to higher education is not as evenly distributed as it is in Europe, businesses have traditionally strong relationships with higher education institutions. The universities in America tend to be geared towards economic outcomes rather than being Ivory Towers. There is a huge range of science parks, technology offices and venture funds dedicated to business – and they invest in new ventures. Stanford University, for example, gained $200 million in Google stock when it went public, and almost half of the start-ups in Silicon Valley have their roots in the university.

This culture is not just limited to Silicon Valley, though. A huge range of American higher education institutions offer programs in entrepreneurship. Mobile millennial graduates are more willing than ever to put their talents and education into startup culture – giving you a large pool of young, talented and hungry graduates to help grow your business.

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Key Difference #4 – Culture and Consumers 

As we’ve seen, American culture lends itself to entrepreneurship in a way other countries don’t. In the U.S. the idea of “work hard, play hard” is fairly commonplace, which is illustrated in how little American employees take time off. Four in ten U.S. employees actually take all of their allocated holiday time.

In America, it’s not seen as boastful or over the top to talk about achievements and to take risks in business. This means that U.S. business culture tends to be more competitive, but also lends itself to people taking more chances and setting their sights higher than many of their European counterparts. Between 1996 and 2004 over 550,000 small businesses were created on average per month.

These attitudes are reflected in the opinions of the public and consumers as well. Consumers in America tend to be more “venturesome” and are far more willing to try new products and learn new technology – even if it means having to learn new skills to do so. In Europe attitudes towards business are more negative, over 42% of people polled by Eurobarometer believe that entrepreneurs exploit other people’s work, as compared to 26% of Americans.

Overall, while the entrepreneur culture in Europe is developing, in America it has a lot more prestige and greater respect and value placed on it. Founders of American start-ups have also enjoyed global recognition and admiration as world-changing founders like Bill Gates and Steve Jobs have become household names. This has helped to boost the positive way that entrepreneurship is seen in the U.S.

This is also shown by the high regard that the U.S. has for foreign entrepreneurs. 52% of Silicon Valley start-ups, for example, were founded by immigrants and a quarter of all America’s science and tech start-ups have a CTO or CEO who was not born in America.

On the whole, the U.S. offers a more competitive work-ethos, a higher level of risk-taking with a “can do” attitude and more international prestige and opportunities than Europe. This means that even though immigration laws are making it tougher to relocate to the U.S., it’s still the top choice for many entrepreneurs.

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Frequently Asked Questions (FAQs) About Taxes, Company Formation, and Residency in the U.S.

We’ve compiled over 150 of the most frequent questions and answers (FAQs) on tax, company formation, and residency in the U.S. in our knowledge base. You can visit our knowledge base here.

If you find that your personal questions have not been answered, book a telephone consultation here.

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Need Advice on Taxation, Company Formation, and Residency in the United States?

Starting a business in the U.S. can be both exhilarating and exasperating. There is much to know and even more to learn, and the pace of the information coming at you can be overwhelming.

That’s where Mount Bonnell Advisors come in.

Would you like to live your very own American Dream? At Mount Bonnell, we can guide you through the labyrinth of regulation and red tape and out into the blue skies of a dream come true – the dream of living and working in America.

Whether it’s technical issues around tax or residency, or strategic ones involving business formation and growth, the experienced team at Mount Bonnell Advisors are here to help.

So make that dream a reality by booking a consultation today with Mount Bonnell Advisors. Let the adventure commence!

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