The differences between European and American startups | Part 3 of the Linnify in the US ecosystem series

As we speak, one of our founders, Cătălin Briciu, has just returned from a three-month-long business trip in the USA to enhance our understanding of the cultural differences between American and European startup ecosystems. Our objective is to refine Linnify’s tailored solution to how American start-ups can accelerate innovation and development processes by following a validation-driven approach.

In the last article, we discussed some of the most significant differences between the EU and US startup ecosystems: Investor Attitudes and Revenue First vs. Growth First. 

If you want to also read more about Failure culture, Access to Funds and their Size, and Value Pool Size, read our first article.

To end this series, it’s time to tackle the last two differences that you should take into account when thinking about taking your business to the next level and developing in another ecosystem. 

#1 Business style

Americans tend to be more direct and action-oriented, while Europeans are more focused on building relationships and taking their time to plan. These attitudes can be observed in the way that Americans are often perceived as being skilled salespeople, due to their ability to clearly articulate what they bring to the table. 

However open American businesses might seem to new collaborations, the ‘the ties between businesses tend to be looser, and never get in the way of pragmatic decision-making.’

On the other hand, in Europe, relationships between businesses often last for years or even decades.’ Europeans are often seen as valuing shared values, trust, and mutual understanding in their business dealings. Germany, for example, has always put a great emphasis on strong ties that ‘connect family businesses both with each other and with large corporations.’

This might be due to the fact that the pace of life in the United States is much faster which leads to a greater emphasis on clear communication and efficient decision-making. In contrast, the slower pace of life in Europe may allow for more time to be spent on building strong relationships and foundations.

This difference in approach can also be seen in the way that entrepreneurship is perceived in the two regions. In the US, there is often a focus on rapid growth and winning market share, while in Europe, there is a greater emphasis on sustainability and becoming a fundamental part of the market.
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#2 Regulations

Regulations can be an important factor for startups, as they can affect everything from how a company operates to how it raises funding. Some of the key regulations that may be more burdensome for European startups include:

• Data Privacy Regulations: European regulations tend to be stricter than those in the United States, which can be more of a burden for European startups. For example, Data Privacy regulations like GDPR (General Data Protection Regulation) are more strict in the EU compared to the USA.

• Labor regulations: EU Labour laws tend to be more restrictive than those in the US, which can make it more difficult for European startups to hire and fire employees. This may add to the operational costs and difficulty to keep the flexibility of the business. 

• VAT: In Europe, Value Added Tax (VAT) regulations are stricter and more complex, which can be a significant burden for startups that sell products or services to customers in different EU countries.

In the United States, startups are subject to a variety of regulations depending on the industry they operate in. Some of the key regulations that may affect American startups include:

• Data Privacy regulations: US has some regulations such as CCPA (California Consumer Privacy Act) and HIPAA (Health Insurance Portability and Accountability Act), but in general its regulations are not as strict as the EU.

• Labor laws: US labor laws are generally less restrictive compared to the EU, which gives more flexibility to startups when it comes to hiring and firing employees, also healthcare laws and employee benefits regulations which may add additional costs to the business.

• Industry-specific regulations: Startups in certain industries, such as healthcare or finance, may be subject to specific regulations that do not apply to other industries.

It's worth noting that regulations in the United States can vary by state, which means that startups operating in different states may be subject to different regulations. 

A good resource for learning more about regulations that may affect American startups is the Small Business Administration (SBA) website (https://www.sba.gov/), which provides guidance on a wide range of topics, including starting and managing a business, funding, and regulation compliance.

US legislation tends to have a capitalist touch due to the fact that it favors investors, legal entities, and the mechanisms by which investments are protected. 

In the United States, legislation tends to be designed with legal protections for businesses. These policies are intended to create an environment that is friendly to entrepreneurs and business owners and to foster economic growth.

In contrast, many European countries have legislation that tends to be more focused on protecting the rights of employees and individuals. This often includes measures such as stronger labor laws, higher minimum wages, and more generous social welfare programs. The goal of these policies is to ensure that everyone has access to a basic standard of living and to mitigate the negative effects of capitalism on the most vulnerable members of society.

It is worth noting that the overall approach to legislation can differ and it can vary between countries, and also some countries may have a balance between the capitalist and socialist touch in their legislation. Additionally, the political, social, and economic factors of the region also play a big role in shaping the legislation.

Ultimately, the best approach is to find a balance between the two, taking the best of both worlds to create a way that fits your particular needs.

Resources:

• https://www.linnify.com/blog/the-differences-between-european-and-american-startups-or-part-2-of-the-linnify-in-the-us-ecosystem-series
• https://www.linnify.com/blog/the-differences-between-european-and-american-startups
• https://www.eurostartentreprises.com/en/business-advice/four-differences-between-american-and-european-business-culture
• https://gdpr-info.eu/
• https://ec.europa.eu/social/main.jsp?catId=157&langId=en#:~:text=Labour%20law%20defines%20your%20rights,%2C%20transfers%20of%20companies%2C%20etc.
• https://en.wikipedia.org/wiki/California_Consumer_Privacy_Act
• https://www.cdc.gov/phlp/publications/topic/hipaa.html
• https://www.usa.gov/laws-and-regulations