Do startups in the US grow bigger and faster than the rest of the world and if so why?


(Arun Basil Lal) #1

Here is the backstory:

I am a struggling entrepreneur based in India. I have been watching startups all my adult life. A few years ago a friend (an American citizen with American parents) of mine who is based in the US started a consulting/client service company and within a few months he was drawing a monthly salary that I estimate is around 5000 USD.

5000 USD just about what a software engineer would make in India in the first year of his job. It’s a lot. Most startup founders would be happy if they can draw that money as their first year annual salary.

I don’t know if this is a normal situation. But I have noticed that many startups here run on survival mode (making just enough to get by). I have worked in the same domain as my friend but I never got to a point where I could draw such a fine salary.

I have heard that “Attitude determines altitude”.

I wonder if this has to do with the geo location.

Some observations. I am looking for someone to correct me or support me and help me find more perspectives.

  • Startups in countries with higher cost of living tend to make more revenue because the pressure to survive is higher.
  • Many clients in the US prefer to work with companies from within the US. Access to better clients means more money in the bank.
  • The clients who look to outsource their business to Asia are usually in the lookout for cheaper services. If they have to pay a premium, they would rather do the job in their home country even if the quality of work is the same.
  • When I traveled the US last year I realized that people grow up in a lifestyle of abundance. I am not saying that everyone is rich but kids grow up having choices. Kids in many eastern countries grow up being okay with what was given to them. This mentality of abundance helps with growth.
  • Technology works in the US. Stable internet and stable power. Phone plans with unlimited international calling was easy. I don’t remember how many days I had to close down my office because of power failure.
  • This creates a mentality of possibilities? A feeling that anything is possible?
  • More social support and lesser criticism to failure? Entrepreneurs have no social value until they are successful here in India.
  • The US Dollar being a stronger currency than many other countries help them spread globally more viably?
  • Cheaper labor and lower cost of living leads to lower financial goals?

Thoughts?


(Kerry Bodle) #2

I think it all depends on your perspective. 5,000 per month in the US/SV is like 500 per month in India. I also think the US is more value driven than just code driven. I’ve done work with both countries and find things are much easier when I can work shoulder to shoulder with a team. The communication and time difference challenges the efficiency of the team. There is a considerable difference between passion to be part of a team and simply providing labor. It’s really difficult to convey passion over Skype…

I know I take many things for granted, such as electrical power and Internet connections. But that is not the reason I feel like I can creat something amazing. You may also only be seeing the “successful startups” without seeing the “stagnant or failing” startups. There are most likely hundreds of startups that are failing for every one successful startup that you may read about. Location may help if you have some connections, but simply “starting up” in Silicon Valley doesn’t mean success. But if you can provide value, consistently, you will inevitably be successful.


(Arun Basil Lal) #3

I agree with your point regarding working with the team in person v/s working with them over Skype.

But I would disagree on 5000 USD in the US is like 500 INR in India. Its more like 25000 INR in India. I believe software engineers there make at least 60-80k a year in their first 5 years. And software engineers here make 300,000 to 500,000 INR in their first 5 years.

I believe regardless of location any startup can be successful, totally agree. But I am looking for the averages.


(Kerry Bodle) #4

As of today, 1$ US is 68.5 Indian Rupee. It also depends where you live in the US. California is much higher cost of living. At 60-80k you could not buy a house with that salary. In Indianapolis, you could afford a nice small house. 5k after taxes in California would be $3476.09. In San Fransisco an small one bedroom apartment is 2500-3500 depending on location. Depending on where your partner lives, he’s not really living the high life like it first sounds.


(Alexander Marktl) #5

Interesting questions. I’ll try to give you some thoughts from my side.

For some background: I run a tech company in Austria, Europe. Austria is not the US, but more or less comparable from an income perspective. Culturally it is very different though (definitely not as entrepreneurial as the US).

Not sure. I think entrepreneurs are generally driven by the will to make something big. If you’re just looking to survive you could easily stop at some point, but most entrepreneurs never really stop.

Moreover, I would argue that the pressure to survive is higher in lower income countries than in higher income countries. For instance: in Austria the pressure to survive is rather low, because of the social welfare state we have here (that may be very different in the US though).

I have not made this experience. Especially in the US people seem to be very result driven. So, they care more about HOW to achieve a result not about WHO can achieve a result.

The most successful companies I know are NOT looking for cheaper ways, but for better ways to achieve something.

Generally I tend to agree, but there may be a counter argument that people tend to get lazy if they have everything. I guess that’s why a lot of successful entrepreneurs are in the sweetspot of not having a big financial heritage but they still had the luxury of growing up with choices and a “good” education.

That’s a problem for sure. But even beyond that: Maybe a reason why so many new things come from the Valley (or richer countries) is, because you get to experience new technology very early. i.e: How can one dream of creating a video streaming service if you’re still on an unreliable 56Kbit connection…

I think that one is very SF specific. Outside of the Valley this seems to be true for almost any place that I travelled to.

I don’t think this plays a role. You can always put up a website or an App and start marketing it to US customers or anyone in the world.

All entrepreneurs that I know dream big. I don’t think this is something specific to income or origin, but this is just my experience.


(Arun Basil Lal) #6

Thank you for taking the time to reply in much detail. I found a lot of your arguments convincing.

I think the definition of “BIG” for a person comes from where he hails from. Speaking in pure financial sense, an entrepreneur who makes 10 grand a month would be a major player in the eastern world, but its nothing to brag about in the west.


(Santiago) #7

I think the same @ArunBasilLal. It’s a very interesting topic. From my side, I would like to add some ideas. I’m from Spain. Right now, I’m working in a company as marketing manager, but before that, I tried to run my own tech company (RiderState)

Regarding your perspectives:

There’re a lot of factors that could affect regarding startups revenues. In my opinion, what your customers are, what type of product/service you sell or if you are a company with global ambition are much more relevant factors that the cost of living. Startups world is more global than other industries, and the difference in this sense in our sector is lower.

But, in this sense, it’s true in my opinion that if you have higher needs, it’s probable that you struggle to higher goals. Ambition is a good engine. But the need is stronger.

I agree with that. In many ways, from Spain we see this issue the same way. However, I think that is now changing. It’s only a matter of time that we change our point of view regarding Asia in this sense.

In this sense, I think that the real difference between USA and others countries (more specifically with Spain) is the competitiveness and ambition. The education and values that you receive in your youthfulness define how you deal your career, and your goals. Of course, in other countries there are people with the same ambition, but the percentage of them is less.

It’s true. Here in Spain is more or less the same. But I think that again, this is related to education and culture. So, we can change our countries’ culture.
If we can change and we don’t penalize the failure, it would be a success for our societies. Of course, it isn’t easy.


(Arun Basil Lal) #8

Thanks for taking the time to reply @SntCasado

I think you said it better on this one. That the percentage is higher in the United States as compared to many other countries.

Of course, I am completely aware that being in the US doesn’t guarantee success. Nor do I believe that you have to be in the US to achieve any level of success because I know companies who perform so well just miles away from my home. But the percentage of success or the level of success I think is higher in the west. At least for now.


(Chika Umeadi) #9

Comparing Nigeria and US, I see a lot of the infrastructure in place that helps US startups focus on growth earlier. The less I have to focus on major hurdles like lack of talent, building non existent infrastructure, currency fluctuations, navigating gray area regulation, and paying off people, the more quickly i can push revenues into growth. Don’t get me wrong, there are a ton of super successful companies in Nigeria. It just seems like they are running marathons for success where the US might be a 1600m race.


(Arun Basil Lal) #10

Thanks for your response, I like the comparison to a marathon and a 1600m race. I feel like the infrastructure gives you a sense that its possible and believing that its possible is often a good share of what it takes to win.


(Matt Roche) #11

A few thoughts:
What you make is a function of what you charge times the number of customers you have. So if you are not making that money you are either charging too little or have too few customers.

I have found that many US startups have a gigantic advantage of simply having a huge base of potential customers, both the number of Americans with disposable income and the number of companies. BTW, that is why it is important not to have monopolies and oligarchy.

In ROW, you simply don’t have enough buyers, and those buyers are not accustomed to spending the same amount of money. We can’t do some deals even in Europe because the companies will spend 20% of what they will spend here.

Of course, you could sell to the US market from India, but if you grew up here you would know a few people who knew people to get you moving.


(Eduard Jubany Tur) #12

India is an amazing country. The economy is growing and there’s plenty of high-level tech talent. It’s a wave you will be able to ride for the next 30-50 years, whereas the US and Europe are mature economies with slower growth. The opportunity is there. You can try being part of a program like Stripe Atlas or Clerky or Gust Launch, which means you keep your corporation in the US (with a virtual office) while you keep the team in India. Cost arbitrage or country arbitrage you maybe call it…