My most expensive lesson ever was to start a startup in risk averse Europe. While I don’t like to name the country (the county has a rich history and proud people), suffice to say it’s a prosperous country in Western Europe.
Not only were there virtually no other startups I could learn from (had I known about vesting, I would have had a way to regain the shares of a cofounder who left), but local laws made it almost impossible to give options to employees. On top of that I learned that most European angel investors were simply management consultants (often in between jobs and eager to join my startup as CEO or marketing manager for salaries five times I paid myself) who claimed to be friends with wealthy individuals (spoiler: they seldom were) and VCs turned out to behave more like late stage private equity and totally not interested in startups with limited revenue.
Fortunately for me, the state government offered a solution: an innovation loan for startups, to be paid back in full within five years plus an annual interest of 6.5%. And oh, I had to sign a personal guarantee in case the startup wasn’t able to pay the loan back. The government worker assured me that if things didn’t go as planned and I wouldn’t be able to pay the guarantee, he’d work something out for me.
There are three things I didn’t know when I signed the innovation loan contract:
1) It’s almost impossible for any startup to go from zero to being able to pay back a loan plus interest in five years.
2) My home country doesn’t allow people to go bankrupt like here in the U.S. (A debt is lifelong by default).
3) The government worker lied. Of course he didn’t plan to work something out if things went wrong.
I haven’t been back to my home country in over 3.5 years. If I would go back, there is a chance (a small one perhaps, but still) my passport has been marked and I will be imprisoned right at the airport.
My debt is about two Tesla Model S’ if you don’t calculate interest (three to four Model S’ if you do include interest). My debt is a huge distraction as I try to rebuild my life and try to start a new startup.
I laugh every single time when I read Mike Butcher claiming he found yet another European city that definitely will be the next Silicon Valley. And while I don’t mean to belittle other entrepreneurs in Silicon Valley, I do smile when I hear about their hardships when their VC backed startup failed while I secretly wish I could trade places with them.