It’s because creating a system that supports start ups and investment in them is hard. Creating one that also protects citizens is even harder. You need to strike the right balance between regulation and letting companies do what they want. You need to offer right protections for investors. You need fast working, predictable legal system. Doing all this is difficult and many countries are not great at it. EU is not great at it. US managed to do it.
For example, one of very promising EU startups, Gowex, turned out to be total scam. The laws in Spain, weak control mechanism and reporting requirements allowed it to mislead investors for years. When it collapsed a lot of people lost a lot of money and investment in startups in EU slowed down. The regulations simply weren’t good enough.
Courts operate faster and more consistent in system based on common low. That’s why UK was the financial capital of Europe (until brexit) and that’s why US was able to develop huge corporations.
In EU for a long time most companies were financed by banks. There were simply not many tools to get investment from other sources.
All this combines means that EU was a slowly moving but stable market that was good at creating regulations protected citizens but not so good at protecting investors. US on the other hand had a system great at protecting investors while completely ignoring its citizens. That’s why.
Of course, US did the right thing for businesses. EU is trying to find a balance. The important thing is that US did not simply stand back while businesses did whatever they wanted to. There was regulation and oversight but only the kind that helps corporations, not citizens.
It’s because creating a system that supports start ups and investment in them is hard. Creating one that also protects citizens is even harder. You need to strike the right balance between regulation and letting companies do what they want. You need to offer right protections for investors. You need fast working, predictable legal system. Doing all this is difficult and many countries are not great at it. EU is not great at it. US managed to do it.
For example, one of very promising EU startups, Gowex, turned out to be total scam. The laws in Spain, weak control mechanism and reporting requirements allowed it to mislead investors for years. When it collapsed a lot of people lost a lot of money and investment in startups in EU slowed down. The regulations simply weren’t good enough.
Courts operate faster and more consistent in system based on common low. That’s why UK was the financial capital of Europe (until brexit) and that’s why US was able to develop huge corporations.
In EU for a long time most companies were financed by banks. There were simply not many tools to get investment from other sources.
All this combines means that EU was a slowly moving but stable market that was good at creating regulations protected citizens but not so good at protecting investors. US on the other hand had a system great at protecting investors while completely ignoring its citizens. That’s why.
If you ignore the “protecting the citizens” part.
Of course, US did the right thing for businesses. EU is trying to find a balance. The important thing is that US did not simply stand back while businesses did whatever they wanted to. There was regulation and oversight but only the kind that helps corporations, not citizens.