European Startups have avoid big layoffs

As the lockdown period is gradually ending, it is time for a first round of assessments
on how the world of startups did during the COVID-19 pandemic.

In particular, there is a strong contrast between how entrepreneurs in Europe and
those in other parts of the world, especially the US. It is difficult to collect
comprehensive data due to the delicate nature of such issues, but the many reports,
public and private, suggest that they can be summed up in one sentence: U.S. startups
fired while Europeans waited.

One reason for this contrast is that European startups generally raise less capital than
their counterparts in Silicon Valley. Thus, they rarely have the luxury of hiring armies of
expendable employees, especially when it comes to sales and customer service. This
makes it less obvious to fire at a time of crisis: if you haven't raised that much money
and managed to hire that many people, you can't reduce the size in the same
proportions either. When cash efficiency is a daily rule, there is less capacity to adjust
in a downturn.

Another reason is that most European governments have made it particularly difficult to
lay off workers in recent weeks. Their bet was that the economic crisis would be brutal,
but brief, and that the best policy would be to help companies retain their employees,
weather the storm and get back on track as soon as it is over. That's why all the
mechanisms that were put in place to provide government assistance had a chain: the
startups would have to resign their employees if they wanted to receive the money. The
only option was to grant those who could not work in the current circumstances, with
the government paying a large part of their salaries.

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