Traditionally Austria has many problems with founding of startups. In particular the culture does not embrace failure, the social security net is ridiculously tight and rewards people who do not work a bit too much, the taxes are high and the rules and regulations are strict. None of that is new however.
What is new is that for the first time in a long time this has been acknowledged as a problem and it would appear that the ones in charge are genuine about wanting to change this.
Taxation wise I think it would be nice to improve things a bit but if you do the math a fully insured person in California will have to deliver a similar percentage of their income to the state so I think this is mostly a marketing problem than an actual issue.
We will see how this goes. In the last few years many of my friends and collegues when to the states and I really wish that some of that talent will eventually come back. There is a lot that is wrong in Austria but the quality of living is great and at one point in life this matters a lot.
Why would this be a problem for startups? Demand for low-wage labor (i.e. people for whom the social safety net yields similar quality of life to the jobs they can access) is certainly a hallmark of traditional small businesses but does not seem particularly common among startups.
Apart from missing venture capital, the biggest hurdle for a flurishing startup ecosystem is of a cultural nature. Failure is still somewhat of a taboo in Austria. Risk aversity is taught from an early age on in most households.
That being said, things are starting to move a little. Small hubs develop around universities in Vienna/Graz/Linz, with regular meetups for networking. Much of it is in its infancy, and attending those events sometimes feels like being in a badly acted version of Silicon Valley. But it's still better than not having them.
I live in Austria, founded (and sold) a company years ago and have invested in 2 startups (6 figure each) - and I believe this is a misleading PR article. Austria has lackluster, under-funded universities, unattractive tax rules for companies and higher-paid employees and the country is dropping in most competitiveness, growth rankings that matter for startups. Infrastructure is good, but hiring good developers e.g. is very difficult because salaries are both low and burdened with high taxation, so they look elsewhere.
Personally, I wouldn't found another company in Austria. There are many better places in the EU, Ireland is probably the best option right now.
> Austria has lackluster, under-funded universities, unattractive tax rules for companies and higher-paid employees and the country is dropping in most competitiveness, growth rankings that matter for startups.
Correct. However I think the hope of many here is that it's going to change now.
Not with this traditional socialist/conservative government keeping everything it's always been.
And let's not hope the FPÖ takes over! They've fucked up good back when they had a chance. With their corruption and strong association with the industrial's association (Industriellenvereinigung), they are more interested in not helping start-ups than any other party.
In case you missed it things are already changing. It would be nice if Neos would get support but they will not largely because the population values stability and conservatism. Politics can't change that.
Nothing at all has changed. The new chancellor is just trying a new spin to attract younger voters again and part of it is positioning Austria somehow as an attractive country for startups (while at the same time discussing a "machine tax" to please marxist voters). I don't know if paid articles in various magazines are part of the campaign.
True. Here is the thing that works well in Austria: the ramen stage. The standard of living you can have on little income is phenomenal. Hardly a country like it. The trick is to keep all the capital in the company, pay the 25% corporate income tax, and only cash out once you made it. Total taxes will still be in the 50% range but if you fail you will still have had a nice ride.
Hiring people in Austria is another issue. Part of the high standard of living is all the employee protections. E.g. by US standards there is an ungodly amount of holidays. If you are a core team of founders or hire people remotely this can be mitigated.
Actually counter intuitive why Austrians tend to be more risk adverse. It's really a mental block rather than a systemic issue.
It's a common (Austrian) myth that Austrians are risk averse and conservative. It's all about "Gemütlichkeit". I remember some studies though that e.g. the Austrian labour market has greater fluctuations than in some neighboring countries. Also recent studies have shown that income inequality is quite high -- contrary to a common belief. Super rich people have a good time in Austria.
If you live in Vienna you do however get to enjoy the highest quality of life in the world [1]. And not just this year either. Vienna has kept the title as the best city to live in for several years. Also, you don't have to pay hundreds of thousands of $ to send your kids to college.
Vienna is outstanding. Just by living there you achieved a "high quality" life.
You can move around with a Bike, the food is amazing if you know where to look, the city is vibrating, full of events and happenings and sightscenes, open concerts and people are amazing :-)
Speak for yourself. Some people are happy to pay high income taxes in return for stability, good schools and health care and a (more) equitable society.
If I understand correctly he is talking about one's employees. Wages are usually the number one cost in a startup, if on top of having to pay competitive wages, which are pretty high in Austria, you also have to pay lots of taxes, then your burn rate goes up through the roof. I don't know that much about the situation in Austria, but it would be nice if someone could develop that point.
Taxes aren't as bad as you make them out to be (the system is progressive), and I believe the benefits far outweigh the costs. Free higher education (university) for example, or excellent healthcare.
50% income tax above €51k. Hardly progressive.
So let's say you earn €120k gross as a developer. Using this calculator [0] - input 8571 monthly because of some weird bonuses - it turns out you get €73344,69. That's not all - the company also has to pay 21.7% as a social tax. So in total, you get 50% of what you earn. But wait, there's also 20% vat! Which makes the total tax rate 58.14%.
There's NO way a startup in Austria is going to compete for talent with the rest of the world. Maybe Austria works for official company residency but not actual work.
>the benefits far outweigh the costs
Yes there are benefits and costs. It costs those that are highly productive and benefits the rest.
>or excellent healthcare.
which young people don't need, and by the time they are going to need it, the demographic situation (in the whole Europe) is going to be horrible and benefits are going to get seriously downsized.
> Which makes the total tax rate 58.14%. [...] There's NO way a startup in Austria is going to compete for talent with the rest of the world.
Your argument is flawed in that it reduces the talent competition to just one factor: the tax rate.
It ignores factors such as cost of living (which is, at least, equally important), and quality of life.
>> or excellent healthcare.
> which young people don't need
Nonsense. Young people need healthcare as well, be it for something trivial as flu medication or a visit to the dentist, or something far more serious.
>Your argument is flawed in that it reduces the talent competition to just one factor: the tax rate.
In Europe, London and Berlin have much better access to capital and bigger startup scene; these things have to happen, you can't legislate them. Tax rate and business environment is the only thing that can be changed by at will and perhaps make the rest happen.
>It ignores factors such as cost of living (which is, at least, equally important), and quality of life.
Where Austria wins how? Don't cite average statistics: how is life in Austria better than the rest for someone earning ~€10k gross a month? Note that's always connected with the tax rate.
Want really cheap living? Go to Bucharest, great internet is a bonus, also many local developers, 16% linear tax. Want great quality of life? A waterfront property in Spain, Canarias, or even Bali, some guys work like that.
People may stay if it's ok, but to make them move to you, you need to be the BEST at some linear combination of all important factors.
>Nonsense. Young people need healthcare as well, be it for something trivial as flu medication or a visit to the dentist
Why do you need insurance for that? Just go and pay out of pocket.
Btw there's no such thing as flu medication. The only medication you may need is something to decrease temperature, but that's OTC.
>or something far more serious.
Which is very unlikely if you are young. Even then, outside of US health care isn't that expensive.
>> >Your argument is flawed in that it reduces the talent competition to just one factor: the tax rate.
> Tax rate and business environment is the only thing that can be changed by at will and perhaps make the rest happen.
But the factors that cannot be changed at will are still factors.
>>It ignores factors such as cost of living (which is, at least, equally important), and quality of life.
> Where Austria wins how? Don't cite average statistics: how is life in Austria better than the rest for someone earning ~€10k gross a month?
That's €5600 after taxes (not counting the 13th and 14th salary, which are regulated bonuses), according to the site you cited earlier. Deduct €1500 for a 75sqm penthouse apartment with terrace in a nice part of town (that's on the expensive side for 75sqm). That leaves you with a discretionary income of €4100/month, since health care etc. are already taken care of.
How much do you have to make in London to have that much discretionary income?
And that's just one factor. Other factors include, but are not limited to: safety (excellent for a city of almost 2m), cultural (art, music), culinary, incredible cleanliness, entertainment, access to healthcare, diversity (Vienna is considered a hub towards the east, and has historically been an international hub).
> Want really cheap living? Go to Bucharest, great internet is a bonus, also many local developers, 16% linear tax.
How much discretionary income does a good developer in Bucharest have?
> Want great quality of life? A waterfront property in Spain, Canarias, or even Bali, some guys work like that.
How safe is Bali? Do I have access to something equivalent to the Vienna Philharmonics, or say a smaller ensemble in the Imperial Palace there? How are the hospitals?
A location cannot be reduced to one or even a few dimensions. The Mercer Quality of Living Survey [1], which has consistenly ranked Vienna #1 in the past years, cites a total of 39 factors, for example.
That's not an inherent risk of being young, that's a risk from doing these things. In fact these activities are safer while young, if only due to a better reaction time.
Being young is associated with risk-taking (see http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2396566/ for instance for some references. In the article, "young" means less than 25). So you're more likely to ski less safely, for instance.
Young drivers are also really more likely to have a car accident (ask car insurance), not because they are this age or that age, but because they less experienced.
Flu medication :) In Austria if you have a "Gripperl" doctors prescribe you to spent some time in bed, pharmaconcern infused fear is not at the level as in the U.S. yet.
By taking your number of 120.000,- EUR salary before tax and entering it into the tax calculator of the Ministry of Finance [0], I get about the same number for the final salary. Therefore, the employee had to pay about 39% tax and social security.
The employer, however, had to pay the salary of 120.000,- to the employee and about 22% of the salary to the state and social insurance.
Apart from that, 120.000,- EUR for a developer in Vienna seems a bit too much. I would expect something between 40.000 - 65.000 on average and higher salaries in the banking / insurance sector. 120.000,- EUR is e.g. the salary of a head of unit in a big Austrian insurance company.
>The employer, however, had to pay the salary of 120.000,- to the employee and about 22% of the salary to the state and social insurance.
That's just accounting fiction. You could as well make it so that the employer pays everything and proclaim there's zero tax. The employee has to make his entire cost (and more).
>Apart from that, 120.000,- EUR for a developer in Vienna seems a bit too much. I would expect something between 40.000 - 65.000 on average
Well yes, there's no financial reason for someone capable of earning more to be in Austria. Which means there are no companies that could use these people to their full potential. In other words brain drain.
Not like high tax is an exclusively Austrian problem. The only country in Europe with sane taxes is Switzerland.
The 50% tax rate is a marginal tax rate. If you would earn e.g. 100.000 EUR per year, you would pay about 39% (tax plus social security). 200.000 EUR per year -> 42% (tax plus social security) totally. This calculation was done for an employee, not for the employer.
Also, there are things like child support, tax credit and allowances as well as social security benefits. In the best case, you will not need to pay for health insurance for your children till the age of about 24 and so on...
Do have children? You get family support for each child. You get money for child care (Kinderbetreueungsgeld) for at least 1 year. You get affordable child care (kindergarten) starting from 1.5 yrs (at least in Vienna).
Vienna! ha ha ha. You better have some VC if you want to afford that kaffe. I was there for a few days earlier this year & felt like I was getting fleeced at every turn.
What is the point? About 30 minutes drive you come to Bratislava. They have the Euro, they have the more affordable everything.. including old slavic roots who kick some serious butt at everything programming & math related.
Was it just garden-variety tourist fleecing, or did you head outside the city centre? Vienna's definitely pricier than Bratislava and Brno, but I've never found it to be outrageous. Also since both of those cities are so close I don't think it's out of the question to be based in either and seek funding/investment in Vienna is it?
It was just inside the center. A few others said this to me.
I've travelled to Morocco and felt insulted at being constantly ripped off because I was a tourist. Well, now I know it doesn't happen just in Morocco.
Ok I think we are talking about different things. I'm just saying that in a western city popular with tourists (think Paris, NY, London, Dublin) things like accommodation, drinks and food will be pricier. Sounds like you're meaning something different, which I haven't experienced
I can't remember who said it, but I remember someone saying there was one question you should ask yourself when reading any news story... Why am I reading about this now? In other words, for what purposes is this story being shared right now?
I'm not suggesting there's a conspiracy behind every story, and there are often benign explanations that can coexist with dramatic ones. What I am suggesting is that question is a vital one for seeing through media spin, regardless of whether it's intentional or unintentional.
It's certainly not a startup hub yet, but you're absolutely wrong about nobody speaking english and foreigners being treated badly by locals. I don't know what problems you had when you were here, but I'd be willing to bet that either you were extremely unlucky and had a couple of really bad experiences (can happen anywhere) or you're overreacting.
What is new is that for the first time in a long time this has been acknowledged as a problem and it would appear that the ones in charge are genuine about wanting to change this.
Taxation wise I think it would be nice to improve things a bit but if you do the math a fully insured person in California will have to deliver a similar percentage of their income to the state so I think this is mostly a marketing problem than an actual issue.
We will see how this goes. In the last few years many of my friends and collegues when to the states and I really wish that some of that talent will eventually come back. There is a lot that is wrong in Austria but the quality of living is great and at one point in life this matters a lot.