EUROPE'S REGULATORY CHALLENGE: HOW UNIFIED RULES CAN UNLOCK STARTUP GROWTH

Regulation in Europe has become synonymous with restriction rather than enablement. While designed to protect, fragmented rules across 27 member states often limit the scale of ambition for innovative entrepreneurs. With globally complex technologies like AI evolving rapidly, European founders can no longer afford regulatory drag.

The Fragmentation Problem

Across Europe, startup founders face hurdles in tax, enforcement, legal frameworks, and finances that make global competition difficult. Entrepreneurs spend more time decoding rules than building products, while capital follows paths of least friction.

When Dutch cloud communications startup Bird quit Europe for the US, citing restrictive AI regulations, it signaled a deeper structural issue. Job van der Voort, founder at Remote, similarly advised founders to leave Europe due to "overboard" tech regulation.

Peter Windischhofer, founder of refurbed, summarizes: "I would harmonize business rules across the whole EU. We operate in 16 different countries; it's 16 different rules. While somewhat similar, we have to adapt to every single one—it's simply too much."

The Draghi Report revealed that trade frictions mean Europe leaves around 10% of potential GDP on the table. The European Central Bank found that obstructions within the EU equal a 100% tariff for services and 65% for goods.

In Speedinvest's 2022 survey of 437 European investors, 87% stated that market fragmentation causes competitive disadvantages. Speedinvest, the Austrian venture capital firm and Global Startup Awards Edition 4 global winner, has identified four critical areas requiring reform.

Four Policy Proposals

1. Simplify Digital Compliance

Regulations like the AI Act and GDPR are important, but inconsistent enforcement creates confusion. Christian Trummer, co-founder at Bitpanda, explains: "We always need to ask ourselves, Is this compliant with the EU AI Act? Sometimes we say, No, we can't do that. That holds us back from innovation."

Thomas Jarzombek, German Bundestag member, notes: "Even when EU regulations like GDPR exist, implementation varies widely. We need to advance the Digital Single Market."

Technology evolves quarterly, but enforcement guidance lags years behind, leaving groundbreaking startups unsure how rules apply to AI, defense, and deep tech.

Solution: Create a single EU enforcement body for data and AI rules, digitize routine company actions, standardize compliance documentation, and introduce a unified compliance dashboard with pre-approved templates.

2. Harmonize Sector-Specific Licensing

Regulated startups in healthtech, fintech, and defense must re-license in every market. Hristo Borisov, founder at Payhawk, explains: "Even though there's a payment service directive, regulators still apply the law differently. When onboarding a company from Spain or France, expectations vary completely."

For defense startups like ARX Robotics, co-founder Stefan Röbel notes: "The party that iterates fastest will be the winner of future conflicts." Long regulatory cycles undermine Europe's strategic competitiveness.

Solution: Introduce EU-wide license passports for regulated industries, create shared digital registries through a single portal where startups upload documents once, and ensure license transferability across markets.

3. Fix Public Procurement

Europe's €2.5 trillion annual public procurement market (16% of GDP) remains largely inaccessible to startups. Jarzombek observes: "We are world champions at creating rules, not at turning ideas into innovation."

Procurement systems favor incumbent vendors over fast-moving entrepreneurs. "The state should act more often as an anchor customer and launch competitions for products that don't yet exist," Jarzombek adds.

Europe needs procurement passporting—allowing startups with successful government contracts in one country to qualify for opportunities elsewhere without restarting bureaucratic cycles.

Solution: Launch milestone-based pre-commercial procurement with small, fast contracts, publish 6–12 month tender pipelines with predictable timelines, and build a unified digital procurement portal with standardized templates.

4. Unify Company Formation

Administrative complexity stifles entrepreneurship from day one. Conor McNamara, CRO EMEA at Stripe, highlights: "What takes a day in the US can take three months in Germany."

Andreas Klinger, founder of EU-INC, advocates for pan-European standardized legal entities enabling digital company formation without notaries. McNamara adds: "European governments should enable company creation within 24 hours, fully online, for less than 100 euros."

Similarly, ESOP rules vary across countries, hampering international growth for high-growth startups. The proposed 28th regime—a single voluntary framework overriding national discrepancies—could provide predictable foundations for scaling.

Solution: Launch a fully digital EU-INC structure with automatic cross-border recognition, create a unified 28th-regime ESOP framework standardizing equity rules, establish a single EU register for incorporation, and standardize digital identity verification including KYC.

From Rules to Growth

Europe needs better regulation: portable, predictable, and pro-growth. As Klinger advises: "Focus on one well-defined solution, align the whole industry behind it, and push that. Fifty people speaking about one issue have more impact than one person with fifty ideas."

Europe excels at writing rules. Now it must excel at updating or removing them quickly enough for innovation to flourish. The continent's competitive advantage should be its ability to align across 27 markets, removing barriers so visionary founders can build generational companies that drive positive change worldwide.

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