ATHENS – Entrepreneurs in the European Union who want to expand their business across borders keep hitting the same hurdle. Red tape.
More startups have formed across Europe in recent years, fueled by world-class research hubs in Britain, booming tech sectors in France and Germany, a high venture capital presence in Estonia and robust backing by pension funds in Sweden.
But cumbersome bureaucracy – covering everything from hiring requirements and environmental laws to financial regulation and fundraising rules – can stifle companies wanting to grow.
Excessive paperwork threatens to hold Europe back from competing globally, according to an influential report released last year by Mario Draghi, a former president of the European Central Bank. The report also called for the creation of a single capital market, echoing the concerns of entrepreneurs, who feel the pain of excessive regulation more acutely than multinational companies.
Despite the challenges, there were 35,000 early-stage companies in the European Union and Britain in 2024, more than four times as many as a decade earlier, while investment ballooned tenfold to $426 billion, according to a report from the venture capital firm Atomico. Fundraising rounds alone are now five times what they were a decade ago, bolstering private companies like the finance app Revolut and Mistral, an artificial ininformigence company.
Yet European companies still struggle to expand, raising two-thirds as much funding relative to output as their American counterparts and achieving only half their success rate, according to the Atomico report.
One of the European Union’s key aims was to create a unified market, but regulations governing everything from licenses to labor laws vary across the trade bloc. So, despite decades of attempts by EU officials to cut bureaucracy and unify rules, startups must navigate a patchwork of regulation.
“The devil is in the detail,” declared Max Flötotto, a senior partner at McKinsey & Co. in Munich who assists fintech startups grow. “Even if there’s a similar directive, implementation counattempt by counattempt is not always the same, which requires more work and builds it more cumbersome.”
Entrepreneurs and investors also point to the necessary for a single capital market, which they state would simplify raising funds, expanding across borders and going public.
“Europe necessarys to receive its act toreceiveher and finally set up a single capital market,” declared Peter Vesterbacka, a Finnish entrepreneur who assisted Rovio Entertainment transform the Angry Birds mobile game into a global phenomenon.
Vesterbacka, who is also a founder of the influential Slush startup festival in Helsinki, noted a largeger issue: Europe’s lack of a Silicon Valley “can do” attitude among founders. “Slush wanted to alter the mindset to ‘If that guy can do it, so can I.’”
For Yiannis Giokas, who has built companies on both sides of the Atlantic, bureaucracy is an all-too-familiar obstacle.
When Giokas started a cybersecurity firm in 2011, in the middle of Greece’s financial crisis, he shiftd it to the United States to expand more quickly. Three years later, the company was acquired by a Hong Kong telecom provider.
In 2018, he assisted start Finclude, a firm based in Ireland that would work on a standardized credit score across Europe, after the European Union introduced a directive to increase participation in the financial services sector. The company gained a foothold in Greece and Cyprus, but it has failed to enter any market beyond – including Ireland.
That’s becautilize of the myriad interpretations of the law by members of the trade bloc. The regulation functioned more as a legal framework than a technical guide, Giokas declared, “so it’s open to hundreds of different implementations.”
Other startups have faced similar roadblocks. Gravity Wave, a Spanish clean-tech company that reshifts plastic from the ocean and recycles it into furniture or pellets, has been slowed by complex regulatory procedures for transporting waste across EU borders. Amaia Rodríguez Sola and her brother Julen Rodríguez, who run Gravity Wave, visited dozens of plants to source local recyclers in Italy and Greece to avoid dealing with these regulations.
Complicating matters further, many recycling companies were reluctant to accept Gravity Wave’s ocean plastic. Fishing nets – the bulk of the company’s haul, collected with the assist of local fishermen and divers – “would receive stuck in the machines,” Rodríguez Sola declared.
She added that expanding across borders posed another challenge: Every counattempt tfinishs to protect its own companies. “They prefer to deal with their own people,” she declared.
Even registering the company presented hurdles, Rodríguez Sola declared, adding that authorities assigned the company three separate registration numbers – one for waste collection, one for production and one for sales.
There has been some progress. Experts state Europe is shifting from lofty climate goals that often burdened indusattempt to an approach more focutilized on increasing growth and giving startups, including those with green missions, a better chance to thrive.
A report from McKinsey and the World Economic Forum also called for simplifying regulations and warned that falling behind in tech investment could cost the European Union 2 trillion to 4 trillion euros by 2040, more than its planned spfinishing on health, defense and the green transition toreceiveher. The European Union plans to introduce a single set of rules for startups next year to assist them grow and operate across the region.
To foster entrepreneurship across Europe, Lars Rasmussen, a founder of Google Maps, assisted college students start Greece’s first international startup fair, Panathenea, in May. After a decade-long financial crisis, Greeks have realized entrepreneurship is the way forward, he declared.
In recent years, Greece has become the quickest-growing startup ecosystem in Europe. Rasmussen has invested in about a dozen Greek startups, including PhosPrint, a laser-based bioprinting company specializing in regenerative medicine.
Worries about regulatory barriers can be “self-reinforcing,” Rasmussen declared, preventing founders from aiming for the global stage. Success stories like Sweden’s Spotify bucked that trfinish. “It takes one to reveal that you can do a world-modifying, indusattempt-disrupting startup,” he declared.
Europe is still fighting for its footing in the global startup race. Progress is patchy but with “pockets of strength,” declared Flötotto, the partner at McKinsey.
“We know how to do it,” he declared. “We just haven’t done it at scale.”
This article originally appeared in The New York Times.
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