Imagine it’s 2035. Europe’s first trillion-dollar tech company, founded in a garage in Krakow, now has 120,000 employees across the continent. A pan-European team leads the world in quantum computing.
Europe has become home to the world’s most valuable and innovative businesses and a magnet for top talent in robotics, climate technology, AI, manufacturing and beyond.
This might sound exaggerated. But it doesn’t have to be.
A coalition of Europe’s most successful entrepreneurs and investors was launched today EU Inca timely and revolutionary initiative to create a single pan-European startup entity.
The proposal captures the grassroots drive and clear consensus that has emerged among European policymakers and founders: that regulatory reform is vital to transform Europe’s competitiveness and position the region as the global epicenter of innovation for the next generation.
The initiative, outlined in a open letter signed by tech leaders from across Europe, calls for the creation of an “EU Inc” entity under the 28th Regime (EU rules that provide an alternative to national laws).
The new structure would standardize investment processes, simplify cross-border operations and create a unified framework for employee stock options – all of which will help European startups scale quickly, attract more capital and have a better chance of to become a success.
The proposal adds to momentum already building in Europe, with Mario Draghi, Enrico Letta and EU Commission President Ursula von der Leyen all calling for reforms to address innovation and competitiveness
I spoke with the co-founders of EU Inc., Andreas Klingerinvestor with Prototype Capital and former CTO of Product Hunt and Simon Schaefer, founder and CEO of Factory and member of AAllied For Startups Advisory Board and Angel Investor to learn more.
According to Klinger, we have six weeks until the new EU commissioners start working on their agenda for the coming years.
“One of the first tasks they have is to define the work for next year and the next five years. If this is one of the top issues, it has a good chance of success in the next few years.”
The proposal builds on the success of previous efforts such as European accelerationism, promoting the needs of European founders and It is not optional campaign for European share option reform. With the political will already present, the EU Inc coalition believes that policymakers can and should implement reforms quickly.
What are we talking about in practice?
The concept of the 28th regime within the European Union (EU) refers to a potential legal framework that would allow member states to opt for a specialized legal system for specific use cases, essentially creating a “28th optional country’ within the EU. This framework would allow countries to collaborate on certain issues without requiring full integration or adherence to all EU laws.
How it works in practice is through optional participation.
Member States can choose whether to engage in this regime according to their specific needs or interests. This flexibility allows for customized legal solutions that can address the unique challenges faced by individual countries or groups of countries.
Countries opting for this regime would operate under a distinct set of rules that differ from standard EU regulations. This could involve the creation of new treaties or agreements that define the scope and limitations of participation.
It creates a vehicle to facilitate deeper cooperation between member states on pressing issues, without the need for unanimous agreement among all EU members, thus speeding up decision-making processes.
According to Schaefer, “there is no modern corporate law anywhere in the world that truly embraces technology and startup entrepreneurship. Maybe we’ll be the first to be successful at something.”
The regulatory landscape across Europe is complex, with significant variations in the tax treatment of equity compensation. In some countries, employees face heavy taxes on stock options compared to the capital gains taxes enjoyed by founders and investors.
This disparity discourages companies from offering equity as a viable compensation strategy.
Countries like Germany have particularly unfavorable conditions for employee equity, which makes it less attractive for both employers and employees.
For startups, Klinger explains, it could mean that “you would standardize certain parts of corporate law, which would benefit employer capital.”
International start-up investors avoid European companies because of complex legal red tape
Klinger points out the main problem in Europe: that in practice all the different startup ecosystems are isolated.
“No Slovenian investor will touch a Portuguese entity because of the tax and legal implications, it’s an administrative headache.
Compare this to the US, where a startup in Chicago can easily get investors from both the east and west coasts.
This will not happen in Europe. So it’s a completely different level of liquidity, with small countries particularly stuck.”
Klinger and Schaefer also believes that an EU Inc. would stimulate international investment. Klinger gave an example of the kind we’ve heard from many founders and investors:
“One of the edtech companies I invest in had the best edtech angel in the world join the first round – bringing in over 50% of the company’s investors.
“Then all of a sudden, three weeks before the actual closing, the guy sends an email. It’s like, “Hey, I just realized this is a German GmbH. I don’t do that. It’s five weeks until Christmas. This will drag on until Christmas. I have no interest in doing this on my vacation.
Call me next round. And he literally gave up.
I had another angel who was thinking of investing $20,000 in a Slovenian company. And his lawyer said, “Yes, I looked at the documents. It is doable. But we should get a local lawyer. And I’d like to sit down with you this afternoon and explain the legal differences in detail so you know what you’re signing,’ and the angel said, ‘I’m not doing this for $20,000. It’s not worth my time.”
Designed with and for the startup community
And when it comes to enforcement, Schaefer notes that people who sign the petition are not only willing to support, but actively contribute to implementation. “That’s what we want with this petition.”
Schaefer shared:
“It is important that this is not the 28th regime designed somewhere in the back streets of Brussels, but rather, it is something designed with and for the startup community.”
The movement is gaining momentum
Schaefer believes that logic and reason will guide this endeavor, detailing how the startup economy has discussed the fact that the sector has been lagging behind without interruption for the past 10 years.
“It is finally becoming a political agenda. Current legal parameters such as due diligence, KYC and beneficial ownership were designed in a pre-internet corporate law framework.
How should this corporate law regulate innovation that is at such a rapid pace? I think based on that, arguing with urgency and reason, I think we’re going to get people excited to join the whole startup community.
EU Inc’s proposal aligns with multiple high-level and policy recommendations
commitments, including:
- Mario Draghi’s report on the future of European competitiveness from September 2024,
supporting a new legal status at the EU level for “European Innovative Companies”; - Enrico Letta’s report on the future of the single market from April 2024, which calls for a
The European Code of Business Law under a 28th Regime; - The political guidelines of the President of the European Commission, Ursula von der Leyen, for
2024-2029, supporting innovation, competitiveness and smarter regulation.
He states:
“There is political will behind this. Van de Leyen, Draghi, everyone mentioned the 20th regime.
But they don’t really know what the details are. This is where the tech industry can help, not just by reproducing another 300-page Draghi report. The 20th regimen, if you’re being generous, is actually a paragraph.”
Bring the unicorns and founders back to Europe
The initiative will boost early-stage innovation, particularly among founders who have left Europe in response to complex bureaucracy.
According to Schaefer:
“I believe that ultimately government is a service to its people. And when it comes to corporate law and setting up a company, the government has failed miserably in every European country.
It is so hard to do all these things. Forget shutting down a company, let’s not even go there. So to make this service so good and so compelling, it will create FOMO for other member states and other countries.”
Schaefer cites Portugal as a country where second-time founders are active in politics. Government support for startups has led to the return of many Portuguese entrepreneurs.
“It’s a powerful message to say, ‘We have what you need to start your company. The easiest, fastest way, and everyone can invest.’
Klinger wanted to point out:
“It’s not about improving the administration and making the bureaucracy a little nicer and all that stuff.
This effectively unifies the European startup ecosystem. It’s about making sure that founders in the middle of nowhere in Europe have enough access to angel investment and have enough access to VC because the borders have suddenly become bigger. And that’s the magic in it.
If we manage to do this, it could be the first step towards creating a unique European startup ecosystem. And that’s actually exciting because then all of a sudden we could compete as a continent and that would be a complete game changer.”
Among the first signatories are:
- Ilkka Paananen, CEO and co-founder of Supercell
- Éléanore Crespo, co-CEO and co-founder of Pigment
- Daavet Hinrikus, co-founder of Wise and partner at Plural
- Reshma Sohoni, Co-Founder and Managing Partner of Seedcamp
- Martin Mignot, partner at Index Ventures
- Jarek Kutylowski, CEO and founder of DeepL
- Job van der Voort, CEO and co-founder of Remote
- Roxanne Varza, Director of Station F
- Niklas Zennstroem, Founding Partner and CEO at Atomico
- Prince of the Netherlands Constantijn van Oranje-Nassau, sent to Techleap
- Patrick Collision of Stripe,
- Michael Jackson, from Wilbe, and
Sign the petition today.
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