It’s a bumper year for European startups — but you couldn’t tell from the conversation in Brussels.
On Monday, Estonian ride-hailing firm Bolt got its hands on €600 million to launch a new grocery delivery service. Officials in Brussels, however, were focused on the European Commission’s investigation into Facebook’s planned acquisition of Kustomer.
That’s part of a pattern. The Continent’s upstarts are raising more money at an unprecedented pace, and are emerging as dominant players in ultra-competitive fields such as financial services and green tech. But Brussels’ unrelenting focus on taming U.S. Big Tech, coupled with European entrepreneurs’ own lack of experience in Brussels, could leave Europe’s startups adrift.
The bloc’s top digital executives, including Executive Vice President Margrethe Vestager and Internal Market Commissioner Thierry Breton, are doubling down on their battle against U.S. Big Tech and meeting hotshot CEOs like Intel’s Pat Gelsinger, but they’ve hardly met any bosses of Europe’s own so-called unicorns — startups valued at more than $1 billion — this year, according to their official agendas.
Experts say the focus on reining in the excesses of the biggest, mostly American, companies is taking away from the good that policymakers and regulators can do for Europe’s own industry.
Even Mariya Gabriel, the commissioner for innovation and a fierce startup supporter, called for an end to Europe’s “fixation” with Silicon Valley.
The quest to create a European Google “is lost,” she told POLITICO in June. “We don’t have to lose time because we won’t create a European Google or Facebook. Let’s be very realistic about that.”
She’s not the only one who says so. Investors are eager to back up the claim that European startups can win a battle — if they pick the right one.
This year, Europe’s companies got a whopping €48 billion in investment, almost three times more money than in the same period last year. Europe accounted for 18 percent of total global funding for startups, its biggest share ever.
“Europe became one of the more interesting regions for U.S. funds to come to and invest in,” said Firat Ileri, a partner at Hummingbird Ventures, one of the early backers of U.K. food delivery giant Deliveroo.
Swedish music streaming service Spotify, which went public in 2018, was one of the trailblazers. “People started to think: in Europe, you can also bring startups from one billion to fifty billion,” Ileri said. For investors, the European market is less overheated and so more attractive to participate in than the U.S. market and less “tough” than China, Russia or Brazil.
But that’s not thanks to the EU.
Systemic problems, like a lack of harmonization across the Continent, mean EU startups have to spend a lot of energy on learning and complying with varying rules, like hiring non-EU recruits or rewarding employees with stock options.
Patrick Collison, of fintech giant Stripe, advocates for a “more streamlined common market, fewer impractical and ineffective regulations, better legal treatment of stock options and easier access to visas for highly skilled individuals.”
But it’s unclear if that’s made a difference. “The startup community has been saying the same things for over 10 years,” said Simon Schaefer, president of Startup Portugal. “We always said: this is alert signal code red. If we don’t harmonize Europe, we’ll never be able to catch up with the U.S. and China.”
The problem is the more time the EU spends on limiting the Apples and Googles, the less time it spends focusing on convincing national capitals to harmonize rules on labor, immigration and taxation, which places a natural ceiling on the startups and their investors.
“Fragmentation is definitely a disadvantage and is kind of unacceptable, given that the U.S. is years ahead,” Ileri said.
EU startups have struggled with getting harmonization on Brussels’ agenda. The Commission says it’s powerless to do anything, since it has little or no say in matters like taxation or immigration.
“Part of the rules are where the EU has no competence, like social security, employment legislation, taxation, that’s just the name of the game in the European Union,” a Commission top official said. “But we can nudge EU states in the right direction.”
But Schaefer, of Startup Portugal, acknowledges that his industry hasn’t really pushed the Commission very much either.
“It’s a PR problem,” Schaefer said. “Entrepreneurs need to see that policy is the driving factor and not a burden, and they should be involved more.”
Ileri, of Hummingbird Ventures, thinks it’s a cultural thing. While Silicon Valley giants aggressively court policymakers, “the EU is as a culture a little bit more introverted than the U.S.”
The few startups lobbying Brussels operate mostly within national umbrella organizations. In May, they handed over yet another policy agenda pushing for more attractive stock options schemes or a pan-European startup visa. The plan isn’t particularly clear on how to do it. On stock options, the recommendation read: “The Commission’s department for financial stability and capital markets should coordinate on this policy activity.”
That might be changing. Successful entrepreneurs, like Spotify’s Daniel Ek, Patrick Collison of Stripe or Klarna’s Sebastian Siemiatkowski, follow a different path, one of tweets and high profiles in Brussels.
The Collison brothers, who started their company in Silicon Valley, are applying a more assertive approach to engaging European policymakers. The company recruited its top lobbyist in Europe, Sandro Gianella, from Google.
There has been some progress.
EU countries in March agreed on the “Startup Nations Standard,” a set of best practices to establish a startup-friendly environment, with an office in Lisbon tasked with monitoring progress.
With France taking over the presidency of the Council of the EU in January, the country plans to form a “coalition of the willing” for an EU startup visa.
Still, the startup community is still wary if the policymakers will be able to keep up with the funding boom.
“Politicians are just no digital natives,” Schaefer said.
Want more analysis from POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to trade, technology, cybersecurity and more, Pro delivers real time intelligence, deep insight and breaking scoops you need to keep one step ahead. Email [email protected] to request a complimentary trial.