Accelerating growth of startups in business services and construction

January 29, 2018

While the long-term goal for startups, the Digital Single Market, remains a priority — there might be another goodie coming from the EU that many of us never heard of: the e-card.

The current vision of a Single European (Digital) Market has been driven since 2015 and has, at least to some extent, set the right parameters. It might also face a dramatic finale: Startups care less about the long term goals than about the impact right here, right now — a hard sell for regulation in general but especially for the DSM. Where the big vision fails (yet) to deliver tangible and pragmatic steps forward another piece, annexed to the EU’s services directive might step up. An e-card for European businesses looking to scale from one member state to another.

This might not be for the big headlines because it misses the flashy branding and the moonshot vision. However, it comes surprisingly close to the underwhelmed charme of Estonia, Europe’s Digital Republic, which is: start with fundamental and uniform principles and make them a reality for everyone. A freedom to provide services, as outlined by article 56 of the European treaties.

While startups in Europe still need a big bang from politics in order to compete globally, there are also plenty of smaller steps to help them grow where they are: in Europe. Administrative and regulatory burdens rank among the first obstacles that prevent companies from offering services abroad, i.e. across EU borders. While we do have a right to freedom of servicesacross Europe, often this does not spare complex procedures in foreign languages. Personal visits, signatures, certified and notarised copies for different authorities and departments and so on. Streamlining these procedures would be a tasty and low hanging fruit for our entrepreneurs.

Yet, grabbing the low-hanging fruit becomes a larger question about how ready many European businesses actually feel about competing in a single market. As it stands, service providers in construction or other business services often benefit from such complexity because it makes it harder for their competition to enter their market. While large and entrenched players fight simplification we won’t get startups daring to innovate and grow in Europe.

For startups as fast growing, scalable businesses, the decision about where to move next is essential. But it’s also straightforward: market accessibility and ease of doing business can trump location. Small teams looking to grow have little incentive to go where the administration is intransparent and diffused across different authorities and processes. Legal clarity is key.

Startups in Construction and Business Services

Now a Commission proposal can help cut down the administrative burdens, not only for startups, but any European business wanting to grow across borders. Rather than appearing in person multiple times and fighting through administrative requirements in a host state, a streamlined and fully digital e-card is supposed to step in.

The e-card would become relevant when the service is offered under the EU regime for services and requires a physical presence in the host state. Best examples are services like consulting, architecture, IT or catering; but foremost construction. It’s not the typical software sector many would expect startups to be in, but by no means less relevant. A lot of innovation benefitting clients, users, safety and the environment happens right here.

Construction is asset-heavy industry with complex processes, a high factor of manual labour and often described as rather dangerous compared to other jobs. Investors and startups work tirelessly to improve for example the management of construction sites, equipment, construction materials themselves or their marketplaces. A surge in the applications of mobile and cloud technologies on site, artificial intelligence and robotics — take companies like Tridom or PlanRadar — AR/VR, and CAD software, is disrupting construction sites in Europe and globally. Consulting firm Roland Berger set up a construction radar to track developments.

According to the World Economic Forum, advanced finishing and building materials are another area of extremely high potential. Startups like Bhaluunot only work on advancing traditional materials or new combinations, but rethink construction in their entirety. By dramatically reducing cost, the carbon footprint and the risk of delays and accidents in construction, these companies contribute to solving some of the world’s biggest challenges. Nevertheless, startups in Europe pushing the edge of global challenges can hardly succeed alone — high investment cost and regulatory complexity make partnerships necessary.

Partnerships between corporates and startups are an integral part of success and the community spends a lot of time figuring out the best way for open innovation. Believing that disruption occurs purely at the cost of established and/or preferred industry would be too simplistic and simply untrue. Yet, just like in financing, one should differentiate between smart and stupid money. Partnerships can be exploitative or mutually reinforcing. In that equation a complex regulatory landscape makes it easier for the bigger partner to muscle around the smaller one. That’s why we should work toward simplification and democratisation of the market.

Compared to other fields like software, the number of startups in construction is still relatively low in Europe counting around 700 companies. Nevertheless, the growth of roughly 10% underlines the potential and experts see many ventures below the radar about to launch. An e-card could relieve founders from the hassle of involuntarily becoming experts in European regional and local administration while building their company.

The crunch question — Daring the future?

Startups in this sector will grow and succeed in transforming the sector towards more efficient, safer, affordable and more personalised buildings and services. The question that policy makers have to ask themselves is: Will we enable European entrepreneurs, employees and consumers to benefit and capture the value of this developments or do we reserve the table for old fashioned industries? An e-card won’t be a silver bullet, but it could be extremely convenient and fair tool at the hands of those who don’t have the legal department, or lawyers on a retainer. Right here, right now.