Startups and Digital Sovereignty

October 29, 2019

As the digital economy permeates our lives on all fronts, can concepts like digital sovereignty be discussed without startups? By forging ahead with new ideas and concepts, startups are shaping the way we think about established concepts. Banks, for instance, offer a set of services while fintechs entered the picture because there was a gap in the market – personalisation and customer experience, to name two. Startups that many haven’t heard of are doing the same in agritech, insurtech, legaltech or any other ‘tech’ sector. With a user-centric disposition, innovation and growth orientation, startups present an important perspective on digital sovereignty.  


A Competitive, Global Startup Ecosystem

Back in the day, one jurisdiction had any amount of national players. Today anyone can be served by any startup unless artificial barriers are put in place. The global nature of the internet has created a worldwide market that startup entrepreneurs set out to conquer every day. Excitingly, that also makes it far harder to have a winner-take-all domain, as new geographies are always available and new business models constantly arise. 

Where their company is located is a secondary concern for startup founders. The primary concern is: How can I best serve my users? Around the globe, millions of entrepreneurs are asking this question in one way or the other. Only once that question is answered do they ask, “Which city gives me the right mix of talent, finance and regulatory simplicity/flexibility to make my startup succeed?” In a way this order of questions implies that even if it might seem as if sometimes some industry sector is particularly strongly impacted by some player or geography, there will always be challengers out there. As other hubs and markets learn from the successes of each other, each should be motivated to empower the next challenger. Shutting oneself in, for instance via protectionist policies, would be the wrong response. Startups are a hotbed of healthy competition and always the most likely to challenge the incumbency of a market player. 


Data Sovereignty – The Status Quo

When boiling the question of sovereignty down to concrete policies, it is useful to remember the progress that has been made in the last few years. The General Data Protection Regulation has set a global benchmark. Every European’s personal data is now protected by a strong set of rights in order to flow freely across borders. In the domain of personal data protection and the free flow thereof, the GDPR pushed the boundaries. 

So does the question of sovereignty unmask itself more as a question of industrial policy? Since there are many questions arising from the rapid growth of the digital economy and society, there may be a legitimate case to look for a legislative remedy. But before policymakers shoot down the foxhole of legislation, potentially sparking an epic battle between governments and big tech giants, they should spare a thought for those who might be caught in the crossfire. As it happens,  when rulemakers target big platforms, they usually end up disproportionately affecting smaller players like startups. That’s why we encourage any discussion on digital sovereignty to be grounded and evidence-based, taking into account three tenets:

1. Startups are central to the sovereignty question because, using the power of innovation and scale, they are the natural challenger to any big incumbent player. Policy approaches should, therefore, be based around the idea of empowering startups.

2. Solving a question of digital sovereignty does not need to happen at the expense of innovation or international cooperation. Again, consider what you can do for startups in your ecosystem, not how to hit big foreign companies.

3. If legislation is proven to be necessary, try going global. If not, the European level is always preferable to the national level. This has the additional advantage of avoiding fragmentation, which disproportionately affects startups.


The Entrepreneurial Perspective on Data Sovereignty

The whole dichotomy between European and non-european firms likely sounds like a bad joke to entrepreneurs. He or she might quip: “That sounds very 20th century!” The more diplomatic explanation would be: In a world where borders disappear and global innovation communities work to democratise entrepreneurship, how much does the origin of a company still matter? The direct question from a startup perspective might be: Is Data Sovereignty all about ring-fencing legacy players?

Success for startups is spelled globally. In fact, success for any company today is spelled globally. While it may be time to have a discussion about the footprint of such companies in Europe, their contribution to job creation and their tax bill, it should be a constructive and positive conversation around the 3 principles laid out above. At all times the question at the back of a policymakers’ mind should be: “What can we do to support startups in our ecosystems?”

It will be exciting to observe how policymakers define digital sovereignty as it becomes a political football. If data sovereignty means empowering startups in Europe to compete with global players, then that is a bold ambition that speaks to the founders across the continent. If data sovereignty means closing oneself in and resorting to protectionist policies, then startups will be the first to feel the negative effects of this. Either way, startups will be the barometer of whether this debate turns into a positive vision followed by constructive policies or the excuse to shut outsiders out and paint doomsday scenarios.