European Commission: With startup friendly regulation, funding follows

January 15, 2021

For the last two weeks, the tech community has has been buzzing about the European Innovation Council’s startup investments (between 15-25 € million). The objective of the fund is to bridge the existing funding gap between Europe and the US and China as well as boosting innovation and job creation. Yet, while we believe the objective of the fund has merit, we wonder if policy makers are best at predicting startups’ success.

Indeed, policy makers are experts in creating policy frameworks  that allow for startups to thrive. In turn, experience shows that the right policy measures incentivises private investment. These include: startup visas to ensure we attract  the best talent to develop innovative solutions; harmonisation in regulation across the EU, so that startups don’t have to scale-up 27 times; stock option reform; and a competition framework that will put startups on an equal footing with legacy industries. No-one should succeed because they “have always succeeded” but only because they offer a superior product, better choice, or consumer benefit. 

While it is true that the US VC ecosystem is significantly larger, it also started developing 10 years before the European ecosystem. Recent funding data suggests that the European Venture Capital ecosystem is growing significantly, having finished 2020 with record rounds of funding despite the pandemic. Should this growth trend continue, Europe will be head to head with the US in the following years. By ameliorating the regulatory framework, once that incentivises startup growth, funding will follow. 

At Allied for Startups we encourage policy makers to create a regulatory framework that increases startups’ chances to succeed. Startup founders excel at choosing the right innovations and ensuring they have the financial liquidity they need. Policy makers should focus their efforts to make legislation for the digital economy startup-friendly!