While vast improvements have been made in national infrastructure for startups—particularly tech startups—the EU remains lacking as an environment for innovation and tech startup growth. Many European businesses still see Silicon Valley as an ultimate destination, and talent leaving for American threatens to create a ‘brain drain’
Given the current dominance of the United States, the growth of Chinese tech, and the lack of an obvious focal point, can Europe really compete with Silicon Valley? The answer is a resounding yes but what investment and sacrifices need to happen on the part of the European Union to make that a reality?
Retaining tech talent
Few places in the world seem to monopolise one industry like Silicon Valley does with technology. The San Francisco Bay Area is the home of many companies which dominate large parts of our lives, from Google and Meta to Apple and Nvidia. Much of the hardware we own and software we use on a daily basis is derived from Silicon Valley, and it’s where a huge amount of investment into tech startups is made. As a result, it’s become a kind of mecca for many entrepreneurs and small tech businesses around the world.
Yet the picture that’s painted of Silicon Valley would make you think that no other substantial tech startup scene exists. The reality is considerably more nuanced, with tech startups constantly emerging all over the world. Indeed, almost every country looking for an economic reboot speaks about making their country the Silicon Valley of its specific region, by investing heavily in startup infrastructure and tools for business growth. This has borne fruit in a number of places, from France and the Netherlands to South Korea and Singapore.
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The trick for all of these nations is not necessarily building an environment that benefits tech startups, but keeping them within your country or region. Ultimately, the pull of Silicon Valley will always exist in the same way that footballers always dream of playing for Real Madrid or Barcelona. Regardless of the financial benefits of being there or the state that Silicon Valley is in, it feels like the place to be, and the culmination of a journey towards tech startup success. So what can the EU in particular do to combat this, and keep tech talent here at home?
The EU Silicon Valley
A number of CEOs from leading European tech companies have banded together to propose one solution: EU Inc. In an open letter, they have made the case for an EU-wide entity dedicated to improving conditions for startups across Europe, rather than relying on the efforts of individual countries. This is seen as more practical and useful as a major issue for European tech businesses is EU regulations, which apply across the bloc regardless of the benefits offered by particular countries.
The interesting part of this proposal is that the signatories aren’t asking for EU-wide legislative changes. Instead, what they propose is the use of the EU’s 28th regime, which allows for legal frameworks to be established that member countries can opt into. This would provide a form of standardisation across the EU without imposing any new rules on countries. The hope is that a significant proportion of major European economies would opt into such a framework, creating an environment for cross-European cooperation.
One major advantage of this model would be a way to standardise and source investment from across the EU, rather than investment being limited to venture capitalists or monetary funds within individual countries. Startup infrastructure could also connect and support entrepreneurs across borders, while measures could be taken to create employee stock options, both providing increased benefits for employees and supporting rapid growth. Providing better investment to scale up startups is often seen as a major issue in Europe, and is something France in particular has focused on improving. For more information see our article on The French Tech Startup Ecosystem.
Opportunities for EU startups
All of this is not to say that tech businesses can’t thrive in Europe at the moment. Several countries have made huge strides towards creating competitive, self-sustaining startup economies, particularly in the tech sector. The La French Tech scheme has been the most successful of these, with France repeatedly sending the biggest non-US contingent to the Consumer Electronics Show in recent years thanks to its burgeoning ecosystem. Multiple specialised tech hubs in cities across the country have provided infrastructure, resources, connections, and routes to investment for a variety of French startups.
Related article: The best cities for tech startups in France
What this needs to represent is a platform for further and more widespread improvement. While funding from schemes such as Horizon Europe has helped innovative businesses across the bloc, more sustained and accessible funding sources are required, as well as a means to attract more independent investors. While the infrastructure provided in France has been a huge boost to local businesses, funding and regulations could both help to increase investment from and cooperation with neighbouring countries.
There are still potential barriers to be overcome, but tech regulation shouldn’t be seen as one of these. Because of fears of being locked out of such a large market, US tech companies have largely bent to the will of the European Union so far. As a result, the prospect of data privacy or other regulations stifling businesses should no longer be seen as the major concern they perhaps once were.
What will be interesting is how the EU resolves to address this issue in a way that benefits the whole European community. The obvious answer may be to implement new directives and funding sources which most immediately benefit countries with an existing tech startup infrastructure, such as France or the Netherlands. But the EU has already battled accusations of economic bias towards its largest ‘engine economies’ for many years. Measures which do not encourage investment and innovation across the bloc would only lead to a brain drain between European countries rather than to Silicon Valley.
EU Inc. represents one approach to solving this issue, allowing countries to opt into regulations and structures that would benefit startups. But it’s possible that more flexibility and more funding opportunities will be required to redress the balance, and afford equal or greater growth to smaller EU economies. The issue the EU will have to solve is how to maintain existing tech success stories like France, while also encouraging investors to look outside of Paris or Berlin. There’s no lack of entrepreneurial talent or desire across the continent—the EU just won’t want people moving to show it off.
