Founders across Europe are sounding the alarm as a regional skills shortage threatens to undermine their startups’ growth.
As demand for expertise in AI, machine learning and data grows, unfilled roles are becoming an expensive liability. Every vacancy can delay product launches, stall expansion plans and ultimately cost startups revenue, turning day-to-day recruitment issues into an existential threat.
For early-stage companies in particular, cutting costs is both a financial and strategic imperative: missed hires can mean slower execution and falling behind better-resourced competitors.
One in three founders say access to skilled workers remains their single biggest barrier to scaling, according to TechNation’s 2025 report “Unlocking the UK's Growth Potential”.
But how real is the labour shortage and how much is perception brought about by a competitive hiring market? Recent data suggests the pressure is intensifying. According to Manpower Group’s 2026 Global Talent Shortage report, around three in four employers in the information industry are struggling to fill roles, making it one of the hardest-hit sectors globally.
A deeper look at the jobs landscape paints a more nuanced picture, with shortages varying by sector, geography and skill set.
Felix Steffens, CEO of global HR platform WorkMotion, and Jule Reich, Head of People at software developer Heyflow, sat down with Sifted to discuss the realities of labour shortages and what they mean for companies looking to scale.
The most crucial talent is kept by big companies. But that talent also understands the market and tends to hold on to jobs.
The reality of the talent shortage
The consequences of Europe’s ongoing labour shortage for the region’s startups have compounded in recent years, says Steffens.
“Access to top talent has been the third biggest constraint after growth capital, which is always hard to get, and the tax environment,” he says. “I know many founders, including myself, are very critical of government bodies and how they approach tax. But top talent is scarce and it’s one of the critical things you need in order to grow fast.”
A report by Boston Consulting Group found countries such as Spain, France and the UK had a talent surplus in 2020. However, that advantage is steadily disappearing, with the region projected to face widespread shortages by 2030, suggesting the current hiring squeeze is just the start of a longer-term structural shift.
Much of Europe’s top talent work at larger corporations, who can offer employees far more than growing startups, says Reich.
People have moved away over the last few years to increase their work-life balance and quality of life.
Bigger companies can typically offer higher salaries, stronger job security and clearer career progression, making it harder for startups to persuade candidates to take a risk on a scaling business.
“The most crucial talent is kept by big companies. But that talent also understands the market and tends to hold on to jobs. They’re not very open to new opportunities and interviews,” she tells Sifted.
“We’re located in Germany, for example, and the market isn’t as attractive as it used to be. People have moved away over the last few years to increase their work-life balance and quality of life in general.”
Labour shortages across Europe have been sparked by recent technological innovations, with AI increasingly becoming a core component in everyday workflows.
According to ManPower Group’s report, AI model and application development and AI literacy are the two hardest skills to find across the workforce. Engineering and sales and marketing skills ranked third and fourth hardest to find.
What does this mean for companies and how can they adapt?
The consequences of the talent shortage are already showing up in how startups operate — and how fast they can grow. Unfilled roles don’t just slow hiring plans; they can delay product development, push back market entry and reduce a company’s ability to compete.
For early-stage companies with limited runway, these delays can be existential. A missing engineer might mean a postponed launch; a missing salesperson could mean lost revenue at a critical moment.
“If you don't fill your roles, you're simply missing out. Your competition is much faster,” says Steffens.
“If you want to open in a new market but can’t find sales representatives, you're delaying the market entry. If you’re committing to a certain product but can’t find the tech talent, you're missing out on your launch. These are things that have ramifications, which can later lead to not getting funding because your investors are disappointed.”
I don't know if Heyflow would be where we are if we hadn’t hired internationally.
Startups are responding by widening their search beyond local markets. Reich says hiring remote workers from abroad has enabled Heyflow to secure top talent.
“I don't know if Heyflow would be where we are if we hadn’t hired internationally. Over a third of our staff are international. This is very critical talent in the software industry, marketing and sales sector and customer support.”
Almost the entirety of WorkMotion’s employees work remotely from abroad, a recruitment strategy which has allowed the company to scale faster than it would have by sticking to the local market.
“Since we’re located in Berlin, it was a bad idea to limit ourselves to that location. We know there’s a certain ‘Berlin bubble’, for example, but that would still limit us. We need talent to deliver as soon as possible in order to stay competitive. That's just not possible if we stay within Germany.
“We’ve discovered Egypt as a hiring market. Egypt has a very young population with amazing talent, and a country you might not expect to find that much skilled talent especially in sectors such as AI.”
When I first started hiring internationally, people would question how they would get paid and what the work relationship would be like.
Expanding into international talent pools allows startups to bypass local shortages, but it also introduces new operational complexity, from compliance to payroll and employment law.
To manage this complexity, more startups are turning to Employer of Record (EOR) providers — third-party organisations that legally employ staff on a company’s behalf in different countries.
This model allows companies to hire globally without setting up local entities, significantly reducing the time and cost required to access international talent.
“When I first started hiring internationally, people would question how they would get paid and what the work relationship would be like,” says Reich. “When I then told them they could stay wherever they want through an employer of record, they didn’t know what I meant. But now that idea has become more established.”
Going forward, AI will reshape the labour market rather than necessarily narrowing the talent shortage. “A lot of people are thinking about how AI will change the workforce. AI is just reshaping the job demand, especially for administrative roles that might disappear because of it,” says Steffens.
For founders, the implications are clear: waiting for local talent markets to improve is no longer a viable strategy.
As competition for skilled workers intensifies, companies that can access talent globally — and move quickly to secure it — will have a decisive advantage. Those that don’t risk falling behind.
“But on the flip side there are so many new AI specialist roles, such as autonomous vehicle engineers that we didn't have 10 years ago. These types of jobs are emerging out of nowhere and the demand is extremely high.”
