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October 14, 2024

DeepL, Personio, Index, Seedcamp call for sweeping reform to pan-European business laws

The founders and VCs hope for "the most pivotal change in the startup ecosystem in a generation"

Zosia Wanat

3 min read

Leading European scaleups and VC firms are calling on European policymakers to create a new single, pan-European legal entity which would help companies operate and scale across 27 EU countries. 

The list of companies supporting the proposal include the founders of AI translation tool DeepL, business planning platform Pigment, payments operator Wise, and HR techs Remote and Personio, as well as GPs of VCs Seedcamp and Index Ventures. 

In an open letter they’re asking for the creation of an “EU Inc” legal entity under the so-called 28th regime — which would allow startups to follow one pan-European set of business rules that would apply across the bloc. The new structure, which countries could voluntarily opt into, would help to standardise investment processes, simplify cross-border operations, and create a unified employee stock options framework. 

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This, the letter says, would help European startups to scale, attract more capital and have a better chance of becoming a breakout success.

“In the startup world, momentum is everything. Anything that slows you down doesn’t just slow you down – it kills you by stopping you from reaching escape velocity,” says Andreas Klinger, an investor at Prototype Capital and one of the leaders of the initiative. “Despite the world-class talent, global ambition and unique strengths of the European startup ecosystem, it’s still absurdly hard to build here. EU Inc is about removing those artificial constraints and allowing our startups to truly accelerate.”

The group behind the initiative hope to gain momentum with the petition and reach “a critical mass” of signatures before the new European Commission kicks off in December — pushing it to the top of policymakers’ priority list. 

The 27 markets challenge 

For years, the European startup community has been complaining about the fragmentation of the continent’s market. If startups want to scale within the EU they have to adjust to 27 different tax regimes, business codes and employment rules. For investors, due to tax and legal reasons, it’s often challenging to back entrepreneurs from another European country. This, entrepreneurs say, stops European companies from scaling and makes the European startup ecosystem less competitive than, for example, the US. 

With the petition, the founders and investors hope to build momentum for introducing the new set of rules, as the new term of the European Parliament has just started, and the new European Commission is approaching. It also aligns with Commission president Ursula von der Leyen’s priorities for the next five years, which include bolstering investment and improving how the single market functions. 

“There's political will,” says Klinger. “I think over the last year, even European politicians woke up to the fact that we are lagging behind…. And it's becoming a reality, even in Brussels. And the European startup ecosystem is one of the forces which could change this,” he says.

“We've been working on features of the problem for so many years: stock options, solvency law, employment law. But now for the first time, we're talking about the core problem, which is actually corporate law. And corporate law is older than the internet — so how could it regulate innovation?,” says Simon Schaefer, the founder of a tech campus Factory Lisbon, another backer of the EU Inc proposal.

“This is the big chance that we have: we're tackling the core of the problem, and if that is recognised, then we have a chance to fix all the features that are attached to it. So we really believe that this is a game changer, if done right”.

“We could really, very realistically, within the next few years, bring about the most pivotal change in the startup ecosystem in our generation,” adds Klinger.

Zosia Wanat

Zosia Wanat is a senior reporter at Sifted. She covers the CEE region and policy. Follow her on X and LinkedIn