Answers to the future of European start-ups: The EU Inc. – Against bureaucracy and difficulties in raising capital

Europe is falling behind: Shocking figures show why radical start-up reform is now overdue

 Only eight percent of global growth companies are based in the EU, while around 60 percent are located in North America.

While the US and China dominate the global tech landscape, Europe is in danger of losing ground in the innovation race. The figures are alarming: significantly less venture capital, a lower density of growth companies, and a dramatic backlog in patent applications paint a picture of a continent that isn't realizing its potential. The cause is largely homegrown: a fragmented internal market that forces founders to navigate the jungle of 27 different national legal systems, unnecessarily complicating and increasing the cost of expansion and investment.

But an ambitious initiative could fundamentally change the game: "EU Inc.", also known as the "28th Regime." The vision is a unified, pan-European legal structure that would enable startups to digitally establish themselves within 24 hours for less than €100 and grow seamlessly across the EU—without having to establish a new subsidiary for each country. Driven by a powerful coalition of prominent founders such as the CEOs of Personio and DeepL, investors, and supported by high-ranking politicians such as Mario Draghi and EU Commission President Ursula von der Leyen, the proposal has already found its way into the European Commission's official work program. It is a crucial attempt to reduce bureaucratic hurdles, mobilize European capital, and secure the continent's technological sovereignty in an increasingly polarized world.

Why is EU Inc. necessary at all?

The answer lies in the fragmented structure of the European startup market. While a startup from California can easily expand and raise capital in any American state, European founders must navigate 27 different legal systems if they want to scale across the EU.

This fragmentation has measurable consequences. Only eight percent of global growth companies are headquartered in the EU, while around 60 percent are located in North America. The figures for venture capital are even more dramatic: On average, venture capitalists invest around three times as much capital in the US as in Europe. Between 2019 and 2024, annual venture capital investments in the EU averaged $68 billion, compared to $221 billion in the Americas.

What is the current situation for European start-ups?

The figures paint a worrying picture. Germany, Europe's largest economy, reached a record high in 2024 with 22,400 corporate insolvencies—the highest level since 2015. The increase among young companies is particularly alarming: startups up to two years old recorded an increase in insolvencies of almost 40 percent.

The dependence on foreign investors is dramatic: One in two European startups depends on US investors. For every company with a lead investor from Europe, there is another company with one from the US. This dependence is less pronounced in other regions – in the US and China, investors from their own country lead eight out of ten financing rounds.

Europe is continually losing ground. While the EU increased its R&D investments by 32 percent since 2019, the US increased its spending by 69 percent and China by 54 percent. In terms of patent applications in the high-tech sector between 2019 and 2023, China reported 1.7 times more than the US and even 7.6 times more than Europe.

What exactly is EU Inc. and how does it work?

The EU Inc., also known as the "28th Regime," is a planned pan-European legal form specifically for startups. It would function as a single European GmbH, existing alongside national legal forms such as GmbHs, SARLs, and SRLs, but equally recognized throughout Europe.

The basic principles comprise four pillars: First, a uniform legal form under EU law that can operate cross-border without having to establish a separate subsidiary in each country. Second, a central, digital register for incorporation and administration online via an EU register, ideally in English. Third, standardized investment documents such as term sheets, participation agreements, and SAFE notes that are recognized everywhere. Fourth, an EU-wide employee participation program with standardized stock options for the whole of Europe.

The vision is ambitious: A startup should be able to register within 24 hours for a fee of less than €100, entirely digitally, without a notary appointment, and without a minimum capital requirement. Andreas Klinger, one of the main initiators, aptly describes the concept as "Delaware Inc. meets Stripe Atlas meets Y Combinator SAFE."

Who is behind the initiative and what support is available?

The EU Inc. initiative was launched in late 2024 by a coalition of prominent founders and investors. The main initiators include Austrian investor Andreas Klinger (Prototype Capital, former CTO of Product Hunt), Philipp Herkelmann, Simon Schaefer, and Vojtech Horna. Andreas Klinger brings extensive experience—he was a founding member of Product Hunt, VPE at CoinList, Head of Remote at AngelList, and CTO at On Deck.

The support is impressively broad: More than 16,000 people have signed the petition, including prominent founders such as Hanno Renner (Personio), Jarek Kutylowski (DeepL), Verena Pausder (Startup Association), and the founders of Revolut and Bolt. High-ranking politicians have also signaled their support, including former central bank governor Mario Draghi and former Italian Prime Minister Enrico Letta.

Particularly noteworthy is the support of established law firms such as Cooley, Orrick, and Osborne Clarke, which are helping to work out the legal details. EU Commission President Ursula von der Leyen already referred to the "28th regime" in Davos in January 2025.

What is the current status and schedule?

The initiative has already made concrete political progress. In May 2025, EU Inc. became part of the European Commission's official work program as part of the "EU Startup and Scaleup Strategy." The Commission has established a dedicated working group with which the initiators are in regular contact.

The timeline is ambitious but realistic: The European Commission is expected to publish its legislative proposals in the first quarter of 2026. After consultations in the European Council and Parliament, the EU Inc. is expected to enter into force in 2027. Andreas Klinger is optimistic: "In the best case scenario, the first company in the new legal form could be launched as early as 2028."

A public consultation by the European Commission, in which stakeholders could contribute their opinions on the planned initiative, ran until the end of September 2025. In parallel, the initiators are working to mobilize political support at the member state level to ensure that the final legislative proposal is sufficiently ambitious.

What role does Mario Draghi’s report play in this context?

Mario Draghi's report on the future of European competitiveness, published in September 2024, provides an important policy foundation for the EU Inc. initiative. The report identifies closing the innovation gap with the US and China as a key challenge and calls for a new industrial strategy for Europe.

Draghi's analysis dramatically demonstrates how Europe is falling behind: Productivity in the EU continues to lag behind the US and is improving more slowly than in Asian markets. The approximately 400-page report contains 170 recommendations and estimates that the digital, social, and sustainable transformation of the EU economy will require approximately €800 billion in annual investment.

Draghi warned emphatically that European governments have "failed to grasp the gravity of the situation." His report particularly emphasizes the removal of regulatory barriers to innovation and the reduction of the fragmented internal market structure as key obstacles to growth. This diagnosis aligns perfectly with the goals of the EU Inc. initiative.

How is the German start-up scene reacting to the initiative?

The reaction in Germany has been overwhelmingly positive. Verena Pausder, who has served as Chair of the German Startup Association since December 2023, actively supports the initiative. She emphasizes: "An EU Inc. would reduce barriers, enable growth across national borders, and thus multiply the innovative power of our continent."

The German startup association, which unites 1,200 members, sees EU Inc. as part of a comprehensive innovation agenda. Pausder, who brings diverse experience as an entrepreneur, investor, and co-founder of FC Viktoria Berlin, argues for an "entrepreneurial awakening" for Germany.

Prominent German founders also support the initiative. Hanno Renner, CEO of the Munich-based billion-euro startup Personio, demands: "We must become independent of the US and China, especially when it comes to technological innovations." He complains that, due to the fragmented European legal situation, Personio must maintain seven locations in Europe with a correspondingly large number of individual subsidiaries.

What specific problems does EU Inc. solve?

EU Inc. addresses several fundamental problems of the European startup ecosystem. First, the complexity of founding a company: While startups can be founded quickly and digitally in the US, many European countries still require notary appointments, minimum capital, and complex bureaucratic procedures.

Second, the investment hurdles: Katharina Wilhelm of the international venture capital firm Index Ventures explains: "Many angel investors and international funds are now wary of countries like Germany – simply because of the high costs and legal complexity." Investors must conduct separate legal and tax assessments for each country.

Third, there are the barriers to scaling: A startup from California can easily expand into any American state, while European companies have to establish separate subsidiaries in each country. This not only slows growth but also creates significant costs and administrative overhead.

Fourth, employee participation: Standardized stock option programs are difficult to implement in Europe due to different national regulations, making it more difficult to attract and retain talent.

Our EU and Germany expertise in business development, sales and marketing - Image: Xpert.Digital

Industry focus: B2B, digitalization (from AI to XR), mechanical engineering, logistics, renewable energies and industry

More about it here:

• Xpert Business Hub

A topic hub with insights and expertise:

• Knowledge platform on the global and regional economy, innovation and industry-specific trends
• Collection of analyses, impulses and background information from our focus areas
• A place for expertise and information on current developments in business and technology
• Topic hub for companies that want to learn about markets, digitalization and industry innovations

What obstacles and criticisms are there?

Despite broad support, there are also skeptical voices. One major criticism concerns the complexity of implementation: The harmonization of corporate law, insolvency law, labor law, and tax law between 27 member states is an enormous regulatory undertaking.

Some observers fear that the EU Inc. could be diluted in practice by compromises between member states. The history of the European Company (SE) shows that pan-European legal forms do not automatically lead to widespread adoption unless they are substantially simpler than national alternatives.

Tax issues remain complex: While the EU Inc. legal form is to be harmonized, taxation and labor law remain fundamentally at the national level. This could result in many of the current problems persisting even if the legal form is standardized.

Time constraints are also relevant: Even with successful political implementation, it will take years before the first EU Inc. can be established. In the fast-moving startup world, this may be too late to catch up with the current lag behind the US and China.

What is the EU Commission’s position on the initiative?

The European Commission has not only embraced the EU Inc. initiative but positioned it as a central component of its startup strategy. Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy, explains: "Companies founded in Europe must grow in Europe."

The Commission plans a comprehensive package of measures in five areas: promoting an innovation-friendly environment, improving financing, supporting market uptake and expansion, attracting and retaining top talent, and facilitating access to infrastructure and networks.

Of particular interest is the "Blue Carpet" initiative (2025-2026), which focuses on entrepreneurial education, tax aspects of employee share ownership, and cross-border employment. The Commission also intends to promote fast-track visas for non-EU founders.

The planned "European Business Wallet" is intended to enable seamless digital interactions with public administrations across the EU through a unified digital identity. This would complement EU Inc.'s vision of a digital infrastructure.

What role do international investors play?

International investors, especially from the US, play a crucial role in the European startup ecosystem. However, this dependence is problematic: US investors such as Sequoia, Bessemer Ventures, and Andreessen Horowitz primarily invest in more established European startups that require larger amounts of financing for their growth.

The figures illustrate the imbalance: Over a quarter (27 percent) of investments in European startups come from the US, while European investors account for only seven percent of deal volume in the US. Between 2020 and 2024, around 60 percent of European startup funding came from foreign investors.

This dependence poses strategic risks: External investors may have different priorities than European stakeholders. They could relocate successful European startups to their home markets or withdraw their investments in the event of economic tensions.

EU Inc. could provide a solution here: Standardized investment documents and simplified legal structures would make it easier for European investors to invest across borders. This could promote the development of a stronger pan-European VC market.

How does the situation differ in different European countries?

Europe's fragmentation is clearly reflected in the differences between countries. France has overtaken Germany as Europe's second-largest startup market: in 2024, French startups received approximately $7.5 billion, while German companies received approximately $6.7 billion. The United Kingdom remains the undisputed leader with $13.1 billion.

These differences reflect different regulatory environments. France has implemented targeted startup-friendly reforms in recent years, while Germany struggles with bureaucratic hurdles. Paradoxically, Brexit has not significantly harmed the UK, as London remains an attractive financial center for international investors.

The structural problems are particularly pronounced in Germany: European pension funds invest only 0.01 percent of their capital in venture capital firms, significantly less than in the US. In German-speaking countries, this share is actually declining and is below the 2016 level.

The German government's planned €12 billion WIN initiative is intended to provide new impetus, but it will take years for the ecosystem to benefit. EU Inc. could have a faster impact because it addresses regulatory rather than just financial hurdles.

What impact would EU Inc. have on competitiveness?

EU Inc. could help Europe avoid completely losing ground to the US and China. Currently, the gap is dramatic: The US venture capital market accounts for 0.7 percent of GDP, while the seven billion euros in German startup investments account for only about 0.2 percent of German economic output.

Europe has fundamental strengths that could be leveraged with better structures: excellent research landscapes, strong SMEs, expertise in industrial automation and power semiconductors. The region is also a leader in certain niche technologies and has a GDP comparable to the US.

EU Inc. could offer advantages, especially in deep tech and robotics. Andreas Klinger argues that Europe, with its production networks and computer vision expertise, would actually be a better location for robotics companies if legal and financing barriers were removed.

A unified European system could also stop the exodus of European founders to the US. The proportion of Europeans founding businesses in the US has risen to approximately 11 percent in recent years. Daniel Khachab, founder of the restaurant ordering app Choco, urges swift action: "I see EU Inc. as a sign of hope, which we need in these times when everyone is thinking about leaving the EU."

What technical and practical challenges need to be solved?

The practical implementation of EU Inc. requires significant technical infrastructure. A central EU register must be created that is compatible with national systems. This is particularly complex because different countries use different IT systems and data standards.

The standardization of investment documents (EUFAST) is legally challenging. These documents must be compatible with different national capital market laws while remaining simple and standardized. International law firms are already working on drafts, but the final coordination with 27 national legal systems will be complex.

KYC (Know Your Customer) and AML (Anti-Money Laundering) processes must be harmonized. Currently, each EU country has its own procedures, complicating cross-border business. A unified EU Inc. would require standardized yet legally compliant procedures.

Integration with existing banking and employment platforms is also challenging. Startups need to be able to work seamlessly with various national banks, payroll providers, and HR systems without the complexity of current multi-country setups.

How could EU Inc. transform the European startup ecosystem?

EU Inc. could bring about a fundamental paradigm shift. Instead of 27 fragmented national markets, a unified European startup market with 450 million consumers would emerge. This would provide European startups with a critical mass comparable to the American market right from the start.

The "flywheel effect" could accelerate: Easier startups lead to more startups, which attracts more investors, which in turn strengthens the ecosystem. Andreas Klinger describes this as a solution to systematic disadvantages that led to Europe losing Web 2.0 due to media, language, and investor fragmentation.

Talent mobility would improve dramatically. With standardized stock option programs, European startups would be able to more easily attract and retain top talent from different countries. This is especially important because, while Europe has excellent universities, many graduates migrate to the US.

Capital markets could become more integrated: If investors no longer have to undergo separate due diligence processes for each country, European VC funds could invest more efficiently across borders. This would increase capital flows within Europe and reduce dependence on US investors.

What are the long-term strategic implications of the initiative?

EU Inc. is more than just a regulatory reform—it's part of a broader strategy for European technological sovereignty. At a time when geopolitical tensions between the US, China, and Europe are increasing, the ability to develop its own technology champions is becoming increasingly strategically important.

The initiative could help Europe create its own "Delaware Inc. equivalent." Delaware attracts a disproportionate share of American companies due to its business-friendly laws. A successful EU Inc. could have a similar effect, attracting international companies to Europe.

This could be particularly relevant in the field of artificial intelligence. While the EU has already approved a three-billion-euro innovation package for AI startups, the EU could offer additional structural advantages to Inc. European AI companies could benefit from stricter EU data protection laws while simultaneously scaling more easily.

Integration into broader EU digital policies is also significant. EU Inc. fits into initiatives such as the Digital Decade, the Digital Services Act, and the planned AI Regulation. Together, these regulations could position Europe as an alternative location to the US and China.

The time dimension is critical: If EU Inc. succeeds, it could help Europe avoid missing out on the next technology wave (Web 3.0, advanced AI, quantum computing). If it fails or arrives too late, Europe could permanently lose its role as a technology developer.

The EU Inc. initiative thus represents more than just bureaucratic simplification – it is an attempt to fundamentally strengthen Europe's position in the global innovation landscape and secure long-term technological sovereignty.

☑️ Our business language is English or German

☑️ NEW: Correspondence in your national language!

Konrad Wolfenstein

I would be happy to serve you and my team as a personal advisor.

You can contact me by filling out the contact form or simply call me on +49 89 89 674 804 (Munich) . My email address is: wolfenstein ∂ xpert.digital

I'm looking forward to our joint project.

☑️ SME support in strategy, consulting, planning and implementation

☑️ Creation or realignment of the digital strategy and digitalization

☑️ Expansion and optimization of international sales processes

☑️ Global & Digital B2B trading platforms

☑️ Pioneer Business Development / Marketing / PR / Trade Fairs

AI & XR 3D Rendering Machine: Fivefold expertise from Xpert.Digital in a comprehensive service package, R&D XR, PR & SEM - Image: Xpert.Digital

Xpert.Digital has in-depth knowledge of various industries. This allows us to develop tailor-made strategies that are tailored precisely to the requirements and challenges of your specific market segment. By continually analyzing market trends and following industry developments, we can act with foresight and offer innovative solutions. Through the combination of experience and knowledge, we generate added value and give our customers a decisive competitive advantage.

More about it here:

• Use the 5x expertise of Xpert.Digital in one package - starting at just €500/month