The European economies are stalling. EU GDP is mostly flat over the last 6 years as the rest of the world continues to grow. But this is not a talent problem. Europe and the UK are home to some of the best educational institutions on the Planet and they are producing incredible founders.
So what can European countries do to stop all their best talent leaving?
1. Seed Funding Not Tax Breaks
Programs that write checks for founders, like Innovate UK, are great and fill-in for absent angel investors but tax incentive schemes like SEIS are problematic, in my opinion. They cost founders a bunch of time with verifications before they raise and change the motivation for some investors, as they want short term tax relief versus a big, shared win.
2. Get Out of Founders Way
In the US, you can download the SAFE document for free from Y-Combinator’s website and start fundraising for your startup immediately without needing to spend time and money on a lawyer. By contrast, in the UK, similar documents like the ASA will usually cost over £1k and founders have only 6 months to progress to a priced round. This causes huge problems for founders, when the company is just getting started.
3. Applaud the Winners
In Norway, the Socialist Party maintains a “Wall of Shame” calling out founders who have left the country due to taxation on unrealized gains. This is the exact wrong approach. Successful startups create thousands of jobs, and if you want those jobs to be in your country, the next generation of founders need to see they will be helped by the government, not reviled or harassed.
Europe has all the ingredients to be a wonderful place to build, but politicians have made it too hard for founders. I hope that changes.
Sterling Road invests in idea stage and pre-seed B2B startups based in the US, Canada and UK.
