Regulatory ‘friction’ hampering European startups growth, new research suggests
As economic uncertainty continues to impact global tech markets, an abundance of regulatory ‘friction’ poses a serious threat to European startup growth, according to new research published today from Stripe, a financial infrastructure platform for businesses. 1 in 3 startups have considered launching their business elsewhere due to the scale of the compliance burden.
The research – ‘European Tech Voices: perspectives from Europe’s fastest-growing startups’ – is a quantitative and qualitative study conducted by B2B International among nearly 200 Stripe users, including Kry, Alma, and Ticketswap. The report examines the European startup experience from the perspective of fast-growing internet businesses, and their views on how policy and regulation are acting as an enabler and barriers to growth.
“As tech builders across Europe face an increasingly difficult economic environment, it is more important than ever to listen to the voices and needs of the startup community. We wanted to hear directly from businesses using Stripe, as the future generation of European tech leaders, to better understand the realities they’re facing and identify the main obstacles to growth,” said Matt Henderson, international business lead at Stripe.
Strong foundations in European tech, increasingly under strain
European startups recognize the advantages Europe has compared to other global tech markets:
- 73% believe that the depth and availability of talent and the level of education in Europe is an advantage compared to other markets.
- More than half (56%) cite the geographical proximity of different markets as an advantage for both the speed and convenience it enables companies.
But despite these strong foundations, the ‘friction’ caused by complex regulatory procedures and outdated compliance practices are adding pressure on limited stretched resources. Over half (53%) of respondents say time spent adhering to compliance processes is the greatest threat regulation poses to their businesses. Over three quarters (79%) say the time spent on compliance has increased.
The growing disconnect between startups and policymakers
Part of the issue is an emerging mismatch between policymaker and startup communities. 83% of respondents say policymaking is geared towards established companies, and only 12% believe that policymakers understand the realities they are facing.
Rather than hallmark pieces of regulation, the research shows startups want policymakers to focus on policies geared towards reducing friction and saving increasingly valuable resources. For example, out of the practices set out in the EU’s Startup Nation Standard, the commitment to ‘digital first’ was cited as the top priority for smooth startup creation and growth. The Baltic states were called out by the greatest number of respondents (36%) for having the most innovative approach to policy, with efforts among Baltic countries to digitize government processes seen to be driving this perception.
Delivering on startup priorities
Based on learnings and insights from this research, Stripe has outlined five areas policymakers should look to prioritize, in order to ensure startups can survive and thrive going forward:
- Bundle, coordinate, and implement existing policies and initiatives designed to remove obstacles for growth and turn startups into scaleups.
- Activate one-stop shops and provide unified guidance to Europe’s entrepreneurs.
- Increase digitization of government processes involved in forming and scaling a business.
- More structured communication between startups and policymakers to ensure startup priorities and points of view are reflected in policy making.
- Harmonize regulatory regimes, reduce friction and maximize growth.
Henderson adds: “European startups have proven resilient during disruptive periods before, but that shouldn’t lure us into a false sense of security. When it comes to policymaker priorities, the focus has to now turn to reduce regulatory friction for Europe’s internet businesses, to help them turbocharge growth when market conditions improve.”
The full report, “European Tech Voices”, can be downloaded here.
The research consisted of one-hour in-depth interviews carried out in January and February 2022 by B2B International with 10 Stripe users, including Kry, Alma, TicketSwap, Klub, Doctolib, Café, Sunday, and Wollit – representing startups and scaleups across different industries to understand their perspectives and attitudes in detail. This informed the development of a quantitative questionnaire used to validate and measure the key findings. The survey was conducted online between March and April 2022 and was completed by 172 Stripe users from the UK, France, Spain, Ireland, DACH, Italy, the Baltics, Benelux, Scandinavia, Greece, and Eastern Europe.
Stripe is a financial infrastructure platform for businesses. Millions of companies, from the world’s largest groups to the most ambitious startups, use Stripe to accept payments, increase revenue and generate new business opportunities. In Europe, one in two new unicorns is built on Stripe. With dual headquarters in San Francisco and Dublin, the company aims to grow internet GDP.
About B2B International
B2B International is a global, full-service market research firm dedicated to researching business-to-business markets.