Why we all need a single startup market in Europe now

Europe has a potential market of 500 million customers but European entrepreneurs can’t take full advantage of its potential, because of fragmentation in the various member states and operational complexity.

But what if suddenly startups could operate within Europe like their US competitors can do in America? What if startups could operate within a unique, simple and competitive legal framework for corporate, labour, tax/fiscal incentives, stock options, bankruptcy matters?

A lot of the friction that makes scaling in Europe difficult for startups would disappear.

When we started to fly this idea at the Unicorn Forum and the Founder Forum, we called it a ‘Single Startup Market’: a new corporate regime designed to build a bigger, more robust and fluid market for innovation in Europe.

The vast majority of startups in the US have a simple and defined set of rules. Delaware based, standard entities, with standard capital structures, classes of shares, option plans and pretty standard legal frameworks. Operating in the Single Startup Market should as simple as it is to operating from Palo Alto a Delaware company. Sort of a ‘Delaware’ of Europe.

All the efforts of European policy makers are doing to armonize rules are important and should be pursued as much as possible, however they will take years to complete. But startups don’t have so much time: global competition is fierce and challenges are scaling.

This idea came about from the experience we had in Italy in the past few years.

In 2012 President Monti’s Government issued the Italian Startup Act. The Government took notice that the germs of a new startup ecosystem were born in Italy and there was the need to quickly create a better environment with more humane beaurocracy and ‘international standard’ corporate tools. But Italy didn’t have much time those days, and neither Premier Monti. The ‘Startup Act’ was released in his last days of government.

Designing a policy that would touch corporate, fiscal, labour laws and regulations would be so complex and take too much time, if such changes apply to every company. A dead end.

There was the need to find a way to quickly hack the system.

The solution has been to create a special regime, accessible to qualified early stage startups (less than 5 years old), with its own public online registry. In Italy if you qualify as ‘innovative startup’ you are on this list where you can enjoy a enter a special set of rules on labour, bankrupcy, tax and several other corporate matters. Plus you have access to ‘things’ that ordinary companies cannot enjoy such as equity crowdfunding, startup visa and many other tools.

So the idea was, what if the same kind hack could be replicated on pan-european scale?

The European Union has gone long ways in armonizing markets, policies, regulations, culture and create a more homogeneous single market, but of course it is a huge challenge and in any case it will take years.

National policy makers, at present, have no sufficient incentives to harmonise their regulations toward a single market at large. But possibly since such policy experiment would touch only a limited number of entities, National entities might consider the Single Startup Market in their best interest.

Startups are today a key resource in Europe to build competitiveness and growth, each smaller innovation ecosystem suddenly would be right into a new Europe. A single legal framework would suddenly bring agility and easier cross contamination for European startups, cultures and ideas, making the overall innovation ecosystem stronger, bigger and more attractive for investors.

And most of all, would create a system to leverage on our strenght in Europe: our diversity.

If you, like me think a Single Startup Market would work for your startup, let us know by signing the Unicorn’s call to policy makers.

Gianluca Dettori, Unicorn Forum