Startup laws in European countries are taking a page from the U.S. Seven EU countries have modified their laws to increase employee ownership in startups to compete with the U.S. in attracting both talent and investment while other countries are lagging behind, according to a report by venture capital firm Index Ventures.
Employee ownership in startups played an important role in Silicon Valley’s success, however, Europe’s startup ecosystem has been impacted by bureaucracy and taxation among other restrictions.
Germany, France, Portugal and the U.K. lead European countries in making changes that match or exceed those of the U.S., while Finland, Switzerland, Norway and Sweden landed lower in the Index report rankings.
In 2019, over 500 startup founders and CEOs from different European nations joined hands for a campaign called “Not Optional” to make a difference in the current laws that decide employee ownership. When an employee owns shares in the company or the right to the value of shares, it is known as employee ownership and can take many forms and arrangements.
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Prior to the latest changes in startup laws in Europe, the U.S. had the ability to offer more flexibility to employees in terms of employee ownership which led to loss of talent for European firms.
The European Union needs a coordinated industrial policy, rapid decisions and massive investment if it wants to keep pace with the U.S. and China economically, former Italian Prime Minister and economist Mario Draghi said in the report last month.
The newest rankings have the U.S. in the fifth position with Latvia, Estonia, Lithuania, Canada ranking higher in strike price, employee tax rate and employee taxation. The methodology used by Index Ventures reviewed and compared 20 European countries and four others outside of the EU.
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If Europe wants to compete effectively with the U.S., it must focus on the real prize: creating the right conditions to foster European champions. After years of policy stagnation, momentum for change is building, Financial Times reported in 2020.