US startups look to EU to regulate their competition? Think twice — it could lead to even more competition.

I read an interesting Pando comment by Paul Carr today describing a somewhat strange situation:

“While commentators in Europe are praising the US for its ability to build seemingly unstoppable tech juggernauts, American industry insiders are equally impressed with Europe. For the continent’s willingness to regulate and rein in those exact same US tech giants.”

The main argument is that due to the political and electoral system of the European Union it is more probable that even big players like Uber, Facebook, Google, etc. “finally get their ass handed to them by lawmakers” in Europe. Exactly what entrepreneurs and industry leaders in the US would love to see happen, according to Carr.

This hope and hypothesis comes with a catch — on both sides of the Atlantic.

Successful startups are looking to relocate to the States.

Like Carr I’ve been talking to “colleagues …, tech entrepreneurs and heads of various industries” in Germany too (sorry for bitching a bit about sources and significance here). My main question to investors (e.g. Lendstar, WestTech), industry leaders (e.g. at Axel Springer, ey), lawyers, professors, entrepreneurs and their consultants was:

Why should European startups stay in Europe and not run as soon as possible?

I can’t speak for whole of Europe or Germany, but for the people I talked to I got the similar answers time and again: Run! And not only due to the common arguments: More investors, higher valuations and a less scattered market, but especially for the US — surprise, surprise — less regulations, a more business-friendly environment and thus market advantage operating in Europe with an US HQ.

This is the attitude now, before we see any further tightening of regulations! The chances are good that we will see more and more startups turn their backs on Europe once they become successful. This leads to the hypothesis:

EU regulation won’t solve any of the dominance and/or competitive issues in the US, they will amplify them.

Some of these companies relocating to the US will be, and actually do, found and start with national and EU subsidies. With this cheap and often non-equity funding, startups can make the border crossing even without venture money — meaning a good advantage over US startups when it comes to maturity, TAM including established traction in Europe, equity hold by founders and eventually attractiveness to investors.

More regulation in Europe, means more subsidized European companies heading towards the US! All in all: I don’t see any advantage for US entrepreneurs at all. So watch out what you wish for ;)

And — as is so often the case — Europe’s decision makers will jealously look to the US and ask how the heck they managed to lure all this formidable startups and their founders away from Europe…

Conclusion: Don’t waste your time whining. Be the big fish in whatever pond or die trying!

Carr’s article in Pando Daily: America tech companies increasingly look to the EU to regulate their rivals

This article was originally published on Sven’s Blog.

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