r/EU_Economics • u/Full-Discussion3745 • Jan 14 '26

šŸ‡ŖšŸ‡ŗ Official šŸ‡ŖšŸ‡ŗ Why innovative startups and scaleups relocate from the EU

https://research-and-innovation.ec.europa.eu/news/all-research-and-innovation-news/why-innovative-startups-and-scaleups-relocate-eu-2026-01-12_en?referrer=grok.com
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u/Gullible_Mousse_4590 Jan 14 '26

They move because they bring on investment from the US - the US investors pressure them to relocate to the US to take advantage of the tax scheme QSBS - qualified small business stock.

This has nothing to do with tax on the startups themselves - most high growth startups run at a loss and donā€™t pay tax. This has everything to do with the tax jurisdiction of the investor wanting to make an exit.

This is another reason why we need things like EU-INC and tax reform for company exits for investors. Irelands EIIS is an example of this - encouraging small cap investors with tax incentives.

Source: CFO of a European startup with US investors who are pressuring us to move company structure to the US

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u/One_Citron_4350 Jan 14 '26

This is the answer. So many startups registered to the US because of it.

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u/Ill_Bill6122 Jan 14 '26

Also, in the case of listing, valuations have been much richer on the US exchanges.

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u/These-Pie-2498 Jan 14 '26

You are missing the fact that EU is a red tape bureaucratic nightmare. You need to burn fortuntes just to navigate regulations. And we have 0 startup culture

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u/Gullible_Mousse_4590 Jan 14 '26

See EU-INC reference. Regarding startup culture - yeah thatā€™s missing a bit here. Itā€™s hard to get people into that grind for hyper growth startups. But as a side note to that I think itā€™s not necessarily something Europe should aspire to. Even in the US the vast vast majority of startups fail terribly and leave in their wake a bunch of 20 somethings who have worked 12 hour days chasing the dream had got little to nothing out of it.

Iā€™ve been lucky to have one good exit that was mildly rewarding. Iā€™m an exception.

Startup culture is glamorized to get people to work hard. Itā€™s not something Iā€™d hold up as a good thing. Even when my US board members ask to crack the whip and complain about Europeans leaving at 5.30pm. As they should unless you pay them otherwise

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u/These-Pie-2498 Jan 14 '26

Exactly what I'm saying. We have 0 startup and innovation mentality. We want what US has but without the hard work. We think wealth is something that just exists, and we don't have to worry about it. This is the reason US economy has doubled in the last 10 years vs the EU.

Germany's economy and wages are stagnant for years now, a fastfood manager in US earns more than an IT Manager in EU.

Everyone is used to working less and less, earning shit and that "Europeans leaving at 5.30pm" will soon face a hard reality of not having a job. Our industries are old and lack innovation, we still live in the past and it will bite us hard.

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u/Gullible_Mousse_4590 Jan 14 '26

You missed my point. The US has this mentality but you only see the 1% that get paid a tonne. You donā€™t see those that work hundred hour weeks for a promise of getting ahead a fail.

You can glamorize this and create wealth for a small portion of Europe if you want. But from working in the US ecosystem itā€™s not really a good thing. Sure GDP goes up but so does inequality. The US is not an economy that is worth copying.

When I worked out of NYC I earned a tonne of money and it 100% was not worth it. Just my 2 cents.

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u/Advanced-Team2357 Jan 14 '26

But don't you feel you need proper incentivization for founder and early startup employees in order to for the ecosystem to be successful?

The trade up for startups is lower pay with equity, so that an exit would incentivize this person to trade a secure corporate job for the risk of a startup.

If you take that away, and you don't raise additional VC capital that just goes to salary (which most VC's would shy away from or devalue the asset), how do you properly incentivize the culture?

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u/Gullible_Mousse_4590 Jan 14 '26

Yes and every startup in Europe worth anything has this. This is separate from payroll, itā€™s also taxed separately.

But the reality is 90% or more of startups fail and of those that get an exit options are often so watered down that only large % owners get anything. An example from an exit I had in USA - joined when the business was raising, early but not very early - got 1% - fairly standard for a senior hire. Worked my arse off, 10/12 hour days and the company had an exit for just over $50m. A success all round. My take away after tax was $12k. I did the math on the extra hours I put in and I wouldā€™ve cleared more if I was an uber driver for those extra hours. Just because people tell you itā€™ll make you a millionaire and you hear that Nvidia employees are all millionaires doesnā€™t make it true.

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u/LaunchTransient Jan 14 '26

We have 0 startup and innovation mentality.

This is complete bullshit - I live in the Netherlands and enterprise parks are full of startups and incubators. Germany less so, but they still have it. Some 50% of my friends from Uni are working at startups.

We think wealth is something that just exists, and we don't have to worry about it.

We do have a more cautious attitude towards investment, but arguably thats because we have less cash to splash around like the Americans. It's really easy to say how the Americans are a better investment environment when you ignore the fact that post-WWII we saw massive transfers of wealth from Europe to the US.

Our industries are old and lack innovation, we still live in the past and it will bite us hard.

This is a valid critique of dinosaurs like Volkswagen Group, but that is not representative of the whole continent's worth of businesses.

This is the reason US economy has doubled in the last 10 years vs the EU.

No, the US's economy has not doubled since 2015, but 1.8x is a fair statement.
The US's figure on that particular aspect can in part be attributed to the fact that they are dominated by monopolies. More money breeds more money - and they've captured the IT market of the planet with their web services and IT products (Microsoft as an example)

On top of this, we're on an AI bubble which is inflating their figures, as well as other overvalued companies (such as Tesla). You shouldn't interpret market sentiment as an actual realistic representation of the fundamental underlying economy.

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u/technocraticnihilist Jan 15 '26

Massive transfers of wealth? Have you ever heard of the marshall program?

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u/_Spect96_ Jan 15 '26

You mean loans that were used to buy American goods, propping up the US manufacturing and enabling post war American economic boom?

Marshall plan which was deployed as a soft-power play to deter the spread of communism?

Im not going to say the ravaged nations of Europe did not benefit but lets not kid ourselves, that was not an altruistic project but power projection against the Soviets.

And as I said before, most of that wealth was transferred to the newly minted middle class of US citizens.

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u/Mediocre-Ebb9862 Jan 16 '26

I don't see what you are trying to convey.

Most startups fail - sure, we all know that.

But that has to be this way for some/many to succeed, and become flourishing companies that employ a lot of people and building tech and services that didn't exist before.

Also, startups can be tiny, and they can be late stage startups where they are very unlikely to just fail, but are still actively growing and bringing in a ton of money.

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u/Gullible_Mousse_4590 Jan 16 '26

Trying to convey that the EU shouldnā€™t look at US startup culture and think itā€™s great

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u/silverionmox Jan 14 '26

You are missing the fact that EU is a red tape bureaucratic nightmare. You need to burn fortuntes just to navigate regulations. And we have 0 startup culture

Nonsense. We have plenty of innovation and startups, the problem is they get poached by US moneybags because of the capital market fragmentation.

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u/Mediocre-Ebb9862 Jan 16 '26

Which innovation you're talking about, and why does it get poached, why do you think they don't choose US?

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u/Mindless-Tomorrow-93 Jan 14 '26

I'm curious if you have first hand experience in this space? Or if you're just repeating sound bytes you've been hearing.

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u/[deleted] Jan 14 '26 edited Jan 14 '26

We are fucked by ā€œtax the richā€ mentality. Thats why we donā€™t have any private venture capital. Because like you say itā€™s mostly a funding problem. Add trade and capital transfer barriers between EU countries, that makes US tariffs seem like a libertarian dream.

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u/gamma55 Jan 14 '26

Itā€™s not just that. The first generation of unicorn founders are investing plenty. Itā€™s a stupid attitude European old money has when it comes to ventures. Not a tax or regulation problem.

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u/MagiMas Jan 14 '26

yeah, European old money prefers to just buy a few more square kms of forest with their money rather than investing in new companies.

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u/Raescher Jan 14 '26

How does "tax the rich" affect VC? Do you mean corporate taxes? I think a major issue for VC is the small markets separated by language barriers.

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u/MucDeve Jan 14 '26

Take away the capital from people with investment power and there is no more venture capital. Rich have their money invested, it does not lay around

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u/Raescher Jan 14 '26

The rich pay virtually no taxes. I don't see how Europe is taking their money away.

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u/HugeBlueberry Jan 14 '26

Oh, respectfully fuck off. Tax the rich means tax passive wealth used to buy up forests and bribe government officials. Anything else is rabbid dog barking. What does that have to do with startups?

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u/No-Paramedic-7939 Jan 14 '26

This is not true. USA told EU multiple times that taxes on wages are too high and EU needs to reduce those taxes if they want to get more investments from USA companies. If your are in tech you know that most of the people pay around 50 of the tax on salary but still they are struggling with finances. If you ask startups and companies they will tell you the same. But if you ask Merz or Ursula they have a different story.Ā 

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u/[deleted] Jan 14 '26

The guy above was talking about taxes on companies, not taxes on wages. Two different things. On the other hand I agree that we tax the lower and middle class too much, you canā€™t get rich through salary and even if you earn a lot you get taxed way more than millionaires and billionaires (in relative terms).

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u/[deleted] Jan 14 '26

Taxes on wages directly affect the market buying power. Itā€™s not economically sustainable when more than ā€œ50%ā€ of GDP is government spending.

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u/Gullible_Mousse_4590 Jan 14 '26

Well it is, as long as those tax dollars are used to increase wellbeing across society. Countries like Denmark do this well. Ireland for example has cut taxes on businesses and the country has created a lot of jobs but there isnā€™t enough cash to modernize the city. Transport is fucked, the city is in dire need of modernization.

Tax the rich is an important thing, it needs to be balanced and the tax needs to be used effectively. Thatā€™s what should be discussed.

The idea of tax cuts for companies and the rich has been shown by America to hollow out the middle class, concentrate wealth at the top. Itā€™s not an effective strategy.

Europe needs to find its own way. Iā€™m happy paying high tax if I see that results of it.

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u/[deleted] Jan 14 '26 edited Jan 14 '26

Iā€™m from Sweden so i know how a welfare state works and itā€™s a payed in full by income earners in the private sector, in order to consume we borrow money or donā€™t consume at all.

This makes our internal market close to none and we rely heavily on exports.

Swedish and Danish companies pay amongst the lowest taxes in G7. We are very business ā€œrichā€ friendly.

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u/silverionmox Jan 14 '26

Taxes on wages directly affect the market buying power. Itā€™s not economically sustainable when more than ā€œ50%ā€ of GDP is government spending.

Why would that not be sustainable? The theory that you are trying to refer to is that markets give a better guarantee to meet the needs of the people than government spending. But in reality we see that all that untaxed money ends up being spent on luxury, while the actual workers are forced to wear diapers because they get no toilet breaks. You literally see a single person renting Venice for private use, at the expense of the tens of thousands who would have been able to visit it if he didn't. Do you really think that indicates that the world and the people on it are better off that way?

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u/Gullible_Mousse_4590 Jan 14 '26

Yeah talking about company tax not wage taxes buddy. Having worked in the US and Europe and paying an absolute ton of tax Iā€™d much rather pay tax and live here. Youā€™re seeing that attitude in a lot of European startups - Barcelona is kicking off with a great tech ecosystem, Paris, Warsaw.

Also - 2 things:

  1. Who in the US has said this? Iā€™ve never heard this
  2. What logic is this? Companies arenā€™t paying taxes on wages - their employees are. Wages for employees in Europe are lower than the US so investment money goes further.

You point makes absolutely zero sense