European start-ups and the promise of a unified legal framework

Europe’s start-up ecosystem has been recognised for years for its scientific excellence, deep technical talent and strong capacity for early-stage innovation. When it comes to scaling, however, the Old Continent has struggled to retain and grow its most promising companies. Former Italian prime minister Mario Draghi’s report on the future of European competitiveness, cited in an analysis by the European Investment Bank (EIB) published this year, notes that around 10% of EU scale-ups relocate abroad, and roughly 85% of them do so to the United States. Between 2008 and 2021, nearly 30% of European unicorns also moved their headquarters outside the EU, mainly to the American giant—particularly those operating in digital technologies, artificial intelligence and biotechnology.

This trend does not reflect a lack of entrepreneurial ambition. Interviews with founders and executives show that relocation decisions are often a response to structural barriers within Europe’s ecosystem, such as market fragmentation, limited access to late-stage growth capital, regulatory complexity and a shortage of talent with scaling experience. These frictions intensify as companies move beyond the earliest stages of growth, reinforcing the perception that Europe is strong at generating innovation but weaker at turning it into global industrial and commercial leadership.

Why scale-ups leave, and what is changing in Europe

The EIB study on the factors driving offshoring identifies a consistent set of reasons behind these decisions, largely independent of sector or country of origin. Access to a large, unified market and to late-stage venture capital emerges as the main driver, followed by regulatory simplicity and proximity to experienced commercial talent. In founders’ perceptions, the United States offers advantages across all these dimensions, while the European Union is often described as fragmented and administratively complex—especially beyond the early phases of growth.

It is important to note that relocation rarely involves the entire company. All the firms interviewed in the EIB study opted for partial offshoring, typically setting up a holding company or a commercial presence abroad while keeping their R&D and engineering teams within the EU. This dual footprint allows them to continue benefiting from European technical talent and cost advantages, while gaining access to larger markets and deeper sources of capital.

European institutions increasingly recognise that reversing this dynamic requires more than incremental tweaks. It calls for a structural shift in how Europe supports start-ups and scale-ups, aligning finance, regulation and ecosystem support around growth and industrialisation. This is the context for the recent wave of initiatives to strengthen Europe’s scaling environment, including the proposal to introduce a new pan-European legal framework for innovative companies, dubbed EU Inc., announced by European Commission President Ursula von der Leyen at the Davos Forum in January.

A 28th Regime to remove cross-border frictions

In Brussels’ vision, EU Inc. would establish a new optional pan-European legal regime for start-ups and scale-ups, known as the long-awaited 28th Regime. Its aim is to reduce legal and administrative fragmentation by offering companies a single, harmonised framework to operate, scale and attract investment across the European Union. The initiative seeks to significantly simplify incorporation and cross-border operations through a “digital by default” approach, with fast, fully online business registration processes.

The proposal is designed particularly for companies in the scale-up phase. By increasing legal clarity and comparability across jurisdictions, EU Inc. aims to make European start-ups more attractive to international investors, who currently tend to prefer familiar legal environments, such as Delaware corporations in the United States.

Nonetheless, EU Inc. would not replace national corporate forms; rather, it would be conceived as an optional regime that companies could choose once they reach a certain level of maturity or cross-border ambition. This flexibility would reflect a broader shift in European policy: instead of imposing a single structure at early stages, the EU would create a pathway to support the transition from national markets to European and global scale.

Complementarity with existing European instruments

EU Inc. would not operate in isolation. It would complement a broader ecosystem of European initiatives that already address start-up and scale-up challenges at different stages of maturity. A central pillar is the European Innovation Council (EIC), which has progressively expanded its role from early-stage disruptive innovation to support for scaling. Three instruments are particularly relevant:

• EIC Accelerator, which finances start-ups and SMEs with high-risk, high-impact innovations.
• STEP Scale Up, which tackles the funding gap in strategic technologies and supports large investments to expand industrial and commercial capacity.
• Advanced Innovation Challenges, which steers funding towards priority technological and industrial areas, linking innovation to the EU’s strategic objectives.

In this context, EU Inc. would play a more structural than financial role. By reducing legal and administrative fragmentation, it would increase the effectiveness of existing instruments and make it easier for companies supported by the EIC, TechEU or InvestEU to scale without changing their legal structure.

The proposal for a unified legal framework could mark a turning point for Europe’s start-up ecosystem. The debate it triggers within EU institutions and Member States will be worth watching closely, because it is its implementation—and not merely its announcement—that will determine whether the promise translates into genuine structural change.