Europe’s single market dream is getting lost in the paperwork

The EU’s single market promises frictionless expansion, but in reality, founders scaling across Europe are facing 27 different rulebooks. Sebastien Marchon, CEO at Rydoo, argues how the EU Inc proposal could finally close that gap, if implemented correctly.

On paper, building a business in Europe should be easy with access to talent across all 27 EU member states and easy, frictionless expansion across the bloc. That is the pitch behind the single market, but if you ask any founder who’s actually attempted this, you’ll likely hear a very different story.

The lived reality is more like a slow grind through red tape, separate legal entities for each country, fragmented payroll systems, and a small army of dedicated tax and employment lawyers just to stay compliant. 

Any founder that has scaled across the continent can tell you that the distance between the single market’s promise and its day-to-day operation is vast. Europe isn’t short of any ambition or talent, but the sheer administrative weight of expansion is holding the region back, costing European businesses around $176 billion every year.

This is why the European Commission’s “EU INC” proposal is needed. Granting founders the option of a single legal entity across all 27 member states would strip out the majority of the complexity, making the EU a far easier and more attractive place to build and back companies. It won’t fix everything overnight, but it represents the first real acknowledgement of a problem founders have been battling for years.

The cost of 27 different rulebooks

Among the many obstacles facing European startups, few are as expensive as the need to run separate legal entities in every country of operation. In practical terms, this requires duplicating corporate infrastructure over and over again, with each new market adding a fresh layer of time, cost, and operational complexity.

VAT illustrates the problem neatly. Each of the 27 member states are free to set their own rates and exemptions, ranging drastically from 17% in Luxembourg to 27% in Hungary. That variation, not to mention the complexity of operating across it, can often mean delaying entry into certain countries entirely.

Hiring also brings a whole new set of challenges. Employment regulations differ significantly across countries, from notice periods and probation rules to how contractors are classified and all of those differences make it even more difficult to scale teams consistently across Europe. 

For a business trying to grow quickly, these are not minor details. How fast you can onboard someone depends on local probation rules. How quickly you can respond to change depends on notice periods. And who you can even hire, on what terms, depends on contractor classification. Add employee equity structures into the mix, which work differently in every country, and every new market becomes its own mountain to scale.

This isn’t just trivial paperwork or bureaucratic friction. Hiring difficulties have a direct effect on how quickly and competitively a business can grow and prevents companies from gaining access to the bloc’s impressive talent pool. 

These challenges together make the region a less attractive place to operate. Between 2008 and 2021, nearly 30% of European unicorns relocated outside the EU entirely, and only 8% of global scaleups are based in Europe.  

 Can EU Inc make a difference?

For EU Inc to be impactful, it needs to be executed in a way that directly responds to the challenges faced by companies in Europe If it ends up adding another layer of bureaucracy, it’s an opportunity wasted.

The focus on reducing administrative burden for investors is key here. Founders need capital to scale, but investors need straightforward processes in order to deploy it. Right now, the complexity of operating across multiple European jurisdictions adds unnecessary steps to both sides of that equation. 

Simplifying share transfers and digitising the processes for funding rounds could go a long way towards fixing this, in turn allowing capital to flow more easily into ambitious high growth EU companies.

This also brings Europe up to speed with the rest of the world, reflecting the broader direction of travel in markets, where digitisation is bringing greater efficiency and competitiveness. 

Unlocking growth across Europe 

Europe’s startups aren’t lacking in ambition. What they lack is the time and money that cross-border expansion currently demands. The moment a founder looks beyond their home market, they instantly collide with a system that is at odds with a growth mindset. 

EU Inc has the right idea, but the real test of its success will be whether founders and investors actually experience less friction in practice. 

Good implementation has to be measurable. That means company formation should be taking days, not years or months. Expanding across borders should not require a whole new legal department for each new market. Reporting requirements should be consistent across member states, not multiplied 27 times. 

The opportunity that EU Inc has to make Europe an attractive place to invest in is very real. Whether that potential is realised depends entirely on how fast and how faithfully the proposal is put into practice. 

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