OPINION: Are we attracting talent to live in Europe or to build here?

Europe is an attractive place to live because of its high quality of life, job opportunities, and stability. However, attracting people to live here for the lifestyle is different from attracting talent and companies to move here and build.

The latter entails companies bringing teams with them, hiring locally, and establishing R&D that fosters an entrepreneurial ecosystem that benefits the continent as a whole. This is an area that Europe isn’t doing so well in, especially compared to the US.

The trend shows that approximately 10% of EU scale-ups relocate abroad, with around 85% moving to the United States. Furthermore, between 2008-2021, nearly 30% of unicorns moved their headquarters abroad (again, mostly to the US).

Despite this, the narrative has recently been disrupted by Langdock, a Berlin-based AI startup. They moved their parent company from the US to Germany and aim to become a “European hyperscaler”.

This illustrates that the phenomenon of startups relocating to the US from Europe isn’t set in stone. Europe can attract and retain its talent. This article explores different cases of that and explores how to get teams to build here rather than just use Europe as a stepping stone.

The US or Europe: How do startups choose?

It is imperative to understand Europe’s main competitor in order to learn where more can be done. The US isn’t just where most European startups relocate, it also captures 85% of startups worldwide. If there’s a US VC, chances are the startup will relocate there. In fact, a Delaware parent company, a US-based legal entity that owns and controls the startup’s operations, including those in Europe, is frequently a precondition US venture funds set before they’ll invest.

Then comes the fact that the US grants access to a single market compared to Europe’s 27 member states. Buyers spread across European jurisdictions take longer to close than buyers spread across US states operating under one framework. This forces European startups to cross borders earlier than many of their US counterparts (something the EU. Inc Framework is working to address). Still, 97% moves are partial exits, with companies retaining operations in their home country. Only around three-quarters of relocating CEOs physically move to the new destination.

The capital gap between Europe and the US cannot be ignored either. Contrary to popular sentiment that the US is more forgiving towards founders whose previous enterprises have failed and that they have more appetite for risk, the reality is that there is more capital to go around to fund newer attempts (€930 billion versus €150 billion in the EU, around sixfold to be precise). European investors are understandably more cautious due to this.

Having prefaced the US’s attraction for startups, how do cases like Langdock exist?

Langdock’s move was commercial. Their customers’ legal teams kept flagging the US parent company as a data-risk exposure despite the fact that it had no staff, servers, or systems access. The US Cloud Act in particular was a great cause of concern.

80% of the company was owned by founders and employees living in the EU, and the teams, coupled with approximately 13,000 client organisations, were being served from Germany.

In short, everything was already based in Europe, but the parent company was created to initially attract US investors and benefit from the start-up accelerator Y Combinator.

What Europe has been doing and what it should do instead

Europe has acted as a magnet for talent to study, train, and build. However, its retention of that same talent has proven to be less successful, as discussed previously. The focus has mostly been on easing restrictions that bring talent into the country, namely by putting in special visa schemes. That is not to say that they haven’t been successful at that.

Germany issued 72% of the EU’s Blue Cards in 2024, which fast-tracks skilled workers residing in the EU. France’s Tech Visa provides a simplified residence route for startup employees, and 1200 companies have utilised it for international recruitment since the program was launched. Portugal’s Digital Nomad Visa (D8) was launched in 2022 to attract remote workers without needing a Portuguese employer or company. It has approved 7,664 applications since then.

But talent attraction is not only about how many people move to Europe. It makes a positive impact only when people and companies build teams, hire locally, create R&D capacity, and stay long enough to strengthen the ecosystem. While founders and talented people moving for lifestyle reasons is good, it is not the same as a company bringing sales teams, engineering, and creating jobs in the area. The good part is that there are already some examples where the latter is happening.

Unicorn Factory Lisbon is one such example. Launched in 2022, has attracted 82 technology companies to set up offices in the city, creating more than 16,000 jobs.

Such clusters are important because their alumni can go on to become new founders, as seen in the case of Talkdesk and OutSystems alumni, who founded Speak, Cleverly.ai, and Screenloop.

Barcelona serves as a stronger example where 6 unicorns are headquartered in the city, and create €36 billion in combined enterprise value by locally-based companies. Whether Lisbon can transform from simply attracting branches and teams to headquarters remains to be seen.

Estonia has provided another innovative way of attracting companies. By providing individual e-residencies, it allows global entrepreneurs to register a business online, access the EU market, and enjoy a 0% corporate tax rate on reinvested and retained profits. This has resulted in dividends amounting to €124.9 million for the country.

The Next Stage for Europe’s Talent

Europe has proven that it is quite capable of attracting talent, but it has yet to stem the loss of its talent to other countries, especially the US. Different symptoms have to be addressed differently.

For example, incentivising companies to open their branches and headquarters on the continent. Providing a common framework for countries to operate with. The issues with capital cannot be ignored. Europe’s pension funds can compensate for the discrepancy to an extent. Europe has proven its innovativeness, but it is time to build it.