Seedtable #269

How to Keep Start-Ups in Europe, and the Week's Top Funding Rounds

Paebbl

Carbon-storing building materials manufacturer raises $25M Series A

18

Energy, Cleantech

Rotterdam

Blecon

Bluetooth Low Energy technology provider for IoT connectivity raises $4.6M Seed

1

Internet of Things, Cloud

Cambridge

xFarm

Super app for farmers raises $39M Series C for geographic expansion

1

AgTech

Switzerland

Perlego

AI-powered subscription-based digital online library raises $20M Series C

46

Edtech

London

Lightdash

Open source self-serve data analytics platform raises $11M Series A

1

Data Analytics

San Francisco

Purespring Therapeutics

Gene therapy provider for kidney diseases raises $105M Series B

1

Biotech

London

Booster Therapeutics

Developer of a new class of proteasome activator medicines raises $15M Seed

1

Biotech

Berlin

Knave

Pay-per-use mobility solutions provider raises $245M in debt financing

1

Mobility, Cleantech, Electric Vehicles

Paris

Basecamp Research

AI-powered biological systems design company raises $60M Series B

44

Biotech

London

Qantev

AI-powered medical claims analysis platform raises $33M Series B

44

AI, Healthtech

Paris

Zepz

Global cross-border payment solutions provider raises $267M

13

FinTech

London

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To say European governments misconstrue how companies work would be an understatement. At least you’d hope it would be. The alternative is far more galling – that they have an active desire to stave off as much enterprise as possible, leaving only legacy companies and those still kept fat on subsidies. Last week, we posted on Linkedin about nuclear energy company Newcleo, who have raised $150m, and have since moved their operations from Turin and London to Paris. In the comments of our post, Italian entrepreneurs poured scorn on the country’s inability to retain an innovative homegrown startup – ‘another great lost opportunity’ one commented with contempt. Reading this thread, one can’t help but sympathise.

There’s a tendency among politicians to believe that they need not do anything to keep the companies that started there – after all, they surely have a debt to the homeland that nurtured them? The issue is, this is a significantly outdated belief. Where twenty years ago, you’d have to just accept the conditions of the country you began in (unless you were prepared for a great deal of friction in relocating), now there is no such obligation. Much like romantic relationships, you can’t just treat it as a given that your partner will remain with you no matter how you treat them. If the relationship continues to be abusive or one-sided, it’s very likely they’ll leave. In the business world, it’s never been easier to de-list or move, and many companies are doing just that. Some, such as London’s Quantum Exponential Group, are even reverting to being private companies, due to the impediments involved with being a UK listed company (even in spite of ‘serious’ investment interest).

Europe’s response has often tended to be a petulant ‘good riddance, didn’t want you anyway’. You could see it in the quasi-ritual punishment of the UK after Brexit, adding unnecessary regulation to spite the apostates, even if measures punished EU residents too (‘cutting off your nose to spite your face’ in English parlance). In the case of Newcleo, sure, this time they remained in Europe. Yet how many other companies have abandoned Europe for America, where profit and success aren’t treated as a zero-sum game (as well as being taxed into oblivion)? Investors will be salivating at the opportunity to pick off Europe’s best at comparatively bargain prices, with CEOs already anticipating higher valuations and lower tax burdens.

It won’t be easy to change the perception of Europe to one where startups don’t just survive but thrive, but that doesn’t mean it’s not worth doing. After all, Europhilia isn’t a myth, and for some companies it’s less about giving reasons to stay, and more about removing reasons to leave. European enterprise could once again be left alone to grow in peace, and even (dare I say it) attract companies from elsewhere (and not just because wages are far lower). It will, however, require a reduction in the ‘crabs in a bucket’ mentality, where none can escape the bucket since the others will always pull them back down.

When Apple were forced by EU courts to pay $15.2 Billion in back taxes to the Irish government, the Irish government cringed. They understood that in the long-run, it was better to attract more investment and employment opportunities than just to maximise their yearly tax intake. Like the fishermen in Africa who realised they could use mosquito nets to catch more fish, the benefits are short-lived if next year there are no fish to catch (since they’d eaten the smaller ones who would normally escape and breed). Sure, Apple are a large company who can swallow the losses, but why would any large company stay if their main incentives to remain are removed? Even more importantly, why would any company decide to move or begin there if there’s such a perverse precedent? To quote the perpetually over-quoted Winston Churchill, ‘a nation trying to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle’. Europe will never again catch up with the US if it insists that high regulation and taxation are just part and parcel of basing a company there.