Is 2025 the perfect year to launch a technology startup in Europe?
That’s up for debate. Industry veterans know that conditions are never quite ideal to start or grow a new enterprise. Yet over the past six to nine months, the outlook has brightened considerably for firms doing business in and around the European Union as regional growth forecasts tick up. Some say the environment looks better than it has in many years.
“The sense of optimism is palpable within the European tech community right now,” says Shmuel Chafets, a cofounder of Target Global, a venture capital firm with offices in Berlin.
Of course, launching a new company is difficult even in the best of times. And knowledge is power. Here’s what Chafets and his peers say entrepreneurs should keep in mind before taking the plunge.
1. Language Can Be a Barrier (But Not As Big As You’d Think)
Europe is a very diverse place. In most of the EU, English is not spoken as a primary language. This is a challenge for entrepreneurs coming from the UK or North America, where English fluency is assumed.
However, the language barrier in Europe is not as big of a problem as many outsiders believe. According to EU statistics, about 47% of Europeans speak English as a foreign or second language. This means about half your customers (and employees) will, on average, be fluent; the percentage may be higher depending on the markets you target.
2. The Common Market Isn’t Totally Friction-Free
Europe has a “common” economic market that is largely free from internal trade barriers. This is a massive appeal of doing business on the continent; in theory, you have tariff-free access to about 450 million consumers.
The reality is perhaps more complicated. Each EU economy has the ability to set its own tax rate and can impose other restrictions on businesses that may require attention (or expert help).
3. Labor and Business Laws May Be Different Than in the UK or North America
Europe is regarded as a more labor-friendly market than the United States or the United Kingdom. Its trade unions are stronger and it has more robust legal protections for workers as well. This is of existential concern for outside businesses that wish to enter the market; you must abide by the rules of the road if you wish to stay on the good side of the law.
Labor customs vary in Europe as well. Paid time off tends to be more generous (and expected as part of employment terms) than in North America; Austria mandates 25 days of PTO per year, for example.
4. Value-Added Taxation Is Complicated, But Experts Stand Ready to Help
Another matter to mind as you enter the European market is value-added taxation, or VAT. This will be familiar if you do business in the UK but perhaps not if you’re familiar only with markets in the Americas.
The trick is that VAT is calculated at the national level. For example, the VAT formula in Croatia is very different from the VAT formula in Cyprus, which, in turn, is very different from the one in Czechia. VAT may apply to industries differently, as well.
5. Specific Cities and Regions Offer Talent & Capital Synergies
Like other parts of the world, Europe has tech, talent and capital “hubs” that make it easier to start and grow certain types of businesses. “Industrial tech” firms tend to take root in former industrial heartlands like Germany’s Rhine-Ruhr region or northern Italy, while software firms gravitate to expat-rich destinations like Paris and Berlin.
For example, “Berlin offers a unique combination of a vibrant startup community, diverse financing options, international talent, cost advantages, [and] a strong technology and creative sector,” says Daniel Kuppe of The Berliner.
The advantages of these locations may seem obvious in retrospect, but they’re important considerations as you decide where to locate.
Rise and Grind
Starting a new business takes patience and determination. It’s not enough to have a great idea, adequate startup capital, or even a great team around you. You need to have a proper mindset, as well. Because if all goes well, this is what you’ll be doing for many years to come.
