A new study by the European Investment Bank (EIB), in collaboration with the European Commission under the InvestEU Advisory Hub, examines the growing concerns for Europe’s innovation ecosystem
The concern highlights that high-potential startups and scale-ups are relocating outside of the European Union.
Drawing on direct input from founders and C-level executives, the EIB study explores why companies choose to relocate, how relocation typically unfolds, and what Europe can do to better retain its most promising firms.
A common set of pressures
Despite differences in sector, country, and company size, relocation decisions across the EU tend to be shaped by a similar set of factors. Access to venture capital is among the most decisive drivers. Many founders report that growth-stage funding is more readily available outside the EU, particularly in the United States, where deeper capital markets and a stronger risk appetite allow companies to scale faster.
Market size also plays a critical role. Start-ups aiming for rapid global expansion are attracted to large, unified markets with fewer legal and commercial barriers. While the EU offers a substantial consumer base, fragmentation across national regulations, tax regimes, and compliance frameworks can make scaling across borders slower and more complex than in competing regions.
Regulation itself is another influential factor. Companies point to more flexible and predictable regulatory environments elsewhere, especially for emerging technologies. Access to experienced commercial and sales talent is often easier outside the EU, where mature startup ecosystems have produced a larger pool of professionals with global scaling experience.
Relocation is rarely absolute
The EIB study finds that relocation is seldom an all-or-nothing decision. Most companies opt for partial relocation strategies rather than a complete exit from Europe. Common approaches include moving legal headquarters, senior management, or commercial operations abroad while keeping research and development, engineering teams, or technical talent within the EU.
This hybrid model allows companies to benefit from Europe’s strong scientific base and skilled workforce while gaining access to capital, customers, and business networks elsewhere.
In several cases, investor expectations act as a catalyst, with non-European investors encouraging or requiring companies to establish a presence outside the EU as a condition for funding.
What founders say Europe needs
Beyond diagnosing the problem, the EIB study captures founders’ views on how Europe can improve its startup and scale-up environment. A recurring recommendation is the need for more innovation-friendly regulation that balances oversight with speed and flexibility, especially for fast-evolving technologies.
Improved access to growth capital is another priority. While early-stage funding has expanded in recent years, many companies still struggle to secure large-scale financing rounds within Europe.
Founders also emphasise the importance of attracting and retaining international talent, calling for simpler visa regimes, competitive taxation, and better integration of skilled professionals from outside the EU.
The EIB study highlights the need for stronger support for globally ambitious companies. This includes better scale-up-focused public programs, stronger connections to international markets, and a clearer European narrative around building global technology leaders.
Implications for EU policy
The findings feed directly into ongoing work on the EU Startup and Scale-up Strategy, which aims to position Europe as the best place in the world to launch and grow innovative, technology-driven companies.
By addressing the structural factors behind relocation decisions, policymakers hope to strengthen Europe’s competitiveness and technological sovereignty, ensuring that the next generation of global innovators can scale without leaving the continent.
