Why European Founders Must Master "Sovereign Flexibility" to Survive

Jan de Vries · 2026-07-29

Over the past two years, anti-tourism protests have spread across southern Europe. In July 2024, demonstrators in Barcelona protested over-tourism with the slogan "go home," while around 10,000 people marched in Mallorca over rising housing costs. Similar protests have also taken place in the Canary Islands, Portugal, and Italy. The backlash reflects an underlying tension: European governments increasingly see expats and digital nomads as a new tax-generating source of revenue. Conversely, many residents associate their arrival with higher rents and housing scarcity. These opposing views raise a more fundamental question. Why can't many Europeans afford the same apartments as foreign professionals? And why can't European businesses consistently pay globally competitive wages? ### The Tension Is Not New Europe has spent decades trying to attract talent and build innovation ecosystems. When I worked in venture capital, almost every country wanted to create its own Silicon Valley. Many governments invested heavily in building domestic startup ecosystems. Yet only a handful produced globally significant innovation hubs. Some venture funds explained Europe's failure to build its own innovation engine in cultural terms. Americans and Israelis were supposedly more willing to take risks, which made the venture model work better in those markets. I always found that explanation troubling. It implied that some nationalities were naturally better suited to entrepreneurship than others. I don't think that's true. People everywhere are fundamentally the same. Math holds a better explanation. In mathematics, there's a remarkably simple formula to explain why people choose to follow a particular course of action or refrain from doing so: > Probability of success × potential upside > probability of failure × cost of failure. The same logic can explain crime rates, investment decisions, or entrepreneurship. Let's assume entrepreneurs everywhere are equally talented and willing to build companies. In the United States, the potential upside is immense. You can build a billion-dollar company and make a fortune. In Europe, the upside is severely capped. Progressive taxation eats away at your margins. With everything else remaining equal, the ultimate decision to build comes down to just one variable: the sheer scale of the upside. ### Where European Scale-Ups Go to Stall The environment to build is changing faster than at any point in the past two decades. The traditional pipeline of building a local startup just to flip it to an American buyer through mergers and acquisitions is broken. Governments now treat digital services as sovereign assets rather than borderless businesses. We witnessed an example recently when the U.S. government imposed emergency export controls on Anthropic's newest AI models. Because the company had no practical way to verify user nationality in real time, it temporarily suspended global access. That illustrates how geopolitical decisions can instantly disrupt software infrastructure across borders. Governments across Europe increasingly want critical digital infrastructure to remain local. Yet restricting foreign platforms only works if domestic alternatives are genuinely competitive. Otherwise, protectionism simply reduces productivity, since businesses and citizens no longer have access to the best tools. While initiatives such as "EU Inc." aim to unify Europe's startup ecosystem, access to growth capital remains one of its biggest structural challenges. Many startups still struggle to secure the later-stage funding needed to become global businesses. Building competitive European alternatives requires conditions that make ambitious founders want to build them in Europe in the first place. That leaves founders with a practical challenge. They must rethink not only where they scale, but also how they build their teams. Top talent is waking up to the reality that a single European market isn't enough. You need a strategy that blends local roots with global reach. That's what I call "sovereign flexibility." It means keeping your core team close to key markets while leveraging remote talent from anywhere. It means incorporating in a jurisdiction that offers tax benefits and investor access, without losing your European identity. ### How to Build with Sovereign Flexibility - **Choose your base wisely.** Look at countries like Estonia or the Netherlands that offer digital-friendly incorporation and competitive tax structures. But don't stop there. Set up a U.S. subsidiary if you need access to American capital markets. - **Hire for talent, not geography.** Remote work is here to stay. Build a distributed team that spans time zones. That gives you 24-hour productivity and access to the best people, regardless of where they live. - **Diversify your funding sources.** Don't rely solely on European VCs. Tap into American and Asian investors who understand your market. Use convertible notes or SAFE agreements to bridge gaps. - **Stay compliant but agile.** Work with legal experts who specialize in cross-border structures. Keep your IP in a jurisdiction that protects it, but operate where the talent is. ### The Bottom Line Europe has the talent, the ideas, and the ambition. What it lacks is a system that rewards risk-taking at scale. The EU Inc. proposal is a step in the right direction, but it's not a silver bullet. Founders who master sovereign flexibility will thrive. Those who wait for the system to change will fall behind. So ask yourself: Are you building for a single market, or for the world? The answer will determine your future.