Why Regulation Gives European Founders a Hidden Edge

Jan de Vries · 2026-07-10

When I joined N26 as CTO, my first real job had nothing to do with building an app. I was asked to help get a banking license and build a core banking system from scratch. I had never worked in finance, and I had never sat across from a regulator. For months, the work felt slow and heavy, full of requirements I didn't understand and couldn't shortcut. This, I thought, was the part of building in Europe that everyone had warned me about. I was wrong about what that experience was teaching me. ### The Real Cost of Regulation A few years later, I built Vivy, a digital health platform handling sensitive medical data for dozens of insurers. Health data is about as regulated as data gets. Once again, my instinct was to treat the constraints as a tax on speed. Over time, I saw them differently. The rules were pushing us to build something genuinely hard to build, and even harder to copy: trust. Let's be honest about the cost, because pretending it doesn't exist helps no one. The 2024 Draghi report on European competitiveness found that more than 60% of EU companies see regulation as an obstacle to investment. And 55% of small and medium-sized companies name regulatory and administrative burden as their single biggest challenge. Fragmented rules across 27 member states, slow processes, and uneven enforcement are a real drag. Founders feel it every week. Anyone who tells you regulation is simply a gift has never tried to deliver under it. ### Where the Real Advantage Lies What often gets missed is what those same constraints do to a company that takes them seriously. In most consumer software, the buyer mainly wants to know whether your product is good. In regulated markets like FinTech and HealthTech, the buyer carries a heavier question: Can they trust you with their customers' money or their patients' records? Will you still be standing, and compliant, in five years? A hospital, a bank, or an insurer is buying that confidence as much as any feature. A startup that has absorbed the rules into how it builds takes that fear off the table. A faster competitor can't simply bolt that on later. That was the key lesson for me, and this is where Europe underrates itself. ### The American Contrast American startups are often admired for moving first and asking permission afterward. That works well until the product touches money, health, children, or critical infrastructure. Then the missing trust becomes very expensive. Consider the genetics company 23andMe. It marketed health reports to consumers for years. In 2013, the US Food and Drug Administration ordered the company to stop selling them until it could show the tests were valid. It pulled its health product for nearly two years to complete the regulatory work it had tried to skip. European founders who have learned to build inside hard constraints are training for exactly the markets where that discipline is the price of entry, often without realizing it. And the skill is transferable. Once you know how to ship a compliant product without losing your sanity, you can do it again in the next regulated category. ### The AI Frontier The same argument is about to repeat itself with AI. The EU AI Act, the first comprehensive law of its kind, has been and continues to be phased in over the next few years. The heaviest obligations land on high-risk uses in areas like hiring, finance, and health. I hear founders describe it the way I once described that banking license: a brake, a burden, a reason Europe will fall behind. I understand the frustration. But I'd ask them to look one step further. The companies that learn to build AI that is transparent, well-governed, and safe will win the regulated sectors where AI is audited and paid for. In AI too, trust is becoming the product. ### What Should Change None of this means the rules should stay as they are. The Draghi report is right that the burden needs to fall, that the rules should be simpler, and that enforcement should be consistent across the EU. But for founders who embrace the challenge, regulation isn't just a hurdle. It's a moat. - It forces you to build with discipline from day one. - It makes your product harder for competitors to replicate. - It gives you a story that resonates with cautious buyers. > "The rules were pushing us to build something genuinely hard to build, and even harder to copy: trust." So next time you're staring down a compliance checklist, take a breath. You're not just jumping through hoops. You're building something that can last.