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 or sat across from a regulator. For months, the work felt slow and heavy. It was 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 Lesson Hidden in 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 it gets, and 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 businesses 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. But here's what often gets missed: what those same constraints do to a company that takes them seriously. ### Why Trust Becomes Your Moat 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, bank, or 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 it's where Europe underrates itself. ### The American Startup Trap American startups are often admired for moving first and asking permission later. That works well until the product touches money, health, children, or critical infrastructure. Then the missing trust becomes very expensive. Consider 23andMe. The genetics company marketed health reports to consumers for years. In 2013, the US Food and Drug Administration ordered them to stop selling until they could prove the tests were valid. They pulled their health product for nearly two years to complete the regulatory work they 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, they don't even realize it. And the skill is very transferable. Once you know how to ship a compliant product without losing your sanity, you can do it again in the next regulated category. ### What This Means for AI The same argument is about to repeat itself with AI. The EU AI Act, the first comprehensive law of its kind, is being 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. ### A Practical Reality Check 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 here's what I've learned from building in regulated markets: - **Regulation forces you to build defensible products.** When you can't cut corners, you build something that lasts. - **Compliance becomes a competitive advantage.** Buyers in regulated industries pay a premium for confidence. - **The skills transfer across sectors.** Once you master regulated building, you can do it in FinTech, HealthTech, AI, or any other high-trust market. The founders who will win in the next decade aren't the ones who move fastest. They're the ones who build trust first. And Europe, with all its regulatory baggage, might just be the best training ground for that.