Why Regulation Is a Secret Weapon for European Founders

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 up a core banking system from scratch. I had never worked in finance and had never sat across from a regulator. For months, the work felt slow and heavy. It was full of requirements I did not understand and could not 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. A few years later, I built Vivy, a digital health platform that handled the sensitive medical data of people across 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 that is genuinely hard to build and even harder to copy: trust. ### The Real Cost of Compliance Let me be honest about the cost because pretending it does not exist helps no one. The 2024 Draghi report on European competitiveness found that more than 60 percent of EU companies see regulation as an obstacle to investment. Additionally, 55 percent 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. The part that often gets missed is what those same constraints do to a company that takes them seriously. ### The Hidden Advantage of Building Under Rules 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 cannot simply bolt that on later. That was the key lesson for me, and this is where Europe underrates itself. ### Why Speed Without Trust Fails 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. Take 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, they do not even realize it. And the skill is very much 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 Regulation Opportunity 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 such as 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 would still 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 Needs to 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 single market. But while we push for reform, we should also recognize what we are building. > "The rules were pushing us to build something that is genuinely hard to build and even harder to copy: trust." Here is what I have learned from years in the trenches: - Regulation forces you to build defensible moats around your product - Compliance creates customer confidence that cheap competitors cannot match - The discipline you learn transfers to any regulated category you enter next So yes, the rules are heavy. But they are also teaching European founders how to win in the markets that matter most. And that is an advantage no amount of venture capital can buy.