Bridging the Transatlantic Funding Gap
European startups have long faced a structural disadvantage when seeking venture capital. While the ideas, talent, and market opportunity in Europe rival those of Silicon Valley, the fragmented legal landscape has made it significantly harder and more expensive for European founders to raise capital. The EU Inc proposal aims to change this by introducing a corporate structure specifically designed to accommodate the needs of venture-backed companies.
In 2025, European startups raised approximately €52 billion in venture capital — impressive, but still less than half the amount raised by US startups in the same period. A significant portion of this gap is attributable not to a lack of innovation but to structural barriers in European company law that make investment rounds more complex, more expensive, and less attractive to international investors.
The Current Problem: 27 Different Company Laws
Today, a startup incorporated in France operates under the Code de Commerce, while one in Germany follows the GmbH-Gesetz, and one in the Netherlands adheres to Boek 2 of the Burgerlijk Wetboek. Each of these legal frameworks has different rules regarding:
- Share classes and voting rights — some jurisdictions severely restrict dual-class share structures
- Employee stock options — tax treatment and vesting mechanisms vary dramatically
- Board composition — mandatory employee representation in some countries, purely shareholder-appointed boards in others
- Shareholder agreements — enforceability and scope differ across jurisdictions
- Anti-dilution protections — familiar tools in US venture deals may not be available or enforceable in all EU countries
For a VC fund investing across Europe, this means engaging different law firms, conducting separate legal due diligence, and negotiating different term sheets for each jurisdiction. The cost and complexity are substantial.
EU Inc: A VC-Friendly Corporate Structure
The EU Inc proposal addresses these pain points through several key provisions:
Flexible Share Classes
EU Inc would allow companies to create multiple share classes with different voting rights, economic rights, and conversion mechanisms. This enables the standard VC investment structures that founders and investors are familiar with:
- Series A, B, C preferred shares with liquidation preferences
- Founder shares with enhanced voting rights
- Convertible instruments that automatically convert on qualifying events
- Anti-dilution provisions enforceable across all member states
Standardized Shareholder Agreements
The framework includes model shareholder agreements that are automatically recognized and enforceable in all 27 member states. These templates cover standard VC provisions including drag-along and tag-along rights, information rights, pre-emptive rights, and board observer rights.
"For the first time, a European VC fund could use the same term sheet template across all its portfolio companies regardless of which country they're based in. This alone could reduce legal costs by 60-70% per deal," says Marcus Danielsen, partner at Nordic Capital Ventures.
US Investor Compatibility
Perhaps the most strategically important aspect of the EU Inc for venture capital is its deliberate compatibility with US investment practices. The proposal was developed in consultation with major US VC firms and incorporates familiar concepts from Delaware corporate law:
- Board governance modeled on the flexibility of Delaware C-Corp structures
- Information rights aligned with standard US venture deal terms
- IP assignment clauses that meet the requirements of US institutional investors
- Exit mechanisms that facilitate IPOs on both European and US stock exchanges
Impact on Investment Rounds
The practical impact on startup fundraising could be transformative. Consider a typical Series A round:
Before EU Inc
A French startup raising a Series A from a German lead investor, with participation from a Dutch VC and a US fund, would typically need:
- French legal counsel for corporate matters
- German legal review for the lead investor
- Dutch legal review for the participating investor
- US legal counsel for the American fund
- Coordination of four different legal opinions
- Total legal costs: €80,000-150,000
- Timeline: 8-12 weeks
With EU Inc
The same round structured as an EU Inc investment would require:
- A single set of standardized EU Inc documents
- One legal opinion valid across all jurisdictions
- Total legal costs: €20,000-40,000
- Timeline: 3-4 weeks
The European Innovation Fund Connection
The EU Inc proposal is being developed in parallel with the European Innovation Fund 2.0, which is expected to allocate €10 billion for direct investment in European startups through 2030. The Innovation Fund has indicated that EU Inc entities will be eligible for simplified application processes, creating an additional incentive for startups to adopt the new corporate form.
Concerns from the VC Community
Despite the enthusiasm, some venture capitalists have raised concerns:
- Tax treatment uncertainty — how will different member states tax capital gains from EU Inc share dispositions?
- Insolvency proceedings — which court has jurisdiction when an EU Inc company fails?
- Regulatory arbitrage — could companies use EU Inc to circumvent stricter national regulations?
- Track record — institutional investors may be cautious about a new, untested legal structure
The European Commission has acknowledged these concerns and is working on supplementary regulations that would address tax coordination and insolvency jurisdiction. A transition period with parallel structures is also being considered to build confidence in the new framework.
What This Means for European Founders
For European founders, EU Inc represents a historic opportunity to compete on equal footing with US startups for global venture capital. The combination of flexible corporate structures, standardized documents, and international investor compatibility could make Europe a significantly more attractive destination for startup formation and growth-stage investment.
As one Berlin-based founder put it: "We used to incorporate in Delaware because European company law couldn't accommodate our cap table. With EU Inc, we can finally build a world-class company from a European base without the legal gymnastics."
Originally published on EU Inc News
