OPINION: Are we attracting talent to live in Europe or to build here?

Europe's high quality of life, job opportunities, and stability make it an attractive place to live. However, the challenge lies in attracting talent and companies to not just live here, but to build operations as well. Unlike attracting people for lifestyle reasons, establishing a business presence in Europe means companies must bring teams, hire locally, and develop R&D that fosters a thriving entrepreneurial ecosystem beneficial for the continent.

Unfortunately, Europe is lagging behind the US in this regard. Approximately 10% of EU scale-ups relocate abroad, with a significant 85% moving to the United States. Furthermore, between 2008-2021, nearly 30% of unicorns chose to move their headquarters abroad, predominantly to the US. Despite this trend, there are promising cases where startups like Langdock, a Berlin-based AI startup, have successfully relocated their parent company from the US to Germany with an ambitious goal of becoming a "European hyperscaler."

To understand why startups choose between the US and Europe, it is crucial to examine Europe's main competitor. The US is not only the primary destination for European startups but also holds 85% of startups worldwide. American venture capital firms often require a Delaware parent company, a US-based legal entity controlling the startup's operations, as a prerequisite for investment.

Additionally, the US offers a single market, while Europe consists of 27 member states, leading to longer sales cycles across European jurisdictions.

While European startups may only partially exit, with most companies retaining operations in their home country, only around 75% of relocating CEOs physically move to the new destination. Moreover, the capital gap between Europe and the US is substantial, with the US boasting €930 billion in available capital compared to €150 billion in the EU. European investors are understandably more cautious given the disparity.

Despite these challenges, Europe has been successful in attracting talent. Visa schemes like Germany's Blue Cards, France's Tech Visa, and Portugal's Digital Nomad Visa D8 have facilitated the movement of skilled workers into the country. However, attracting talent goes beyond merely bringing individuals into the country. It is essential for companies to build teams, hire locally, create R&D capacity, and remain long enough to strengthen the ecosystem.

There are examples of European startups successfully establishing a presence, such as Unicorn Factory Lisbon, which has attracted 82 technology companies to set up offices in the city, creating over 16,000 jobs. Barcelona is another strong example, with six unicorns headquartered in the city and contributing to €36 billion in combined enterprise value.

Estonia has also innovatively attracted companies through individual e-residencies, providing global entrepreneurs with access to the EU market and a 0% corporate tax rate on reinvested and retained profits.

To address the loss of talent, Europe must tackle symptoms differently. The focus should shift from merely easing restrictions that bring talent into the country to fostering a culture where companies build teams, hire locally, and establish R&D capacity, ensuring that talent stays long enough to make a lasting impact.