Europe has a startup formation problem it has largely solved, and a startup scaling problem it has not. The region continues to create more new companies per year than the United States, yet by early 2025 the EU counted only around 110 unicorns compared with 687 in the US and 162 in China, according to the European Commission's own figures. Part of the explanation is structural: a meaningful share of Europe's most promising deep tech founders end up building — or at least incorporating — outside the EU altogether. In March 2026, the European Commission proposed its most ambitious response yet: a single, EU-wide corporate legal form known as "EU Inc." This article looks at the scale of the founder mobility problem, what EU Inc is designed to fix, and what it means for corporate investors backing European startups.
The Scale of the Problem
Research on Europe's deep tech ecosystem — now a $690 billion sector capturing roughly a third of all European venture capital — found that 40% of European deep tech unicorn founders are now based in the US, having either relocated after founding their company or moved before starting it in the first place. Separate legal analysis covering founders who relocate found that the large majority who do so choose the United States specifically, rather than distributing across other markets — this is not diffuse brain drain, but a consistent, specific pull toward one destination.
The exit data compounds the picture: European deep tech exits are dominated by M&A rather than public listings, and the majority of that M&A value, by Europe's own analysis, is captured by US acquirers rather than European ones — meaning the companies that do succeed often end up owned outside the region regardless of where they were founded.
Why Founders Leave: The 27-Puddles Problem
The most consistently cited structural cause is legal and regulatory fragmentation. The EU operates 27 separate national legal systems with more than 60 different available company forms, a patchwork that the Draghi and Letta competitiveness reports both diagnosed as functioning like an "invisible tariff" on cross-border growth — the IMF has estimated the equivalent burden of persistent EU single market barriers at roughly a 110% tariff on services. In practical terms, a founder scaling from Paris to Berlin to Milan faces different tax codes, labor laws and filing requirements at every border, friction that a founder scaling from New York to Texas to California simply does not encounter.
This fragmentation shows up directly in financing too: European startups have been found to be only about half as likely as their US counterparts to raise financing rounds above $15 million, a gap that compounds the incentive to incorporate somewhere with deeper, more unified capital markets in the first place.
What EU Inc Is Designed to Fix
On March 18, 2026, the European Commission published its legislative proposal for "EU Inc" — formally the "28th regime" — an optional, digital-first EU-wide corporate legal form operating in parallel with the 27 existing national systems. Under the proposal, a founder anywhere in the world could register a company within roughly 48 hours, choose freely where to incorporate and headquarter within the EU, and operate under a single harmonized rulebook rather than navigating national variation at every cross-border step. The proposal also includes simplified insolvency procedures — explicitly framed as giving founders "the chance to try and test, and to start again" — and harmonized employee equity schemes, addressing a second long-standing complaint about Europe's fragmented approach to startup stock options.
The Commission has set an ambitious target of reaching political agreement by the end of 2026, with early political signals — including a European Council statement issued just one day after the proposal itself — suggesting real institutional urgency behind the timeline, even as the measure still requires approval from both the European Parliament and the Council before it can take effect.
Reasons for Skepticism
EU Inc is not the first attempt at a pan-European corporate form — the Societas Europaea, introduced in 2004, aimed at similar goals and saw limited adoption, largely restricted to larger businesses rather than startups. Critics of the current proposal have also pointed to a specific structural weakness: matters not explicitly covered by the EU Inc regulation or a company's own articles of association fall back to national law, which could reintroduce some of the same fragmentation the framework is meant to eliminate, depending on how narrowly or broadly the final regulation is scoped during negotiation.
What This Means for Corporate Investors
For corporate investors building or expanding a European venture strategy, the founder mobility problem is worth treating as a real, quantifiable risk factor rather than background noise: a portfolio company's country of incorporation and its founders' long-term location intentions are legitimate diligence questions, not formalities. If EU Inc is adopted on anything close to its proposed timeline, it would materially reduce one of the structural reasons promising European founders have historically re-incorporated or relocated outside the region — a shift worth monitoring closely over the next 12 to 18 months rather than assuming away in either direction.
Frequently Asked Questions
What percentage of European deep tech unicorn founders are based outside Europe?
Research on the European deep tech ecosystem found that 40% of deep tech unicorn founders are now US-based, having either relocated after founding or moved before starting their company.
What is EU Inc?
EU Inc, also called the "28th regime," is a European Commission legislative proposal, published in March 2026, for an optional, EU-wide corporate legal form that would let founders register and operate across all 27 EU member states under a single harmonized rulebook, rather than navigating 27 separate national systems.
When could EU Inc take effect?
The European Commission has targeted political agreement between the Parliament and Council by the end of 2026, though the measure still requires formal approval through the EU's ordinary legislative procedure before it can take effect.
Why do European startups struggle to raise large funding rounds domestically?
European startups have been found to be roughly half as likely as US counterparts to raise financing rounds above $15 million, a gap linked to comparatively limited institutional investor participation in venture capital in Europe relative to the US.
Conclusion
Europe's founder mobility problem is well documented, structurally understood, and — for the first time in over two decades — the subject of a genuinely ambitious legislative response. Whether EU Inc closes the gap will depend on how the proposal survives negotiation over the next year, but for corporate investors building a European venture strategy today, the direction of travel is worth factoring into portfolio construction and diligence now, rather than waiting for the outcome.