Erasmus University Rotterdam: Scaling the European dream, from research insights to EU strategy

This week's European Scaleup Institute conference in Rotterdam felt like watching two movies at once. On one screen, we had researchers from across Europe presenting hard truths about why European startups struggle to scale. On the other, the European Union was rolling out its shiny new Startup and Scaleup Strategy, promising to make Europe "the best place in the world to launch and grow global technology-driven companies." The timing was almost too perfect. After 2 days of presentations and ongoing policy announcements, one thing became crystal clear to me: Europe has diagnosed its scaling problem correctly, but the real test will be whether policymakers can stomach the medicine that research suggests we actually need.

Let's start with what Moritz Jim Tilgner's research really tells us. Europe faces a significant gap in unicorn creation compared to the US and the UK, with a factor of 22 in quantity and 27 in valuation. These numbers represent a fundamental competitive disadvantage that goes beyond simple market dynamics. The research - as I understood it- reveals structural problems, particularly around equity compensation. E.g. Germany's regulations are seen as inadequate for attracting and retaining talent. while significant information asymmetry exists between companies and employees regarding equity compensation packages. My take on this is that tools used at Silicon Valley to attract top talent are either unavailable or poorly understood in European markets.

However, it's worth noting that equity compensation itself isn't inherently a structural problem, but rather a solution to engage, motivate and retain top talent for growth, which is crucial for company success. The challenge lies in the regulatory frameworks and information gaps that prevent European companies from effectively implementing these tools.

The EU Strategy acknowledges this challenge and promises to "explore best practices concerning the treatment of employee stock options" and "harmonise certain aspects of their treatment." While these initiatives address real problems, the timeline for European harmonisation typically extends over years. Meanwhile, the competitive pressure for talent continues to intensify, raising questions about whether regulatory solutions can move quickly enough to prevent further talent migration to more established tech ecosystems. This is particularly relevant now, as the US ecosystem may soon become less attractive to top talent, which may choose to relocate -- but that is my personal opinion.

For me the most thought provoking insights came from studies that actually looked inside scaling companies. In that regard, I'd highly recommend Ellani Amirian findings as required reading for every entrepreneur, in short and given a flexible interpretation: companies that scale revenue without scaling their workforce are essentially burning out their employees. These studies directly contradict the Silicon Valley myth of "move fast, break things". Research suggest that European companies might actually have an advantage if they can

resist the temptation to optimise purely for growth metrics. But that requires a level of patience and long-term thinking that VC markets don't typically reward. As Ruben van Werven points out in his research, the internal organisation consistently lags behind company size during scaling. Implying that most scaling failures aren't about market fit or funding- but about basis organisational competence. Which made me think, is scaling about growth, or is it sheer survival? Or is it both?

Something European policymakers should take notice of is Qian Zhou's research, which shows that combining patents and trademarks significantly enhances growth, and high-growth firms exhibit greater absorptive capacity for innovation, allowing them to convert it into profitability more effectively than low growth-firms. The EU strategy acknowledged that only one-third of patents filed by European universities are commercially exploited. The proposed "Lab to Unicorn Initiative" aims to accelerate the commercialisation of research results through supporting leading European start- and scaleup hubs and developing blueprints for licensing and revenu-sharing. There is a huge potential to valorise unused patents and bring them successfully to the market by involving top entrepreneurial talent. Perhaps an opportunity for social sciences universities like Erasmus University Rotterdam?

Amongst a lot of other things, two things I recommend the EU to pay attention to:

1. The relocation problem: conference presentations showed how European companies start locally but relocate to e.g. the US as foreign investors lead their funding rounds, prompting the EU strategy's proposed Scaleup Europe Fund to provide European alternatives.

2. Different industries face distinct scaling challenges, from financing gaps in some sectors to difficulties transitioning from prototypes to commercial contracts in others. As Simone Brummelhuis (serial entrepreneur and founder & CEO of Borski Fund) pointed out, specifically in certain sectors like MedTech, entrepreneurs inevitably have to look at US investors as they don't find the large amount of capital and ambition from EU investors needed to scale to the next level.

The real test ahead

Research presented at conference point to several considerations for entrepreneurs. The mental health and organisational development research suggests that sustainable scaling requires attention to internal capabilities as well as external market opportunities. Giuseppe Pirrone emphasised that scaling is a dynamic process with distinct phases, each requiring different strategies and resource dynamics.

International mobility research shows that with each new funding round, innovative EU companies are likely to encounter incentives to relocate abroad.

The Commission's commitment to propose a 28th regime, Innovation Act, and various funding initiatives is designed to address these challenges identified by researchers - from regulatory fragmentation that complicates scaling across borders, to funding gaps that push

companies toward foreign investors, to commercialisation barriers that prevent research from reaching market.

However, scaling success involves complex dynamics, is not a linear journey, requires adaptive strategies, and different types of scaling have varying effects on employee (mental)health and organisational development. The real test isn't whether Europe can draft better policies - it's whether regulatory solutions can actually solve problems that the research shows are fundamentally about human psychology, organisational complexity, and market timing. The European Scaleup Institute conference demonstrated that Europe has both the research capabilities and policy ambition to build a world-class innovation ecosystem. The next step would be to incorporate more of these scientific insights so the policies are evidence-based and respond to the real challenges companies face rather than idealised policy frameworks.

This article has been written by Farshida Zafar, director of the Erasmus Centre for Entrepreneurship.