European competitiveness: an operator's view

Andrew McAfee has a long piece in Foreign Affairs, Europe Can't Get Out of Its Own Way, on European competitiveness. The short version: EU productivity is now 20 percent below the US, only two of the world's 100 most valuable tech companies are in the EU, and the Draghi report, even if fully implemented, would not fix the root cause. His diagnosis of that root cause is blunt: "It is that they are doing too much to impede it."

I mostly agree. But the piece is written from 10,000 meters, with market caps and policy bundles. I want to add the view from the ground floor, because since 2023 my job at Bakeca has been exactly this: launching new ventures from inside an Italian company and scaling them outside Italy. Two startups, strict budget, international growth. So here is what actually slowed us down, and what didn't.

What he gets right

His list of fixes is stock options not taxed until exercised, flexible labor markets, pass-through partnerships for VC funds, minimal paperwork. And his point that all of these sit with individual member states, not with Brussels. That last part is important and a bit uncomfortable. It means nobody gets to blame "Europe" as an abstract thing. Italy could fix its own piece tomorrow.

Paperwork is the one I feel most. Not because any single form is terrible, but because they stack. Every step (a new entity, a new hire, a new market) comes with its own small tax of time. Individually nobody notices. Added up, it's weeks of a small team's life, and in a new venture weeks are the only currency that really matters.

The single market is not that single

Here I would push back a little. McAfee uses Israel to challenge the idea that a small home market is what holds European startups back. Fair enough, size is probably not the issue. But I think that argument misses the point. The problem is not that the market is small. It's that it is 27 markets wearing one jacket.

Scaling a startup in Europe does not feel like scaling one company. It feels like launching the same company several times, each time with a slightly different rulebook. The single market barriers that bite are rarely the big dramatic ones. They are the boring ones:

Payments. Stripe makes taking a card payment boring, which is the best compliment I can give it (I have integrated it in pretty much every product I have worked on, from eKoodo to Bakeca). Everything around the payment is not boring: invoicing, VAT, local habits about how people like to pay.
Hiring across borders. At GreatPixel I led a team of people from 7 countries. Finding the right people across Europe was never the hard part. Contracts, payroll and the local rules behind them were.
Language and positioning. You don't translate a go-to-market, you redo it. That costs media budget and time, per country.

A US startup gets one set of problems and then a very large market. A European one gets the problems first, multiplied, and the market in slices. None of this shows up in a productivity chart, but it is exactly where early money disappears.

Culture, and where the money came from

McAfee points out that the 50 most valuable EU companies are on average more than 150 years old, and that old successful companies struggle with fast change. I believe it. What I would add is that the risk aversion doesn't stay inside the big companies, it leaks into everything that sells to them. I once delivered a canteen app for a university campus in Rome. The software was the easy part. The long approval process through procurement and IT was the real project.

To be fair, I have also seen the opposite. Bakeca gave me a new division with full P&L and real freedom over technology, team and strategy. That is not a typical Italian corporate setup, and it is the reason we could launch two startups in six months. So innovation in Europe is possible inside established companies. It just depends too much on one leadership team deciding to take the risk, instead of being the default.

And then there is eKoodo, my first startup, a marketplace for sport schools and instructors. I split my time between Milan and Santiago, and in 2016 the investment that came from a government came from the Chilean one. I'm not going to turn that into a big theory about Italy, one data point is one data point. But I remember thinking it was a bit strange that the public money betting on an Italian founder was from the other side of the world.

Where I'm unsure is how much policy can fix on its own. Tax rules for stock options, yes, that's a law you can change. Making 27 rulebooks feel like one, or making a procurement office comfortable with a two-year-old supplier, is slower and more cultural. I would still start with the laws, because they are the only part anyone can change by next year.