In U.S.-EU Relationship, Startups Can Benefit From a Race to the Top
By Nathan Lindfors, Policy Analyst, Engine Advocacy & Foundation
Today in Lisbon, Portugal, a collection of European nations launched the European Startup Nations Alliance, a formal body to support the implementation of the Startup Nations Standard. The standards, originally announced in March, are eight best practices designed to accelerate startup growth on the European continent and “make the European Union the most attractive” place to launch and grow a startup.
While the standards are designed to benefit European startups in Europe, American startups stand to gain as well. So much of digital trade policy and international competition today — including between the U.S. and Europe — embodies a race to the bottom for startups, whether through data-localization policies that create barriers to trade or regulations targeting American firms that lead to increased costs for startups. The Startup Nations Standard instead inspires a race to the top — a competition for the brightest tech talent, most impactful innovations, and strongest startup ecosystem, with tried and true policies to support startups. The U.S. should rise to the occasion by implementing key components of the Standard here at home.
For example, Engine has long advocated for a Startup Visa — one of the European standards — to cement the U.S. as the best place to found innovative, scalable, prosperous new businesses. Immigrant founders are responsible for an outsize portion of business ownership and contribute significant economic value. However, current U.S. immigration policy makes it tougher for immigrants to come to the U.S. to start innovative companies. As one immigrant startup founder that supports other immigrant entrepreneurs told us, it places them “in this weird limbo, waiting to see if they’ll have the option or ability to come to the U.S.” The U.S. is already starting to lose tech talent to other countries, and without a policy change, that trend is likely to accelerate as more European countries implement Startup Visas as part of the Standard.
Another standard involves startup stock options, which have been recently implicated in U.S. policy debates. As part of negotiations around the Build Back Better reconciliation package, policymakers are considering changes to the tax treatment of qualified small business stock (QSBS). The current favorable treatment of QSBS — which provides a capital gains tax exclusion of up to 100% on sales of stock meeting certain requirements — incentivizes investment in startups and promotes employee retention. To remain competitive in the global startup ecosystem, the U.S. should strengthen startup stock options, not undermine them.
The six remaining Standards similarly involve policies that Engine advocates for, including easing regulatory burdens, promoting access to capital, and advancing diversity in the startup ecosystem. While the European Union has a history of lackluster implementation of its pro-startup policies, today’s event marks a step toward a stronger global startup ecosystem. American policymakers should consider what the Europeans’ Startup Nations Standard means for U.S. startup competitiveness and respond in-kind with policies to keep the U.S. the best place to start and grow a company.
Engine is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups. Engine works with government and a community of thousands of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues.
