Scaling Europe
00:06:23 · Simon Schaefer, Sebastian Johnson
If you look at, of course, also previous experience of member states and even everyone with European Union, handing over responsibility to the European Union hasn't always worked in the favor of who's handing that over, right? So I'm not surprised that the first pushback you get is why would we create another complex institution? Yet single economic realm, why would we create 27 versions of the euro? Right? I mean, the euro is also... It works because there's only one. And so that's that's where we're coming from, and there's like a total of five non negotiables. Happy to touch on every one of them. It's quite it's quite geeky. It's a technical matter. [00:07:02] S0: And what what has been the general pushback so far? Has it been, you know, an aversion to the kind of, like, centralizing more power within the EU? Is it a sort of, like, cynicism that actually maybe the EU itself won't want it that well? What what has been the pushback to these proposals?
00:07:17 · Simon Schaefer
[00:07:17] S1: I think the... First of all, the the the good thing there is that it used to be nice to have innovation economy, and since the Draghi and the letter reports, which I which I wouldn't want everyone to have a look at because they're really important for what's going on right now. Since those two reports, it's become not nice to have, but a must have. Innovation economy is also relevant for our security. We see how sovereignty is a big topic nowadays and has never been as on top of the agenda as it is today. Now, of course, we're touching several monopolies, would I dare I say. Right? One example is notaries in Germany. Believe it or not, you've seen the post recently, people actually have to read out loud every contract you sign, almost every contract you sign, it's stark simplification. And then you have the notary sitting there going through a series A stack of documents and reading it out loud, right, and you have to be there, and if you're not there, you have to give them a power of attorney, and they have to do this manually, completely offline process. You can do it online, but you need to be certified, yada yada yada, so it's a it's a old structure. Andreas, my my my partner in this EU-INC team, he he almost put it like, you have to ask the elderly for approval to actually get the transaction done. Right? And I thought that's a very fitting comparison actually, because it's so anachronistic. And of course, they don't want that. Second big adversary, which which not I don't even personally, I don't agree it's an adversary. It's just a downside protection that they're looking for is trade unions. So if you look at worker protection, right, I mean, obviously, you look at industrial age and industrialization and the results from that, worker protection is an extremely important topic. But is it really necessary for a German startup fast growing company to have employee representation in the board decisions when they're meeting with their VCs? I don't think so. I think the appropriate tool for today's time is to have them be shareholders, employee stock options, right, and have them sit on the table as shareholders and vote for whatever it is that the the board decides shareholders need to be voting for. So I think some of these pushbacks are from a a challenging position or or a lack of knowledge even about the innovation economy.
00:09:33 · Simon Schaefer, Sebastian Johnson
If you're not in the trenches, if you've never raised capital from a VC or invested in a company, how can you know these things? Right? And so people tend to stick to what they've built as the the thing that they're looking to protect, and, you know, we're rattling a lot of cages here. [00:09:50] S0: Yeah. It's really interesting. So, yeah, the the notaries has been a big one, of course, been very viral. It's interesting about the trade unions. You know, the notaries are obviously German. Are there markets or countries which are more cynical or more aggressively pushing back? [00:10:04] S1: Yeah. Of course. So it's not the country Germany, but it's German trade unions, obviously. If you look at one of the shadow repertoires and the leader of the pike actually, René Repasi, he's a social democrat from Germany. His mandate, his his constituency is social democrats and of course trade unions are a big part of that. Right? And so codetermination is a big topic in Germany. It's not a topic at all in Spain, and so there's there's these various levels. But, see, that's that's precisely, and this this touches on another nonnegotiable that we're trying to keep in there that member states want to delete, which is insolvency. We [00:10:41] S0: can
00:10:41 · Sebastian Johnson, Simon Schaefer
[00:10:41] S0: can [00:10:41] S1: get to the details of why and how, but that's that's another indicator of, like, a lack of understanding of this innovation economy where, you know, in the end, insolvency is a really rare case for the startup economy. Like, your your normal case would be, you know, you have venture capitalists on board, okay, venture capitalists on board, okay, you find a way for a fire sale or you unwind the company professionally and close it. Right? But for the company to lose its revenues and no longer be able to pay its obligations for a court to close the company, that's kind of like not really our case to optimize for. Yeah. And so, yeah, there's there's a lot of these where you have gap of knowledge and Germany is definitely a country that has an industrial backbone. Right? And as such, some of the structures that they've come to live with are not necessarily compatible with what we're looking at in the innovation economy. [00:11:34] S0: And how do we get through that? Is it a case of convincing them to get on our side? Or is it a case of, I don't know, trying to bypass it or convince people in charge that actually they're not well informed, they're making the wrong decisions? How do we how do we get over those objections?
00:11:34 · Sebastian Johnson, Simon Schaefer
[00:11:34] S0: And how do we get through that? Is it a case of convincing them to get on our side? Or is it a case of, I don't know, trying to bypass it or convince people in charge that actually they're not well informed, they're making the wrong decisions? How do we how do we get over those objections? [00:11:47] S1: My European answer would be fine. Compromise? My entrepreneurial answer is, you know, that's their problem. I I I I have two hearts beating here, because the one thing is compromise where compromise is possible, yes, but not at the cost of the original goal. And let's put a framing around that, because what's the original goal? We currently... I don't know. Think yesterday or the day before yesterday, one of the guys from deal room pulled a chart on how much value was created by European founders abroad, right, in trillions. And, like, that's what we're trying to get away from. We're trying to have Europeans found in Europe, scale in Europe, and finance in Europe. Right? Yeah. And our competitor is Delaware. And that we we see EU-INC from the team's perspective, we see that as a first building block of, like, getting somewhere. This is infrastructure. This is a base layer component, but this is by no means the end goal, and it's not touching IPOs yet. Right? [00:12:43] S0: Yeah. Yeah.
00:12:43 · Sebastian Johnson, Simon Schaefer
[00:12:43] S0: Yeah. Yeah. [00:12:44] S1: So really there's this... Yeah. I I want to say from an entrepreneurial perspective, whatever is in the way of this might one way or the other have to be overcome in in whichever way possible. We would be used to hack it, hack the system. At the very beginning of EU Inc, we actually thought about it. Why not approach it like Deel or Remote have done it and and build this cluster of companies that we make available as a service for people so you can easily scale across Europe. Right? But sounds like a ten year time frame to do that. Yeah. That's really interesting. 70 billions raised. Yeah. Yeah. But that's the normal solution entrepreneur would get to. Right? [00:13:25] S0: Yeah. And what's it been like working with the people in the EU itself? Right? Because we... You know, there's so many memes about the EU, and I don't think it's particularly fair. A lot of the anti EU propaganda that we get, especially from from The US, it actually feels like the EU has been pretty receptive to a lot of this stuff, and it's actually been surprisingly willingly to engage and to try and get it over the line and to compromise. What's been your experience working very closely with a lot of these kind of politicians or bureaucrats?