“Yes” to a European employment contract specific to start-ups

by bold-lichterman

European entrepreneurs often complain about the difficulty of raising funds on their own soil. Indeed, on average, when 10 million euros are raised in the United States, French entrepreneurs somehow manage to raise 1 million euros. If, according to EY, fundraising in France has shown healthy dynamism since the start of the year (+ 70% compared to the first half of 2014), we are still lagging behind the United Kingdom and Germany (5 times less fundraising over 100 million euros for example) and of course compared to the United States.

In Silicon Valley, there are three times more start-ups than in Europe. Of the 130 Unicorns (i.e. start-ups with a valuation of over $ 1 million) identified worldwide, only 40 are European, including 3 French.

Of course, in the United States, investors are distinguished by less reluctance, risk appetite being much more developed there. But this does not explain everything. We know, for example, that the size of the American domestic market (400 million inhabitants) allows start-ups to develop an ambitious business model with ease and at a lower cost. In Europe, seasoned entrepreneurs advise targeting the international market from the start due to the limited nature of each internal market. The largest local European market, Germany, is five times smaller than that of the United States.

As the manager of a technological start-up, I come up against the European reality on a daily basis: the slightest opening of a subsidiary is a puzzle, due to the existence of a nebula of overlapping rights, and ‘social obligations, regulations and of course, different languages ​​and cultures. The French employment contract has nothing to do with that of the British and the Germans. In the end, we have to reinvent everything with each new opening, which is expensive and takes a lot of time. Creating a legal entity is ultimately complex in Europe, and implies having legal, accounting and financial teams in each country, if only for a question of language and culture of law.

A contract governed by European law, or at least a multilateral agreement of the countries of the Euro zone, would provide a common basis for harmonizing the terms of recruitment or dismissal, social charges, VAT rules, etc. Each country now has its own labor law. There was once talk of harmonizing it on a European scale, but today it seems that European leaders have abandoned this idea. The Ryanair case, prosecuted at the criminal level for concealed work, demonstrated all the difficulty of the exercise.

Europe today is not the big domestic market announced, despite the free movement of goods and people. As a result, when a French start-up seeks to raise, for example, 100 million dollars for its expansion in Europe, it ultimately obtains and at best 10 times 10 million dollars. Development can therefore only be done step by step. We are far from the real pace of world affairs.

A simplified employment contract, exclusively dedicated to start-ups, which would also benefit from a specific statute with its own regulations, would make it possible to resolve some of these problems. A first step has been taken with the introduction of the single currency. But does the tree hide the forest today? If we are not able to harmonize our social regulations, we will not be able to make Europe. We can see that out of the 28 countries of the European Union, only 17 have adopted the single currency. Why not imagine initiating a social Europe with a limited number of countries, like the Euro?

The only project in Europe is, it seems, to maintain the Euro zone at all costs. The rest is not moving forward, and even in certain aspects, Europe is retreating. The absence of formal regulations regarding the use of private data is one example among others of the difficulty of Europe in federating.

While large companies have the human and financial resources to manage this complexity, start-ups must struggle with their limited means. The presence of legal teams is often correlated with possible fundraising. And national investors focus above all on their own territory, while leaving it to others to finance international development. Once again, we quickly reach the limits of the European market.

The establishment of a single European contract for start-ups would break down these barriers. The first step could be the adoption of a single employment contract, as proposed by the former Director-General of the World Trade Organization, Pascal Lamy. But this idea today arouses little enthusiasm. However, the digital sector could, as explained by the Cercle des Economistes, perfectly suited to social experiments at European level. While the number of young people entering the labor market in France exceeds that of retirees who leave the same market (750,000 against 600,000), the unemployment problem will intensify if labor regulations do not change. . We have here an avenue that could allow start-ups to support their development. What are we waiting for?

laurent-lefouetLaurent Lefouet is Managing Director – EMEA at Anaplan.