You just had your million-dollar idea and you are excited and ready to do whatever it takes to make it a reality.
But… you run into a brick wall. Don’t worry though, it is the same brick wall that most other European startups face when wanting to scale up, develop, and collaborate. These are some of the most common financial challenges that startups face in the European market.
Limited Collaboration Possibilities
As compared to the startup giant that is the United States of America, European market borders, laws, and regulations do not allow for full talent acquisition. The European market is not taking advantage of the diversified labour that each country can offer. The limited labour mobility reinforces bias towards home-market talent.
For big countries like Germany, it does not prove to be a problem, but for smaller countries it limits their ability to acquire professionals for greater growth.
Today, with more work shifting towards an online setting, many startups find ways to collaborate and acquire professionals without ever meeting in person. While it seems to be a solution to the problem, the jurisdictional regulations between the European countries are proving a problem of fund distribution.
Developing a unified system that allows for the best talent to be hired and paid requires great investment upfront. Hiring the right talent seems to be the easiest way of reaching early success with your startup.
Yet, the dispersed ecosystem of European countries makes it difficult for startups to efficiently run their operations without spending a large amount of money upfront.
Lack of “Risk Culture”
When it comes to funding your project, for many the go-to decision is to look for investors. Investors’ risk appetite differs based upon different factors. Many choose to avoid risk due to political, economical, and other reasons.
Investors are often reluctant with risk-taking due to the diversified European setting. With a lack of risk-taking culture, many startups are forced to sacrifice their growth potential in the early stages because of the need to give a return on investment.
For example, a startup might narrow its ambitions and focus on quick revenue rather than long-term growth in response to risk aversion on the part of an investor. This changes the startup’s goal of global dominance to a mission of survival.
Whether you are an experienced entrepreneur or not, funding is an obstacle that everyone faces when wanting to start their own business. The process can sometimes be lengthy, painful (with rejections), and demotivating.
With banks seeing too much risk investing in your startup, and your business model not being accepted by government grants and subsidies —you have to look elsewhere to raise capital.
Many startups are founded upon relatives’ money. As only a few manage to pursue the ambitions of private investors.
The disadvantage lies in the jurisdictional restrictions between countries. Many investors cannot invest in foreign businesses and for developing countries like Romania and Bulgaria, and this proves to be a big problem. Without sufficient foreign investment, developing countries in Europe need to capitalize on increasing and educating human capital as well as increasing innovation.
When facing these obstacles as a new business owner, startup or entrepreneur, know that you are not alone. There are multiple ways that you can overcome this. Joining a local startup organisation or group will help guide you when facing these obstacles. The group might be able to offer you some advice and consolidation.
When looking at financial solutions, there are a myriad of options out there. Using a digital bank could offer you assistance with your financial woes.
Velvet Platform is a great tool to help you financially with your startup. Keep an eye on the latest Velvet Platform developments.