Startups side with Draghi: EU red tape hampers growth

Europe’s tech scene has a message for Brussels: Your artificial intelligence and data rules are bad for business.

In a landmark survey on European tech performance, startup founders and investors lamented that the EU’s rulebooks on AI and data protection have “negatively” affected the conditions for starting or scaling up a tech company.

The tech industry is urging the incoming European Commission to start the cure prescribed to it by former Italian Prime Minister Mario Draghi, who in a landmark economic report in September warned the Europe’s complex patchwork of laws was what was stopping its technology sector from catching up with the United States and China.

“The EU’s regulatory stance towards tech companies hampers innovation,” former Italian Prime Minister Mario Draghi wrote in his landmark report on competitiveness, adding that the EU had about 100 tech-focused laws holding back its tech firms from competing globally in cutting-edge technologies, including AI.

Tech giants including Meta and Google have doubled down on that message with fierce lobbying campaigns warning European leaders that its regulatory roadblocks will cause the Continent to miss out on the boom in artificial intelligence.

The new tech survey echoed those warnings loud and clear. Sixty percent of survey respondents said the 2018 General Data Protection Regulation negatively affected the startup and scale-up environment, while 25 percent said it had no significant effect; only 15 percent said its effects were positive.

The Artificial Intelligence Act also scored poorly: Fifty-three percent said its effect was negative; 27 percent said there was no significant influence. Only 20 percent said it had a positive effect.

“Anything that is perceived to create … different sort of conditions versus your competitors operating in other markets is something that is ultimately seen to be a handicap versus a tailwind,” said Tom Wehmeier, a partner at Atomico.

The survey is part of a landmark yearly study by VC firm Atomico on European tech performance. It received about 3,500 responses.

The European Commission has already begun to change its course.

Commission President Ursula von der Leyen floated “AI innovation” as a priority for her next mandate. Finland’s Henna Virkkunen, poised to be the EU’s next tech czar, said in her European Parliament hearing last week that she wanted Europe to become an “AI continent.”

The report indicates another hurdle for European tech companies when it comes to winning the global AI race: a massive funding gap.

European AI companies raised $11 billion in funding this year, compared with $47 billion by U.S.-based AI companies.