Global Shift in Motion

In recent years, many companies and investors have started rethinking where and how they do business. While the United States has long been the center of global tech and innovation, new risks are starting to change that picture.

Geopolitical tensions, trade restrictions, and shifting policies are creating uncertainty for non-US companies working with US-based services or launching operations there. At the same time, the cost of doing business in major US tech hubs has continued to rise. Add to this the growing number of government interventions in tech ownership, data access, and digital infrastructure, and the result is clear: the landscape is shifting.

Many founders and investors are now looking toward regions that offer a more stable and predictable environment. Europe is emerging as one of the most promising alternatives – not just for funding, but also for building and scaling tech companies with long-term resilience in mind.

What’s Changing in the US Tech Landscape

2025 has brought several new challenges for companies operating in or relying on the U.S. tech ecosystem. These challenges are not limited to political concerns – they also include economic pressure, legal uncertainty, and rising regulatory complexity.

Increased Export Controls

New restrictions announced in January 2025 expanded export controls on advanced semiconductors and AI chips. These regulations limit global access to high-end graphics processing units and other advanced AI processors and are part of a broader U.S.–China tech decoupling strategy. For companies relying on U.S.-based hardware or services, this adds a layer of compliance complexity and supply uncertainty.

Rising Pressure on Privacy and Data Storage

The U.S. is moving toward stricter federal privacy regulations. In 2025, the American Data Privacy Protection Act (ADPPA) gained new momentum in Congress. While it hasn’t passed yet, many companies are preparing for future compliance obligations that may resemble Europe’s GDPR but with different legal interpretations, complicating global data strategies.

At the same time, concerns remain about data safety in the U.S. Following multiple reports of data access issues and government surveillance, some founders view the U.S. framework as unpredictable. While GDPR is often seen as complex or strict, many entrepreneurs also appreciate its clearer rules and stronger enforcement when it comes to protecting user data.

Unstable Legal Landscape for AI

Unlike the EU, which passed the AI Act (effective from 2026), the U.S. still lacks a federal AI law. While some federal proposals have been introduced, including action plans criticized for lacking safety safeguards and favoring industry interests, none have been formally adopted. In 2025, several states – including California, New York, and Texas – introduced their own AI regulation proposals, creating a patchwork of rules that makes it harder for AI startups to operate nationally.

Unpredictable Political Climate

With the 2026 U.S. midterm elections approaching and shifting policy trends, changes in immigration, trade, and antitrust rules have increased unpredictability. Foreign founders face added hurdles as visa approval rates for startup-related and H‑1B visas have dropped in early 2025, limiting access for international entrepreneurs.

Tighter Foreign Ownership Restrictions

In recent years, the U.S. has increased scrutiny of foreign ownership in tech, especially when it involves access to user data, infrastructure, or AI systems. Several foreign firms have faced pressure to divest from U.S. operations or restructure ownership to comply with national security expectations. A high-profile example is the 2025 legislation requiring ByteDance to sell TikTok’s U.S. operations or face a nationwide ban. While the law was focused on national security, it also sent a broader message: foreign-owned tech companies may face forced divestments in the U.S. if political winds shift.

Why Europe Is Attracting Founders and Investors

Public Investment That Delivers Big Returns

In 2025, the European Commission’s Horizon Europe program allocated €7.3 billion to green and digital innovation. Since its launch, the program has supported over 15,000 projects, with a total budget of more than €43 billion. Some estimates show it creates up to €11 in GDP gain for every €1 invested.

High ROI From EU-Backed Startups

With just €12 billion in public support, around 13,600 startups in Europe have already created roughly €520 billion in total value and attracted €70 billion in private capital –  showing Europe’s ability to turn modest public funding into real private growth.

Growing Venture Capital Ecosystem

Europe’s share of global VC stood at 13% in the first half of 2025, with strong activity in AI and climate tech. In Q1 2025 alone, European startups raised $12.6 billion across more than 2,400 deals – showing resilience despite global VC slowdown.

Targeted Support for DeepTech and Climate Innovation

The European Innovation Council (EIC) provides up to €2.5 million in grants and up to €15 million in equity per company. In its latest round, €230 million was awarded to nearly 40 startups across health, space, and sustainability – with 32% of the winners led by women.

New EU Strategy To Close the Gap with US and China

In May 2025, the European Commission announced the “Choose Europe” initiative, including a €10 billion Scaleup Europe Fund to help startups scale faster and attract more founders to the region.

Real Success Stories of Fast Growth

European AI firms are quickly gaining ground. German automation startup n8n is targeting a $1.5 billion valuation, and Swedish platform Lovable is reportedly raising at a similar level. Meanwhile, French AI company Mistral is in talks to raise $1 billion at a $10 billion valuation.

A Better Environment for Regenerative and Purpose-Driven Business

Europe has become a preferred location for founders building regenerative and mission-driven companies. It offers dedicated funding, strong institutional support, and a policy framework that favors long-term thinking over short-term returns.

One example is the EU’s Regenerative Innovation Portfolio, which supports partnerships focused on sustainable agriculture, circular food systems, and carbon capture. These initiatives are helping shift entire sectors toward more responsible models, and they are backed by cross-sector collaboration between startups, investors, and governments (eitfood.eu).

Startups building solutions in this space can also benefit from cascade funding – a simple, low-barrier grant scheme that provides equity-free support of up to €300,000 to innovative SMEs in digital, green, and social impact domains (Wikipedia).

Larger initiatives like the Enterprise Europe Network support early-stage companies in navigating regulation, accessing international markets, and finding the right EU programs for growth. This network is especially useful for startups with sustainability or social innovation goals (Wikipedia).

Funding tools are also aligned with these values. The EU’s recovery program, Next Generation EU, has mobilized over €1.8 trillion, with 37% of the budget tied to climate-related and green transition goals (Wikipedia).

This policy and funding environment has fostered a strong ecosystem of climate tech–focused VC funds across Europe. For instance, Norrsken VC closed a €320 million impact fund – making it one of Europe’s largest early-stage impact investors – focused on climate, energy, biotech, and AI aligned with UN Sustainable Development Goals. Pale Blue Dot, a Swedish seed-stage fund, exclusively backs climate tech startups in Europe and the U.S. advancing a sustainable future through scalable solutions like energy, food systems, and carbon reduction.

Case for Building in Europe: Lower Risk, More Autonomy

Europe offers a tech ecosystem with lower costs and more strategic autonomy, though founders must still navigate the complexity of 27 national legal systems. Efforts like the proposed “28th regime” aim to simplify cross-border operations and improve regulatory consistency across the EU.

Startups in Europe tend to run leaner. On average, European companies burn 25–50% less than their U.S. counterparts – a figure highlighted in a Toptal analysis showing significantly lower startup burn rates across Europe compared to the U.S.  

Europe is generally more affordable for starting and scaling a company. Cost of hiring a senior software engineer is often around €80k–€120k, compared to $160k–$200k in the U.S., depending on location (blog.g2vp.com). This enables startups to maintain strong teams at lower cost and reduces pressure to raise immediately.

Founders also benefit from greater autonomy. European startups often adopt a step‑by‑step market expansion approach—testing in one country or region before scaling broadly. This sequential strategy helps refine product–market fit and processes before incurring high costs (startupgrind.com).

For many entrepreneurs, Europe also feels more stable and structured. While regulations exist, the clarity of rules and social systems can reduce extreme swings in policy or investor behavior – especially compared to the sharply fluctuating U.S. regulatory and financial cycles. This gives founders more predictable planning horizons, especially for long-term and impact-driven business models.

Finally, personal lifestyles matter. Several founders cite better work–life balance, affordable housing, and a strong social safety net as reasons for choosing European hubs like Berlin, Amsterdam, or Lisbon over U.S. cities. One founder even noted that moving to Berlin allowed them to build a 45-person team on a lower cost base than San Francisco, while still raising capital across Europe and the U.S. (businessinsider.com).

Squads and Squads Fund: Your Ally in Europe

Squads has worked closely with early-stage startups across Europe for over a decade. The team’s experience spans building MVPs, scaling products, and supporting go-to-market strategies in multiple European markets. This hands-on work has shown how Europe’s structure – its talent base, funding options, and regulatory clarity – creates a strong foundation for long-term, sustainable business growth.

Through Squads Member Fund, the organization supports startups that align with regenerative business principles and solve real-world problems. Many of the companies backed by Squads are purpose-driven, capital-efficient, and built by teams distributed across the continent. The team has also helped founders navigate EU innovation programs, access non-dilutive funding, and grow in markets where strategic pacing matters more than hypergrowth.

The Squads model combines product and growth expertise, support in building effective teams, and early-stage investment when appropriate. More importantly, Squads works alongside founders who want to build responsibly and with autonomy – goals that are increasingly realistic and well-supported in the European environment.

The Opportunity Is Real – and It’s European

The conditions for building and investing in tech are changing. As uncertainty grows in other regions, Europe offers stability, support, and long-term potential. Its ecosystem rewards thoughtful growth, values-driven business, and capital efficiency.

For founders and investors looking for resilience over hype, Europe isn’t just an alternative – it’s a strategic choice. And the moment to act is now.