Andreas Klinger, Co-initiator at EU-Inc, and founder at ⁨Prototype Capital

0:00How are you guys doing?

0:01Andreas Klinger:Very good. Great. How are you? Very, very good. Thanks for having me, Paul. Thanks for having me, Zap. It's awesome. It's our absolute pleasure. We're big fans of the work that EU Inc. and everything's doing. But I guess to kick off, for our listeners who are unfamiliar, can you touch a bit on what EU Inc. is and why it was set up? Yeah, yeah. Happy to. Happy to. So first of all, excited to be here. Thanks for having me. um eu ink in a nutshell for anybody who has any experience with startups is the idea of having an deliver ink a stripe atlas and a wisely safe in europe and given the fact that europe is set up differently than the states we can't just use estonia for example um so we have to do a setup that each country accepts and for this what we did is basically a legal deep dive with some of the best legal teams in europe like auric burden bird 100 plus contributors and essentially went deep how could you do this in europe uh it's like an 80 page legal proposal fully public fully open source if anybody wants to read this and we got 16 000 of the most important people in europe uh behind this to sign it so the founders of stripe the founders of vault of vice like any company like any company basically every investor and we are working with brussels to make this reality in brussels this whole concept is called the 20th regime or a pan-european legal entity using the 20th regime which is very catchy and we call it eo inc and the core idea is you standardize corporate law but you keep employment and taxation local so by doing that you have a new central registry that you can digitally create a company and you can get investments within seconds globally and but you still keep the authority of the nation state on taxation and employment and all these things that they desperately care for and so like this is basically a european style a compromise to make this whole model work how much how many decisions or things do you actually need from brussels for that to be a reality so how complex is is that journey um so if anybody ever wants to get in policy here's my alzheimer's order of advice don't uh it's a work it's a lot but on a very high level the way to create such a standard in europe is by brussels suggesting how the standard would look and then all the member states agreeing that they want this the alternative if this doesn't work out is like you create a subgroup which in europe of like let's say eight countries that want to like do this as a test pilot and then these agree on this one standard and the whole point of this is to have one standard so like the whole point is that you have afterwards like one standard corporate law that your lawyers if your team is used to that you can have always the same investment documents and so on and so on uh in practice what this means is you uh work with the commission you work with like multiple different task forces don't ask me how many and um ultimately it's uh we are like essentially rain dancers like ultimately it's the politicians doing politics you know not like outside groups you know that being said they want to like we already know the number one thing in the european startup and scale up strategy which is like this huge paper they released like a few months ago and they want to have a proposal or like a law to be voted on by uh early next year and if that goes through and everything goes well there should be the first uh pan-european legal entity using the fundier regime uh by 28 that's amazing i mean and and do you when did you start working on this like how long has the journey been to that possibly being the timeline yes so yeah according to my policy so like i get a lot of credit for this i'm actually just a loud mouth in the front there's a whole extremely competent team in the back and my policy team always tells me that we that everything we happened so far at rocket speed and like if you're used to startups you're just like what what no um but basically uh early last year like in january got like i noticed like a lot of my vc friends from the state so i used to work in can francisco a lot of my vc friends got very hostile towards europe and i was like okay half the stuff they say is just propaganda and wrong and the other half is unfortunately truth and i don't know which which one is worse you know so i decided to do a few things in this area started like a larger community and a few other things and then really quickly for me it was clear we actually need to change the system and then over last year summer we tried to figure out how to do this properly um originally trying to do it completely private market and then realizing there's actually a chance to make it proper on the u level um and we launched this uh mid-summer end of summer last year um and uh like fully public launch was i think end of september last year or october last year something like that um and uh had like perfect timing because also maria draghi report came around the same time also mentioning 20th regime and a few other things so like timing wise freaking lucky lucky hit you know um but now the goal is not to make sure that let only make sure that they want something like that but they want the right solution because otherwise there's no point you know and what's the response been like from brussels uh good uh uh so in general like in brussels you will meet some of the most pro-european people ever uh i mean i guess selection bias right um so in general they are very much for it the big question is always in the end all the powers with the member states so the big question here is like what does brussels think that the member states would be okay with you know and by default uh this kind of stuff like corporate law stays with the member states so by default this would be like new power for brussels which a lot of uh people obviously think this could be a slippery slope you know i mean uh so like it's much more about figuring out from their end like what is the right feature set stack ranking of those features right compromises right amount of self-mutilation before anything else you know so like that's more the discussion than if they want it or not.

6:26And is that the feedback, I guess, have you got feedback from the member states? And has there been that concern about kind of giving up more power, especially at a time when we're seeing across Europe, there's almost a lot of skepticism of the EU and an attempt to regain sovereignty?

6:43Andreas Klinger:Yeah, it's a weird balance, because the way Europe is set up is all the member states send delegations to Brussels, have all the control, make all the decisions in Brussels, and in the end everything runs through member states. But also if there's anything successful, it's like local national success. And if anything is horrible or bad, it's like Brussels, you know? And so it's like a really weird overall setup, you know? We have so far good feedback. The main thing we currently focus on is Brussels because our point of view is if Brussels doesn't suggest something that startups even can use, then what's the point of anything else, you know?

7:23Andreas Klinger:so we focus mainly on brussels right now but the concept itself like pan-europia legal entity using 20th regime like jesus christ but this thing is um endorsed by macon and merz and draghi and letter and like a bunch of other people that are very shameless in the scene um so let's see it's now all about the details i would say and you mentioned earlier like um that they're stack ranking the features of this overall push is there kind of features that are more important to you or sort of to the to the you inc movement where you would say okay fine like if we get those this is going to be a huge win already and then the rest we can maybe do later or something so so the main premise that we have is a startup success to build massive companies this is the main premise like we don't want a lot of very creative, innovative, small companies that are so smart, you know, and like maybe invent something that a big company can buy.

8:28Andreas Klinger:The goal is to build new massive companies that drive GDP, you know, and that employ like hundreds, if not thousands of people. So there's a very common saying that in, that Europe has not a startup problem, there's a scalar problem. And to be honest, I haven't heard the term scale up outside of Europe ever, but whatever. And this is the idea we have enough small companies but not enough big companies my personal pov is europe has an acceleration problem it's really really hard in europe to get quickly going raise a lot of money quickly and then just like higher and like raise more money and so on and so on like that's in my experience after like 100 plus investments the biggest issue um so from our point what we wanted to fix is this whole early acceleration moment so in corporation your first investments ideally like random angels like europe-wide global ideally the top people in your industry that not like just the local people but like internationally the top people in that specific niche and then additionally stock options because stock options in europe is also a complete mess and from our point of view like if you can fix this so like quick incorporation quick investments and stock options this is like 90 percent of what early stage startups face as an issue you know plus you have now a platform that you can build a whole ecosystem around you have like an api where like bank providers can build better services where you can do employments pan-european properly and so on and so on like there's multiple things you can build on top of that so from our point it was like there were like two things that are very important number one that's actually one standard so that you have the scaling effect of like investing and like like this kind of stuff and then number two that there isn't like an arbitrary limit who can use it so like only companies until they are 50 people or 100 like 1 million in revenue or some crap you know or the first two years because in practice that would mean is you have a lot of companies that intentionally stop at that scale you know because they cannot like face right now a fully reincorporation into a gmbh or some some insane thing you know so for us it was very important that this is not like limited to some niche but like available to everybody and like scale as much as possible and these were the two main things we focused on a lot of discussions we also had were around like pan-european hiring which i think is important and theoretically already possible and maybe with e-wink easier but not our focus for example or standardized taxes in Europe, which I just don't think that member state would give up as a power.

11:03Andreas Klinger:So we didn't really push for that. There was a lot of discussions around regulation red tape removal. But this sounds like a great idea, which I absolutely would be for. The problem is the moment you do this, every big company in every country will pretend to be five startups in a trench coat. You know what I mean? And then the member states get panic and like niche down who can actually access. and then we are back to square one with like no solution for startup founders right um so there's a lot of things where we basically had to make compromises to make it possible that investments work on scale and also um it's available to everybody and not just like to whoever the government seems is worthy and employment the employment piece uh you said that kind of quick employment was one of your three priorities.

11:55Does that include the whole VSOP, ESOP, employee incentives, et cetera, structure?

12:01Andreas Klinger:Yes. So we focus primarily actually on stock options. Theoretically speaking, right now in Europe, you can employ anybody across the EU by getting a tax ID and like a few other things. The only thing that if in the EU proposal that we did is just to say, let's make the backend platform that we anyway need to, that somebody needs to build, you know just make it easy to do within that and then have existing laws so we don't touch employment otherwise because employment law for example in germany or austria and like a lot of other countries is like a very hot topic you know but we focus on stock options because uh with like very few little changes you can actually harmonize stock options not like how much they are taxed but when they are taxed and the goal is to only have them taxed at exit you know and that's the big big discussion that politicians particularly don't understand yeah yeah i mean that's also why we see some european companies with u.s inks just so that they can actually give real stock options that yeah it's insane uh we we have um i cannot say names but i know very large european companies where leadership people refuse to go to other countries to open up an office because they don't want to like drop out of the current stock option thing and fall into the other one and like this kind of insanity you know and um or like there's discussion if you can actually give somebody stock options because of tax hits and so on and so on like it's it's crazy or the notary or the whatever else things that make it hard so notaries uh yeah so i'm personally yeah like notaries so we are not against notaries we just don't think they should be mandatory um so notaries have like in multiple countries the mandatoryness of monetary whatever uh was like removed uh in multiple countries mandate yes this one uh was removed in multiple countries uh and notaries are still a very good business in those countries uh we did we just we think that right now with eo inc there's an opportunity to introduce an ekyc and aml standard that's way more strict than anything else you know um and that also has a lot of other benefits so for example that you can click open a bank account with one click because the bank like sees the full cap table and transparency and so on and so on right and um so we don't think that there is a need to have the notarist anymore mandatory in that system but again you know let's see we are rain dancers here keep this in mind and i have one more question that i have to get off my chest what about the uk so um a few years ago there was a thing in the uk where they decided to leave the eu um was called the brexit um i don't know if this was to be used yeah okay cool never heard of it not sure you talk about so in principle the way we set it up intentionally um theoretically anybody could join that um and this is me speaking as like you know we see crazy mind brain you know like it's like technically it's possible so absolutely going to happen you know like this kind of the illusion that we have in our brain um so outside of political reasons there's no reason why this the uk wouldn't join this and also norway also switzerland and like multiple others you know and theoretically speaking delaware is only the standard worldwide like in africa india and a few others because it's like used by enough investors and known by enough investors so like theoretically speaking this could even work in other non-european countries you know but i'm not like dying on that hill i like um yeah let's get it over the line first yeah focus on the eu and then i'm you know i'm i'm optimistic that the the uk would uh would adopt it you know anton from lovable was posting about how he sat down with the uk government like last week to talk about fixing a lot of these issues across europe but it does sound like the uk government is open to it can you um touch on a bit more about what's going on right now so we've seen posts from anybody and everybody across the european tech ecosystem talking about the public consultation can you talk about what it is what people should do and why it's happening so uh brussels has like a very good hack that i use in the future as well so um they basically did a consultation so the idea is like in brussel everything is like transparent and democratic to the point that it's annoying which is a good thing i guess as a citizen you know um but very much against the whole uh stuff i read in media but anyway um so one thing they do now is they have a survey which i call a consultation which is asking like hey what's your opinion on doing something along the lines of this right um and that survey is like i don't know 45 minutes or so to complete like it's insane like it's it's borderline torture like it's a geneva convention kind of shit in my opinion anyway uh so they have like a survey where people can fill out and to give feedback um and uh what they did really smart is they basically said look the survey runs until end of september that's like the normal rotation for this kind of stuff which also means until then they can't do anything else and like voila summer you know so i i have to find a similar hack for my job you know where i can basically say look we have to anyway wait for this now you know uh what we did now with the whole campaign that we started now is basically summer break is over uh now let's like get a few more people into this consultation it's already 10x the size of any consultation that brussels has running right now um so let's make this even more to make it clear that if brussels wants to do something for startups and for the startup ecosystem they should do it with the startup ecosystem and uh so like that's the whole point of this right now like to to show brussels like please don't do this with mckinsey you know like do this with the startup ecosystem please don't make sure it works for Siemens, make sure it works for like young startups, you know, and so on and so on, you know, and that's basically the whole campaign right now.

18:14Andreas Klinger:And if people want to help, it's EU Inc. So eu-inc.org slash CTA. And there it explains how to fill out the consultation without going insane. Amazing. Yeah, definitely. Like we'll 100 % be filling out. It seems like there's a lot of momentum and there's a lot of optimism around it. um what are the sort of the biggest pushbacks or challenges are you are you seeing pushback from other lobbying companies or other lobbyists who are pushing back on certain elements of it are there groups across europe who are trying to fight against this it's um i mean sure like legacy industries legacy stuff sure um in in in general like the big question is like do we want to keep some legacy concepts or like we don't want to keep the status quo alive a few more years until like we're completely irrelevant or do we like now bring a solution and from our point of view the only way to do this is by introducing similar to the euro like one standard across europe you know and uh for example the people in the parliament so the parliament is like the check and balance towards the commission so like the commission does something and the parliament approves it essentially the parliament made their own suggestion how this could work heavily influenced by um that's a whole list like it's like i think 10 startup people and the rest is just banks and this kind of stuff um banks notaries and trade unions and whatever um and their suggestion was that everybody should have their own thing so basically think like let's introduce the euro and your suggestion is every country has their own euro with own trade own courtesy exchange rates and whatever right and we are kind of like that that defeats the purpose you know if we do that then let's not bother because then i might as well not you know so that has been a little bit of a pushback but fortunately that pushback was so black and white that it helped us more than it hurt us you know because we were very worried that we have like a very nuanced discussion around this topic and there's a few things that are really hard to explain you know like that the fact that we don't think that uh harmonizing taxes is worth the effort you know uh and so on and so on um and so we've averted like all the discussions around the nuance of compromises but this was so extremely black and white that we actually had it easier a part of that pushback a lot of people just don't like brussels so anything that comes from brussels by default bad you know um and a bunch of people also think this why do you think that is why do why do you think there is that pushback towards brussels like what because what are the negative experiences i mean i think two like one the reality of brussels in the last years introducing a lot of regulation that has the idea of that paper trail could avoid risk you know by like documenting everything and like creating a bunch of like paperwork and like following a strict process all of a sudden you don't have any risk which is just not true and there were like a lot of regulation in that vein which i think just turned off people in general you know and then the other aspect is any success is nationalized any failure is uh put to brussels you know that's very very common in politics and to the point that for example most uh people when they vote for example for the parliament it's actually just a proxy vote for the local stuff you know and it's very hard for even like there is no very few direct elections into brussels i guess very brand it feels very disconnected to a lot of people so brussels feels like this meta organization of government so like if you don't like government and that's basically government square you know i mean um so i think a lot of the negativity comes out of that to be honest yeah i mean yeah i mean Of course, here in the UK, we had it in abundance, that negativity and that sort of like skepticism to that sort of like centralized government, the super centralized government.

22:22One year of time, you know, I've seen a lot of people post about kind of what it is that they're aiming for, what EUWINK is aiming for. There's a single pan European digital first legal company form, one central EU level registry, standardized investment documents, standardized EU wise stock options. of those four let's say what's the number one thing that you would implement tomorrow that

22:44Andreas Klinger:you think would have the biggest impact it's generally like like if you have one of them you have them all that's the crazy shit like the way we set it up it's like very much straightforward you have a new legal entity and you have one central registry and everything else falls out of this got it it's like very much like almost like startup product thinking like what is the minimal change you can do to have the maximal unfolding impact and this is it this is it so you know if we get this over the line this like i mean actually this is a good question does this open the door for even more or or is the way that you're presenting this we get this done and that's going to be it and that's as much centralization that we're going to do this solves the bulk of our problems we're going to leave it there i i personally think the um you could use it for more as a platform you could say that you create sandboxes only for eoink that harmonize employment taxation if you want to sure you know um personally i think the next biggest problem that startups in europe faces ipos so uh instead of like doing more here i would rather get a team please not need but like somebody uh you like essentially euipo.org and figure how to do joint listings in europe because right now if one any any of my portfolio founders would actually IPO in Europe, there's a non-zero chance I might sue them because the stock markets are just too small.

24:07Andreas Klinger:You know, IFL, please, whose company is like a fourth of their national stock market. Yeah. Like they're just too small and we cannot complain about not having enough large companies if they cannot go public. Yeah. You know, that doesn't make sense. So for me, this would be the actual next thing that should be done. And it's actually, I think, easier than EO Inc, to be very honest, because many of these stock markets are fully private and so on and so on. So it's theoretically possible. Got it. Okay. So solve the pan-European legal entity issue and then solve the European IPO market. And then once we've done those two, then we're there.

24:45Andreas Klinger:I genuinely think that a lot of people... So let's take mindset, right? A lot of people say Europe's lack the mindset. I think mindset is an outcome of a system. if you know that if you do something it's less likely to succeed and has like high risk you're less likely to do it you know i mean and like everybody around is less likely to do it but if the system allows more success more people will do it period you know i mean and um there's like multiple other things that should be fixed sure sure why not you know but to me if you think of tech innovation as a loop it's like get money to the best founders as quickly as possible and not like only local money, but like the best money globally, you know?

25:29Andreas Klinger:And then ultimately, once the company is big, make sure that there's a cycle of the money so the money gets like flushed back into the system that like the employees get rich, the founders get rich, the investors get rich, and so on and so on. That's to me, the ultimate core loop of tech innovation. Amazing. Well, Andres, we're out of time. Yeah, we're actually five minutes over time, but thank you so much for joining us. Like we're huge fans. I'm going to be filling out the form. we're going to be pushing it out but let's stay in touch cool thanks so much paula sepp thanks for your time bye bye thanks bye bye