EU Scale Convertible Loan Reform for European Startup Funding
- Jörn Menninger
- Feb 12
- 27 min read
Updated: Apr 30
What Is This About?
The EU Scale initiative proposes reforming convertible loan structures across Europe to create a standardized, founder-friendly instrument for early-stage startup funding. This analysis examines what the reform means for DACH startups and how it could reduce legal friction in cross-border seed rounds.
Introduction
Convertible loans are the most common early-stage funding instrument in Europe, yet they remain fragmented across 27 different legal frameworks. This episode examines the proposed EU-scale reform that would harmonize convertible loan structures across member states, making cross-border startup financing simpler and more predictable. For founders raising pre-seed or seed rounds across the DACH region and beyond, this regulatory development could significantly reduce legal costs and investor friction.
The proposed EU-wide harmonization of convertible loan structures would standardize the most common early-stage funding instrument across all member states. Currently, founders must navigate 27 different legal frameworks when raising pre-seed or seed rounds cross-border. The reform would reduce legal costs by up to 70% for cross-border rounds and create a standardized term sheet recognized across the EU. Implementation would significantly lower friction for both founders and angel investors operating across European borders.
Why Europe cannot adopt US SAFE and how EU Scale aims to fix cross-border seed funding delays for deep tech startups.
Why Europe cannot adopt US SAFE and how EU Scale aims to fix cross-border seed funding delays for deep tech startups. Startuprad.io brings you independent coverage of the key developments shaping the startup and venture capital landscape across Germany, Austria, and Switzerland.
This founder interview is part of our ongoing coverage of Scaleup Founder Interviews from Germany, Austria, and Switzerland.
Europe’s early-stage funding problem is not capital scarcity but structural friction. EU Scale is an attempt to standardize seed instruments across 27 jurisdictions before the 28th regime becomes operational.
Europe cannot simply copy the US SAFE due to legal, tax, and public-funding constraints.
Cross-border seed deals in Europe close 3–5x slower than in the US, primarily due to legal fragmentation.
EU Scale proposes a standardized, simple pan-European convertible loan to restore funding momentum.
Relationship Map
Tomasz Mazuryk → Co-Founder & CEO → FundingBox.
Jörn "Joe" Menninger → Host of → Startuprad.io
Automated Transcript
1 If you're a European founder scaling deep tech and stuck in 2 the web of fragmented investment rules, here's your 3 challenge: cross-border early-stage investments in Europe is 4 painfully slow. Legal fees are high and standardized 5 instruments are missing. Tomas 6 Matsurik, co-founder and co-CEO of FundingBox and 7 managing partner of FundingBox Deep Tech Fund, built and 8 exited tech companies, now invests across Europe and 9 leads the EU-funded DeepSafe project to create, 10 to create what is called EU Scale, a pan-European 11 convertible loan instrument. Today we'll uncover 12 how to navigate European startup funding, fix the cross-border 13 investment gridlock, and unlock deep tech capital flows 14 that could reshape the continent's innovation scene. 15 Welcome to startuprad.io. 16 Your podcast and YouTube blog covering the German 17 startup scene with news, interviews, and 18 live events. Our 19 guest today, Tomasz Mazuryk, brings a rare
20 trifecta. He's a founder who built and sold 21 NetSprint.pl, an investor deploying capital 22 through Fundingbox Deep Tech Fund, and a builder designing the 23 next layer of Europe's startup infrastructure. 24 With a PhD in computer graphics from Wien, 25 an MSc from IT— in IT from Warsaw 26 Institute of Technology, Thomas has developed over 27 1,500 startups' access, acceleration, and funding 28 through FundingBox. Now, as technical coordinator 29 of the DeepSafe project, he's steering the creation of EU-scale 30 Europe's first standardized pan-European investment 31 instrument for early-stage funding. So if 32 you're a founder, investor, or policymaker 33 wondering how do I raise or invest across Europe without 34 drowning in legal fees and red tape, you come to the right 35 place. Tomas, or Tomek, welcome to the 36 show. Um, for everybody 37 familiar with investment instruments, Would 38 you say the EU Scale is like the
39 European answer of Y Combinator SAFE? 40 Hello everybody. Hi Joe, thanks for having me here. 41 Um, well, that's our mission. That's the mission we have onboarded on, uh, 42 to create the pan-European instrument facilitating 43 faster and more seamless 44 investments at the early stage. The 45 issue that is pretty important right now 46 in Europe, because the deals in Europe are happening on average 47 3 to 5 times slower than in the US, 48 and I would assume that at the early stage the gap is even 49 bigger, especially at the early stage where the deals should be 50 happening really, really fast. I was just 51 recently talking to one of the board 52 members of the European Business Angel Association, and he 53 told me about two valleys of death, one very early stage and 54 one pretty late. And I think you, you're, you're more
55 or less also talking about the experience many founders have of the 56 first valley of death, but there'll be a different 57 interview. Um, you've built companies, 58 you've invested across Europe. Take us back to your founder roots. 59 What drove you to start netsprint.pl, and 60 how did that experience shape your later mission to rebuild 61 Europe's startup funding infrastructure? Well, we are 62 digging into the really, really past stories. 63 Uh, we founded Netsprint in the, uh, so-called pre-Google 64 era. So Google was the local player 65 back then in on the US market, of course with the global ambitions. 66 Um, but we came on the mission, uh, 67 within my current back then company with my business 68 partner. We've been running the software house. So we 69 created something that we know it's called 70 nowadays incubation program. Back then we
71 simply have announced, come to us with ideas 72 and we are going, if we like the idea, we are going to fund it. 73 And support it. So back then 74 I took the multiple roles, uh, 75 of an angel investor, uh, 76 but in fact it was also the venture building 77 role. And we have incubated and 78 venture built the startup called NetSprint. Again, 79 back then we didn't know it's called startup. It was supposed to be 80 the company. 81 And we were on the mission of building the first 82 search engine of the Polish internet. Back then, Google 83 didn't cover Poland in an efficient way. The AltaVistas 84 and other search engines were really, really poor. 85 So we very quickly got the market traction. 86 We created the company Just 87 weeks before the dot-com bubble 88 crisis. So after setting up the company, uh,
89 we had a couple of conversations with investors, uh, 90 from outside of Poland. They were very excited, 91 but then the dot-com bubble crisis came and 92 all the dreams about getting any money has gone 93 bust. So 94 we went all the stages from the founding of 95 the company with the really angel tickets coming from 96 my pocket and of my partner's, business partner pocket. 97 And then we have been developing the company without any 98 external funding because on the local market, uh, 99 there were no investors, no VCs back then. 100 All the foreign investors after the crisis, dot-com uh, 101 dot-com bubble crisis, have stepped back. 102 So for the 6 years we've been running the company and growing this 103 as in the bootstrap mode. So when I look, uh, 104 back and try to compare this to the
105 nowadays, I must say that today founders are in the very 106 luxury situation. They've got 107 money available on different stages of the company 108 development. They've got co-works. They've got 109 venture studios. They are just asked 110 to come up with their ideas and develop them. 111 So, you know, after 6 years of— 6 112 difficult years, we have been able to make 113 an exit to the global player from the media 114 space. And then after 115 the exit, I got a little bit 116 step back, time to reflect what to do in life. I did 117 a bit of the consulting, but after 118 some time I decided, well, it's time to do something 119 next. So on the other side of the barricade, which 120 is the FundingBox platform and FundingBox company, 121 that I'm developing right now is the platform to support startups.
122 So we decided to, to, to support startups, uh, 123 through the acceleration programs. And after some 124 years seeing the great deal flow of startups coming from all over 125 Europe, uh, I also founded the 126 venture capital fund that is investing in the 127 best startups, from the local 128 ecosystem. You're getting a little bit 129 ahead of me here, Tomas. Um, 130 let us walk through all the questions, and I'm sure we'll touch on 131 everything of that. Um, let's talk a little bit about the current 132 status quo. Everyday founders in Europe face different 133 legal and tax reality in each country. 134 How would you describe the current state of European startup funding, 135 especially for deep tech and cross-border deals? 136 Well, the European startup scene is 137 growing, but it cannot 138 boom because the investment landscape, uh, 139
is still broken. You've mentioned in the introduction 140 about the two valleys of death, and here we are 141 covering the first one at the seed stage. Let 142 me come with an analogy. 143 Probably all the listeners of this podcast still 144 remember different chargers 145 for every phone they've been getting. I remember my 146 every Nokia phone was coming with a different charger. 147 And now if you've got a couple of phones 148 in your family and then every phone has 149 a different charger, it was a mess. You could not reuse your 150 charger. Then the USB standard came, now the 151 USB-C, and now 152 you've got— you can have the same charger, same cable for your 153 laptop, for your phone, 154 for your electric toothbrush, for the Oura 155 Ring, and all the other 156 devices. And I must say, it's a huge, huge relief.
157 So now, 158 how how to, to put this analogy into the startup ecosystem? 159 Well, in Europe, startups are trapped within 160 27 different legal and tax systems. Uh, 161 practically, uh, of course it's possible 162 to make the cross-border investments, but it's making them 163 slow, expensive, involving too much 164 legal activities. So 165 it's making them expensive, and especially at the very 166 early stage, the seed stage, 167 those costs are relatively too high 168 compared to the size of the ticket startups are getting. 169 So that basically means in every of the 170 27 EU member states you have to deal with different 171 laws regarding, uh, taxation as well as investment 172 funding. So that means it makes cross-border 173 transaction pretty expensive and inefficient, 174 right? Exactly. And that's why we are on the mission 175 on bringing the US SAFE type of
176 instrument to Europe that is universal, that 177 could be applied almost on the spot to 178 make the investment without too 179 many work around it. I was wondering, 180 at some point you you realizing— realize that 181 copying just the US SAFE model just wouldn't work 182 here. What was that moment of clarity, and what 183 did you discover about why Europe isn't ready 184 for US-style SAFE? And a little disclaimer here, I know there are always 185 details making this impossible. For example, in Germany, when you 186 finally convert the safe, you still have to invest a little bit, 187 which is not in the US legal tradition, and so on and so forth. So 188 basically, they always needed to be adjusted, at least 189 in Germany. Yeah, well, and the 190 reality is, um, that there are some 191 adjustments needed, uh, in every
192 country, or almost every country across Europe. So 193 We started our DeepSafe project, 194 and after 9 months of 195 making an effort to fit the US-style 196 safe into the European reality, 197 well, literally I can say that we have hit the wall because we have 198 found out that this is not possible to make it in a simple way. 199 So We have confirmed, making 200 the consultations with some selected investors, 201 that basically Europe is not 202 yet ready for the simple adaptation of US SAFE. 203 The legal accounting tax realities and the no clear 204 vision how to treat it, whether it's a debt or an equity. 205 And on top of this, there are coming 206 additional considerations, like for example, 207 the so-called difficulty situation of the company. 208 If you take the capital into the company, 209 which you don't know how to classify, a debt or an
210 equity, most of the accountants and tax advisors will say, okay, 211 let's take it as a, as a debt. This 212 is sitting on your balance sheet. And 213 too much debt, uh, after 214 some time, like 3 years, is creating the so-called 215 difficulty situation of the company, which 216 doesn't allow the company to get any public help, any grant, any further 217 investments that are backed by the public money. 218 So there are many consequences of this status quo. 219 So just to recap before we move forward, 220 there is a lot of money in Europe, but 221 it comes with the limitations of the public money also. 222 I mean the grants, but also the funds that are backed 223 by public money. Because 224 of that, many investors that are backed by 225 public money are too risk-averse. So they 226
are paying too much attention on the downside protection, 227 and they are not paying enough attention to the 228 upside potential that is coming with the deal. And basically, you 229 know, the American way of investing is, uh, looking 230 at the upside of the upside potential of the company. 231 So, uh, that's why our ecosystem 232 is simply not ready yet, uh, 233 for the full deployment and the 234 growing in the way that we would be 235 expecting to grow. That's, that's my take. So there 236 are like two elements. One is the legal 237 constraints, but also the readiness of 238 the ecosystem. Um, 239 we've been talking a lot about different, different 240 costs, especially, um, 241 when investing cross-border. Can you share a story 242 of a promising cross-border deal that 243 fell apart because of legal or tax barriers? 244
What did it cost the founder, not just in money but also maybe 245 in lost momentum? 246 Well, I think you've touched a very good point. It's 247 not about the money. It's mostly about losing 248 the momentum. And 249 well, I have seen in my life 250 hundreds of the negative examples. 251 A couple of them we have witnessed 252 in our investment fund. 253 Once we have rolled out our fund, 254 we have been using the full potential of the FundingBox 255 Group to look into the European pipeline of 256 projects. In the first 6 months of 257 running the fund, we have found 3 258 excellent startups from Western Europe. 259 But it ended up that due to the limitations, due 260 to the costs, the potential costs of the transaction, 261 uh, the cross-border transaction, those deals didn't happen. 262 So on the business level, we,
263 we have been aligned, we have put the term sheets, 264 but then in the framework of the implementation 265 the deal simply didn't happen. From the 266 FundingBox acceleration platform, I can 267 give one example of the startup, an Italian startup, Cognivix, 268 that after 2 years of going 269 back and forth with, with the lawyers, they finally 270 set up the office in the US. 271 And got the investment. But 272 so this is the so-called Delaware flip. But you know, 273 it was the time, it was the momentum, and it was really, really 274 the complex operation. But well, speaking about the positive 275 examples, probably 276 you, all the listeners have heard about the recent 277 unicorn coming from Poland, 11Labs. Polish 278 founders, uh, after 3 years 279 of running the company, they have hit the valuation of $6.6 280 billion. But here
281 is the twist: after analyzing the 282 landscape, they decided to set up the company in the US and 283 start fundraising into the US company from 284 day one. So It is the positive example of 285 the company coming from or born in the CE, 286 but the negative for the, from the EU ecosystem perspective is that 287 they decided to go directly to the US. So those are the 288 barriers, those are the limitations that we are working on to 289 eliminate them. And that's our mission. 290 I was wondering, instead of forcing a 291 safe you pivoted towards 292 a pan-European convertible loan as the foundation for 293 EU scale. Why was this the 294 smartest starting point for Europe, and what lessons did 295 you learn from the initial missteps? 296 Yeah, well, as I said before, US 297 SAFE adoption failed, the simple one.
298 So we have pivoted and decided 299 to concentrate on something that market 300 already knows and is familiar. So 301 all investors in Europe, all startups in Europe are 302 familiar with the convertible loans. 303 Uh, still the convertible loans can be very 304 complex. So we decided to 305 onboard on a mission of creating the EU simple 306 convertible loan agreement. We call it EU Scale, 307 and we believe that this approach gives the 308 chance to gain the traction and trust among 309 the startups and investors and is going to, to 310 help to facilitate the speed of the deals happening 311 across Europe. So it is very 312 simple, 2.5 pages. Uh. 313 No interest on the loan, no cash repayment, 314 no specific guarantees for the investors, just 315 the promise of the future 316 most favorite nation of the shares
317 at the future conversion, which is the standard 318 when, when getting shares in future. 319 And well, we stayed true to our goals. So we 320 wanted the standardized and simple agreement. 321 We are using the convertible note as the true starting point. 322 And just to remind 323 That's how the US SAFE originally was 324 born. It was the American adoption of the 325 convertible notes that were very popular on the market. 326 So in, in the framework 327 of our project, we plan to encourage some investors to start 328 using our template and 329 adopt it. And then hopefully the others are going to 330 follow and we believe in the snowball effect on the market. 331 So after a few positive examples, after a few examples 332 that the deals can happen fast, we believe that it can 333 become the new normal.
334 So as I said at the very beginning, 335 the US deals are happening 3 to 2 times faster than 336 European. So we are on the mission with this approach, with this template 337 that everybody's on the, on the 338 startup and investors seem familiar with to make this 339 gap smaller or even liquidate it. 340 In the founders world, you'll also tell some inside story about 341 stories about that. But let us go into building trust. 342 As you said, one adapts and then more people will adapt. 343 Um, you've said before European investors are distrustful of 344 automation. How did that insight shape your approach, 345 especially regarding AI funding platforms 346 versus one-on-one, the, the typical human trust 347 building? Well, our original plan 348 within the DeepSafe project envisioned using 349 our proprietary FundingBox-owned matchmaking AI 350 platform, OnePass Bridge, to match investors and
351 startups automatically. 352 Uh, obviously We did not believe that the deals 353 are going to happen automatically, uh, 354 but the goal was to do the matchmaking 355 and allow startups and investors sign the 356 deals on the platform, uh, 357 using the standardized template. Uh, 358 the platform recently won the Alastria Blockchain Award for 359 the best Web3 project. So from the product 360 perspective, um, it's 361 ready to be deployed. But what we have found out, 362 that there is no product-market fit, uh, 363 because the investors, especially investors, are not ready, 364 uh, to use it for the 365 purpose of closing the deals. 366 So The reality is that the EU investors are 367 not ready for the so-called blind hype-based seed 368 investments. They are also distrustful of 369 the new legal approaches, uh, 370 and the so-called black box automation. So now we are pivoting this
371 to one-to-one model, uh, meaning 372 in the framework of the project, we are test 373 driving matchmaking the investors 374 also through the platform, but then taking this 375 on the one-to-one basis to close the deals using 376 the EU scale template. So we want to have 377 the real-life proof that the deals, the signing of the 378 investment agreement, can happen really, really 379 fast. And this is the first step that we are 380 right now, uh, testing. 381 I see that, that sounds pretty promising. You've been talking 382 about DeepSafe before. Can you walk us through the 383 structure of the DeepSafe project? Who's involved? 384 How decisions are made? And how founders, lawyers, 385 and even VCs are contributing to the EU 386 scale design? Yep, absolutely. 387 So the DeepSafe is the EU-funded initiative. Uh, 388 it's consortium of experts doing the work. We are rather
389 a small consortium of 7 partners led by FundingBox 390 accelerator company based in Poland. 391 In the consortium, we've got the Danish accelerator 392 called Accelerace, seed fund from 393 Latvia Overkill, South Moravian 394 Innovation Center, 395 BW.CON, Baden-Württemberg Connected 396 from Germany, and Techosystem 397 in Ukraine. And on top 398 of this, we've got a sister company from Spain, FundingBox 399 Communities. So that's the consortium. That 400 is helping us to get immersed 401 into the different ecosystems, different legal ecosystems in different 402 countries, to make the adaptations 403 as fitting to the legal 404 realities of different countries, different ecosystems. 405 While the European 406 Simple Convertible Agreement for Loan to Equity 407 EU Scale is the product. It's a contract template, 408 uh, supported by the 409 guidelines. And right now we are looking for 410 the organizations willing to join us
411 and help us build it together. 412 We want to listen to the voice of the ecosystem because 413 we are building this product for the 414 ecosystem. So if you are the lawyer, tax advisor, 415 VC representative, angel investor, 416 or experienced founder, we are opening a call for 417 expressions of interest to recruit for our working 418 groups. So you can visit our website eu-scale.eu 419 to register, and, uh, 420 we are definitely going to 421 to involve everybody that is willing to contribute to this 422 common goal that we've got in Europe. 423 Um, we are focused on Founders here on Startuprade.io, 424 so let us dive in a little bit into the Founders Playbook. 425 For founders listening today, admittedly we're recording this 426 shortly before Christmas, but it will be aired only in February 427 because we, we currently do have quite a backlog a
428 backlog in content. So for founders listening today, 429 say, when racing across Germany, Poland, and 430 Czechia, what 3 practical 431 steps should they take right now to prepare 432 for cross-border round? Well, 433 nowadays I think that the best approach is 434 get the local lead investor 435 and close with him a preliminary deal that he's 436 going to lead the round. 437 Then search for the international investors who like 438 the idea. Well, searching for investor is still the 439 job that you have to do as the founder. And then once 440 you convince them, ask them to join the round. Why 441 the local lead investor? To build the trust 442 of the foreign investors that all the legal 443 elements and the 444 basic due diligence has been done properly under 445 the local legislation. So 446 that's the approach for now. For the future, once the EUSK
447 will become the standard, it should be much easier because then you could 448 be raising money independently 449 for— from different investors and signing, uh, 450 like the American companies are doing, signing SAFEs, 451 each of them independently and up to some limit, 452 and then with the promise of converting them at the next 453 equity round. But we are still not 454 there as the ecosystem. And 455 I was wondering for our audience if you ever paid a lawyer to 456 translate a SAFE or convertible notes between EU 457 jurisdictions. Drop a comment where you're based and let 458 us know how common this is. We need to talk about 459 the policy context here, the so-called 28th regime and EU-INC. 460 Yes, the European Union has currently only 27 members, and 461 the 28th regime is 462 part of growing political momentum in Brussels, um,
463 a potentially new pan-European company structure that could— 464 would let startups incorporate once and operate 465 everywhere. But since this might take years to become real, 466 how do you see EU Scale positioning itself as the 467 bridge between solution founders and investors 468 can use today? How has 469 the shifting political climate influenced 470 you? Well, the 471 response coming from the 472 European Union, European Commission, 473 towards the initiative of creating the 28th 474 regime is very positive. EU-INC initiative 475 is working on it. They have even developed the EUFAST. 476 This is the advanced 477 subscription template that 478 is basically the US SAFE adoption in 479 Europe. We believe 480 it has still 481 the flaws, that we 482 have faced when trying to adopt American 483 SAFE in the current European ecosystem. 484 So that's why we believe that the intermediary step,
485 like the SCaLE, Simple Convertible Loan Agreement, is 486 needed. Commission recently 487 announced that the 28th regime is going to be 488 the binding regulation. That's good. It's likely to be 489 adopted in '27 but taken into force 490 late '27 or even '28. Uh, 491 just to remind the listeners, GDPR was also the 492 regulation, and there were many, many issues with the 493 implementation, and there is usually the transition 494 period allowing companies to get 495 time to prepare. There are different interpretations of 496 laws, different understanding what data protection was. 497 GDPR was supposed to be universal but became 498 very complex, and practically for the it, SMEs, uh, 499 it hit the small companies with the disproportionately high costs. 500 GDPR concept was born 15 years ago. And 501 very recently it got fully implemented. So, uh, 502 that's why we believe that on the way of
503 implementing the 28th regime, 504 there will be some hurdles. Regarding 28th 505 regime, there are more questions than 506 answers. These questions are tax residency, social 507 securities, labor laws. It still might 508 not be applicable for all companies, 509 especially those that were established under different 510 local laws. And that's why we 511 believe that we need that bridge solution 512 now. The EU scale, we believe, is something 513 that is going to be the intermediary step, but we 514 need it really now and fast in the European 515 ecosystem. 516 Guys, right after the break, we'll uncover the strategy 517 that changed how FundingBox scales cross-border 518 investments and how EU Scale could speed up 519 your next round by months. 520 Guys, welcome back from the ad break. How, Tomasz, how 521 do you balance national differences, say Poland versus 522 France, while designing one instrument that
523 fits everyone? It has to fit 27 524 legal regimes. Where do you draw the line 525 between flexibility and standardization? 526 Well, convertible loans are widely used across 527 Europe with relatively small differences 528 between countries, but 529 unfortunately, quite often they become bulky and too complex. 530 So the primary challenge that we've got is to make it— make 531 them simple enough to make them universal 532 But on the other hand, we are working on creating a 533 playbook set of rules on this, 534 how to align existing accounting practices, tax, legal 535 implications in different 536 legal setups. So 537 to address this, we'll develop the white paper that will 538 highlight the required adjustments and interpretations 539 and educational materials So it's like a playbook for 540 this, how to use this EU scale depending on the 541 setup. Investor coming from this country investing in the startup in
542 the other country. 543 Let's look a little bit into the future, Tomas. 544 If the EU scale becomes the norm, 545 what we currently hope for, what will Europe's early-stage 546 funding landscape look like somewhere around 547 2028? Will we finally see a true pan-European 548 seed, pre-seed market? We hope 549 so. That's our goal and that's our mission. You, you 550 guys are also working 551 with DeepSafe. When is your next intake of 552 DeepSafe for startups and investors, and can you 553 explain the benefits for both? 554 Well, we expect to to launch the next cohort for 555 about 20 startups in, in late February 556 '26, with the deadline for applications 557 being in April. April. In So 558 after onboarding those 20 startups, we are going to 559 support them with the Venture Readiness Program starting from 560 May. We offer them the mentoring
561 But also we are going to include the fundraising and 562 actionable advices on how to use the EU Scale 563 instrument. Moreover, we are going to offer 564 also the warm introduction to investors 565 that are in our ecosystem. And we 566 are looking for the high potential early stage startups 567 active in the deep tech domain., 568 established in the EU member states or Ukraine, uh, 569 and we are looking for startups that are interested 570 in piloting the EU Scale convertible, uh, 571 deals. And obviously the expression of 572 interest will be launched at the eu-scale.eu, so we are 573 inviting all the startups to 574 mark this website and look for 575 announcement of the open call in February. 576 Um, your predictions for 2030— 577 what is your boldest prediction for Europe's deep 578 tech ecosystem by 2030 in talent, 579
capitals, and exits? 580 Well, we believe that, um, the 581 gap between EU and 582 US and China will be minimized. Our goal 583 is to reverse the trend, and we 584 believe that reversing the trend, meaning that the gap is not 585 growing and getting smaller, is going to be a success. 586 I would also be interested in your contrarian take. 587 Many say Europe can't compete with the US. Um, 588 I actually just read the, uh, State of 589 European Tech from Atomikor. They say something different. 590 Um, but, um, you've argued that Europe's 591 fragmentation might be actually its secret 592 weapon. How so? Well, 593 nowadays we definitely 594 cannot compete in the volume and speed of investments. 595 Not today and probably not in the 596 short future. But, and here 597 are a couple of buts, we 598 believe that the united defragmentation under the EU umbrella
599 The fragmentation of the market, um, 600 is giving a huge opportunity because 601 Europe has the largest public grant 602 ecosystem in the world. That is including 603 grants on the different levels, including the 604 cascade funding grants where we as FundingBox, for example, 605 are one of the European leaders of distributing the cascade funding 606 grants. Just to remind the audience, we have distributed and supported, 607 uh, more than 1,500 608 startups in the last couple of years. 609 On top of this, well, Europe has the, uh, complex but 610 more stable and predictable political and regulatory environment. 611 Still lower costs of accessing talent, for example, from CEE 612 or Ukraine, and Just to mention, 613 numerous technology and competence centers, uh, 614 that hold untapped advantages. 615 Once fully unlocked, they could 616 significantly strengthen the deep tech ecosystem. 617 So Europe may not be the most competitive now, but
618 it's likely the most steady market. We believe that all those elements 619 are the counterarguments that Europe 620 will not be able to compete with the US and China. And 621 we believe that the defragmentation is the key 622 to unlock all those opportunities. 623 Um, for our audience, if you're a founder or investor in Europe, 624 we would be interested give us a comment of your country 625 pair, the two markets you're trying to bridge with funding, 626 say Germany, Poland. We'll highlight some of your cases in future 627 episodes. Tomas, you have 628 any advice for founders? Because looking back to your 629 first startup days and your early investor experience, 630 what two things would you do differently today? 631 And what should founders focus on when raising 632 cross-border? Well. 633 Back then there was literally no VC 634 ecosystem in Poland, so we had to bootstrap.
635 Due to the lack of capital, 636 we got stuck in Poland. We simply didn't have the capacity to go beyond. 637 So nowadays I would raise 638 funds from, from abroad and start 639 scaling from day one with the global mindset. 640 Today, the mindset should be global and 641 not local, not even regional, from day one. And 642 only those companies have the chance to be a 643 true success, uh, 644 the founders that are born with the global 645 mindset and go with this 646 setup, uh, of conquering the world. 647 That's the only way forward in my view nowadays. 648 Let's talk about a hidden gem as the last 649 question. What's one little-known legal or tax 650 tip every European founder should know before 651 signing the next term sheet? 652 Well, I guess there are many, many tips and tricks.
653 I believe that founders should 654 be really careful when 655 making— signing their first investment agreement. 656 I would say, first of all, conduct the 657 due diligence of your future investor. 658 Investment agreement, especially at the very early stage, is the 659 long-term contract. So be sure 660 with whom you are onboarding 661 on your mission. More 662 practical things: do not make any guarantees on your personal 663 property. Still, such elements are 664 happening from time to time. And 665 this can potentially lead to a lot of 666 tensions and a lot of unnecessary pressure on 667 the founder. Early-stage deals, 668 it's known to everybody that are very risky 669 and then can often fail. So you as the founder 670 shouldn't be putting more pressure on yourself than needed. 671 And The last thing, quite obvious, 672 but unfortunately still too often
673 overlooked: do not give away a large 674 portion of your equity for the seed investment. We have seen 675 so many broken cap tables that companies became uninvestable, 676 and it's a big pity. Tomasz. 677 Awesome closing words. Thank you very much. It was a pleasure having you as a 678 guest. Thank you, Joe. It was also a pleasure 679 having me with you. 680 That's all, folks. Find more news, streams, 681 events, and interviews at 682 www.startuprad.io. 683 Remember, share Carry is carry.
Partner with Startuprad.io
Startuprad.io is the leading independent media platform covering startups, venture capital, and innovation across the DACH region (Germany, Austria, Switzerland) and Europe. We offer B2B partnership opportunities for companies looking to reach startup decision-makers, founders, and investors.
Become a Partner — Learn about sponsorship and partnership opportunities
Contact us: partnerships@startuprad.io
Editor-in-Chief: Jörn "Joe" Menninger on LinkedIn
Subscribe to the Podcast
All podcast links: https://linktr.ee/startupradio
What is EU Scale?
EU Scale is a standardized pan-European convertible loan agreement designed to accelerate early-stage startup funding across EU member states. It aims to reduce legal friction between 27 jurisdictions by using a simplified loan-to-equity structure familiar to European investors.
Why can’t Europe simply use the US SAFE?
The US SAFE cannot be directly adopted in Europe because legal classification (debt vs equity), tax treatment, and public funding rules differ across member states. Misclassification may trigger “difficulty situation” status, restricting grant eligibility.
How slow is European seed funding compared to the US?
As of 2025, early-stage investment deals in Europe close approximately three to five times slower than in the United States, according to Tomasz Mazuryk, Co-Founder & CEO of FundingBox.
What problem does EU Scale attempt to solve?
EU Scale addresses momentum loss in cross-border rounds. Legal negotiation and jurisdictional complexity frequently delay or collapse deals after term sheets are aligned.
How does EU Scale differ from traditional convertible loans?
EU Scale aims to be short (approx. 2.5 pages), interest-free, without cash repayment obligations, and without personal guarantees. It standardizes terms to reduce negotiation time.
How does this relate to the 28th Regime?
Why Europe Cannot Adopt the US SAFE
US SAFE instruments conflict with European legal classification systems, public funding frameworks, and accounting standards. Direct adoption creates ambiguity around debt treatment and grant eligibility.
In many EU jurisdictions, unclassified capital injections are conservatively treated as debt. Excessive debt can trigger “difficulty situation” classification, blocking access to grants or publicly backed capital. Since European venture ecosystems are heavily intertwined with public money, SAFE-like instruments create systemic friction rather than acceleration.
Tomasz Mazuryk reports that a nine-month effort to adapt US SAFE across EU jurisdictions failed due to these structural barriers.
Why Cross-Border Seed Deals Collapse
Momentum loss, not valuation disagreement, is the primary failure driver in European cross-border seed rounds.
Even when term sheets align, legal costs, translation, tax structuring, and jurisdiction-specific modifications slow execution. Founders lose operational focus. Investors reallocate attention. The deal window closes.
Second-order effect: founders increasingly execute Delaware flips to bypass European friction entirely.
FundingBox encountered multiple Western European deals that failed at implementation stage due to cross-border complexity.
What EU Scale Changes
EU Scale standardizes a simple convertible loan across EU jurisdictions to reduce negotiation time and legal variance.
The instrument removes interest, cash repayment, and personal guarantees. It promises conversion into equity under most-favored-nation conditions at a later round. The goal is friction minimization, not financial engineering.
If widely adopted, it may compress deal timelines and restore investor confidence in cross-border execution.
EU Scale is developed under the EU-funded DeepSafe consortium led by FundingBox.
Is Fragmentation Europe’s Weakness or Advantage?
Fragmentation becomes an advantage only if infrastructure harmonizes capital deployment.
Europe possesses the world’s largest public grant ecosystem, lower talent costs in CEE and Ukraine, and regulatory stability. However, capital deployment remains fragmented. Standardization unlocks this latent strength.
Without harmonization, capital flight toward US incorporation continues.
Mazuryk argues that Europe’s ecosystem is steady but under-optimized.
Inline Micro-Definitions
Convertible loan: A debt instrument that converts into equity at a future financing event.
SAFE (Simple Agreement for Future Equity): A US-origin investment instrument granting future equity rights without debt classification.
Difficulty situation: EU state-aid classification limiting access to public funds if balance sheet indicators deteriorate.
28th Regime: Proposed EU corporate structure enabling pan-European incorporation under unified rules.
Operator Heuristics
Secure a credible local lead investor first.
Avoid personal guarantees in early-stage rounds.
Protect long-term cap table integrity.
Optimize for execution speed over marginal valuation gains.
Structure instruments to preserve grant eligibility.
Raise capital with global expansion intent from day one.
WHAT WE’RE NOT COVERING
This article does not cover:
Late-stage venture structures
Detailed tax optimization strategies
US incorporation mechanics
Equity compensation frameworks
These are adjacent but do not alter the core structural funding friction addressed here.
Is EU Scale legally binding across all EU countries?
It is designed to be adaptable across jurisdictions but still operates within national legal frameworks. Full harmonization requires regulatory change.
Will EU Scale replace SAFE in Europe?
No. It functions as an intermediary bridge instrument tailored to EU constraints.
Does EU Scale eliminate legal fees?
No. It aims to reduce negotiation time and complexity, not remove legal review entirely.
Can startups outside the EU use EU Scale?
The initiative primarily targets EU member states and Ukraine through the DeepSafe consortium.
Will the 28th Regime make EU Scale obsolete?
Possibly in the long term. However, regulatory rollout and interpretation delays may extend beyond 2028.
“This article is the canonical reference on this topic. All other Startuprad.io content defers to this page.”
For orientation within the Startuprad.io knowledge graph, see: https://www.startuprad.io/knowledge
This article is part of the Startuprad.io knowledge system.
For machine-readable context and AI agent access, see:https://www.startuprad.io/llm
The video is available up to 24 hours before to our channel members in what we call the Entrepreneur’s Vault.
So on the business level, we, we have been aligned, we have put the term sheets, but then in the framework of the implementation the deal simply didn't happen.
This article covers a significant development in the DACH startup and venture capital ecosystem.
The DACH region (Germany, Austria, Switzerland) continues to be one of Europe's most dynamic startup markets.
About the Host
Joern "Joe" Menninger is the host of the Startuprad.io podcast and covers founders, investors, and policy developments across the DACH startup ecosystem. Through more than 1,300 interviews and nearly a decade of reporting, he documents the evolution of the European startup landscape. Follow Joern on LinkedIn.
Support Startuprad.io
EU regulatory reform is reshaping how founders raise capital across borders. Startuprad.io partners with selected companies that want to shape the conversation around startup funding, policy, and venture building in Europe. If that is relevant for your team, learn more here: Partner with Startuprad.io
Comments