Currently, there is a tendency in the world of establishing new startups as it has become a way to gain benefits in a creative and innovative way. Entrepreneurs all over the world are developing various startups and among them, one of the most popular markets for setting up a business is the crypto market. Usage of cryptocurrencies has rapidly gained popularity and now it has a great influence on the economy of several countries. It is widely believed that blockchain technology will definitely change the future of fintech startups but unfortunately for European businessmen, it may not be the case with Europe.
Despite lots of effort, not every startup market is successful and the crypto ecosystem in Europe is among those unsuccessful markets. Although many European countries have adopted blockchain with great benefits, in general, if we compare them to some small countries outside Europe, we will notice that the crypto startup market in Europe is nothing special and even more, it is considered a failure. Considering the fact that Europe is one of the worldwide leaders in technological development and the tech market of the continent has advanced so much in recent years, the collapse of the crypto market seems a little bit strange. However, it actually has some serious reasons that should be taken into account by everyone who plans to start a new business or invest in European startups.
Reasons behind the failure of the EU crypto landscape
People have been wondering why the European startup landscape has never made it into Silicon Valley. This probably has a number of reasons like not having access to huge funding capital, less intellectual resources, or orientation on revenue instead of economic growth. But when it comes to the crypto landscape, the most important reason is probably existing strict regulations.
Despite the success of cryptocurrencies, many countries still consider it as something doubtful, something that needs to be regulated strictly. Indeed, sometimes people use cryptos without even realizing the mechanism behind this digital currency and how it really works, and in this case, it can be harmful to their safety while making online transactions. But also it can damage innovation in the EU startup market.
The EU crypto regulations is the main reason why most Europeans don't want to go into absolute chaos. So they mostly delve into more traditional financial startups. For example, if we try to discover the best forex brokers in Europe, it will quickly dawn on us that most of them are new companies funded by private investors, showing that innovation is not necessarily the driving force of EU startups. But the foreign exchange is an industry that needs to be open to new technologies and innovation and only in this way will it have the potential to help the crypto startup market rise.
But considering the current strict regulation system, it’s not a big surprise that instead of stimulating innovation, the EU regulation actually hinders the European business sector. This is why it is believed that a more flexible approach is needed to stimulate innovation. Of course, sometimes regulation can even be a powerful stimulus, but most of the time it suppresses new ideas and delays startups to achieve success, while more flexible legislation will probably be beneficial for the whole crypto landscape of Europe.
The problem of raising enough capital
However, having strong crypto-related regulations is not the only factor that plays a major role in the failure of European startups. Lack of access to large funding capital can also be an important issue. Usually, the success or failure of crypto startups or any type of startup depends on the amount of money injected into the company. Most of the European startups lack investors that take part in high funding even though they are recording great sales.
The reason is simple - these investors are skeptical about the success of EU businesses and try to take precautionary measures. Therefore, they care more to achieve good returns in the coming years instead of the growth of the company. But if we look at Silicon Valley, we can see that investors there are trying hard to help the company grow without even thinking of generating revenue immediately. As a result, startups there can access their funds in less than a month while EU startups have to wait for six months and this is why they aren’t so successful after all.
Another reason why European entrepreneurs face problems is a fragmented market. There are many different countries in the EU with completely different cultures and lifestyles and this is why it’s harder for entrepreneurs to develop a key strategy that would fit all the European markets. For example, cryptocurrencies are permitted in some countries while others strictly prohibit any startup related to digital money, therefore, it’s hard to understand this diverse market. But without understanding every important element of the market, success is unachievable.
These are just a few of the reasons why it’s hard for the EU startups and especially, crypto startup market to achieve success. Lack of innovation, problems of raising funds, and strict crypto regulations actually slow down the pace of technologies, not to mention Brexit which also causes uncertainty. In any way, one thing is certain - changes need to be made in order to change the downward tendency of crypto startups in Europe.