Challenges for European startups: How it actually works

The real challenges for startups in Europe

Before we look at the positive side, let's be honest about what's genuinely difficult. These obstacles aren't made up—they're daily reality for every European startup trying to grow.

Talent and recruitment is fundamentally different than in Silicon Valley. There, being a startup is a badge of honour. Employees accept lower salaries in exchange for equity because they know the story. That cultural context is largely absent here. Dutch engineers expect market salaries that compete with established companies, without the startup discount that's normal in the US. This means that as a European startup, you often need to search twice as long for the right people and pay more cash for the same level of talent.

Financing and investment climate differs not just in size but also in mindset. European investors want earlier proof of traction and conservative growth figures. American VCs invest in vision and market dominance potential. This means European startups need to become profitable earlier, which practically means you grow slower. An American seed round of $2-3 million is normal. In Europe, €500k-1 million is already on the high side. This difference compounds in every round.

Regulatory pressure and compliance obligations are serious in Europe. GDPR alone requires a level of data governance that many startups only implement when they have a hundred employees. For a European team of ten, it's already mandatory. Then there are the labour law obligations per country—each market requires local knowledge of HR, tax, and administration. This contrasts with one uniform legal framework for an entire large market.

And then the compliance certifications. Enterprise clients expect ISO 27001 certification. This isn't optional if you want to grow seriously. The traditional path costs €30k-50k and six to nine months. For a startup with limited budget and time, that's an enormous investment that's difficult to justify in the early stage.

Winning trust with enterprise clients is perhaps the most frustrating challenge. A startup from San Francisco can more easily get a meeting with the CTO of a Fortune 500 than a startup from Amsterdam. This partly comes from perceived innovation—the US is still seen as the epicentre of tech. But it also comes from risk perception. A procurement manager who chooses an established company and it goes wrong can say "everyone uses them." Choose a less-known European company and it goes wrong? Then you get asked why you didn't go for the safe choice.

Why these challenges sometimes become advantages

Each of these obstacles has forced us to build in ways that ultimately make us stronger.

The poverty advantage forces you to become profitable earlier. This sounds like a disadvantage, but when the financing market cooled in 2022-2023, this proved our salvation. Where others had to halve their teams and drastically reduce their burn rate, we had already learned to operate efficiently. The market change that was existential for many startups, we could weather relatively easily. This discipline gives you an edge: you've learned to survive on less, which makes you more resilient against economic headwinds.

The high-touch paradox emerges because limited resources force you to combine software with personal service. This is often seen as "less scalable", but in practice it became our advantage. When we pitch against pure software players, this personal approach often tips the scales. The best part? We learn from each project and build those insights into Tidal Control. It may be slower than "move fast and break things", but it ensures our software actually solves problems. Features we build come directly from client pain we've seen ourselves, not from what was thought up in a boardroom.

The importance of local ecosystems is often underestimated. In Europe, much revolves around local networks—per region, per country, sometimes even per province. Everyone knows everyone. This means relationships go deeper than purely commercial agreements. For us at Tidal, this has led to stronger bonds with implementation consultants, auditors, and cybersecurity partners. These relationships are built on trust and mutual understanding, where we truly help each other grow instead of just executing transactions. The smaller, tight-knit ecosystem compensates for the fragmented market—collaborations come together faster because people know and trust each other.

The role of AI as an unexpected accelerator for European startups

AI fundamentally changes what's possible with small teams. What used to require a team of twenty developers can now be done with five. This dramatically narrows the funding gap. If you have half as much capital but triple your productivity, you're suddenly competitive.

The real advantage for late starters: you can build from scratch with AI at the core. No legacy code that needs adapting, no outdated architectures getting in the way. You build directly with modern technology that maximally leverages AI.

More importantly: compliance that's mandatory in Europe from day one proves advantageous during international expansion. When companies from other markets come to Europe, they must adapt their software to local laws and regulations like GDPR. They must revise their architecture for European privacy requirements and add flexibility for regional requirements. For us, this is already "baked in" from the beginning. We didn't first build one version and then have to adapt—we built directly with European regulations as our starting point.

This means concrete advantages: GDPR compliance is native in the architecture, not as a layer on top. We build flexibility for country-specific requirements as standard, because we know the Netherlands works differently than Germany, which works differently than France. This flexibility we had to build out of necessity proves valuable for all markets with complex regulations. Sometimes starting later is a blessing—you learn from others' mistakes and skip difficult detours.

The compliance challenge for growing European startups

Enterprise sales in Europe is impossible without ISO 27001. It's not "nice to have"—it's essential for serious B2B SaaS. The problem is timing. Many startups think: "we'll wait until we're bigger." But then you're too late. You miss deals because you're not certified.

Start with ISO 27001 when you're still small. A team of ten people can be certified in three months. A team of fifty? Six to nine months. Complexity grows exponentially with your organisation. Moreover: starting early means building security in from the beginning. You don't have to go back later to fix systems and processes—something that's always multiples more expensive.

The biggest risk of delay is technical debt. Every month you wait, you build systems and processes that need adapting later. We've seen startups that finally tackle compliance after two years, and then discover that fundamental architectural choices don't comply. Fixing this stops product development and costs ten times as much as doing it right immediately.

How Tidal specifically addresses European compliance challenges

We built Tidal Control from the beginning for European startups and their specific challenges. You see this reflected in fundamental product choices.

ISO 27001 as starting point. Many popular GRC platforms are developed from SOC 2 requirements and treat other frameworks as supplements. We deliberately chose ISO 27001 as our foundation, because this is the standard that European enterprise clients expect and ask for. This choice determines how the entire platform works: from how we assess risks to how we suggest controls. SOC 2 works from outside in (what do you promise clients?), ISO 27001 works from inside out (what information must you protect?). This latter approach fits how European companies think about information security and aligns with European laws and regulations like GDPR.

30+ frameworks including regional and sector-specific requirements. European clients don't just ask for ISO 27001. They ask for NIS2 for critical infrastructure, NEN7510 for healthcare, DORA for financial services, or specific GDPR implementations per country. We have more than thirty frameworks in the platform, including country-specific legislation and industry requirements. This directly addresses what European enterprise clients need and prevents organisations from having to combine multiple tools to meet all their obligations.

Built for understanding, not just checkboxes. European startups want to understand how a standard works and why certain controls are important. The focus isn't just on getting "the green checkmark"—though that ultimately needs to be there. We provide context and explanation you need to achieve real security improvement, not just tick off compliance. You see this reflected in how we present information: with rationale, examples, and the ability to dig deeper when you want to understand the underlying logic. This approach helps teams not just get certified, but actually become more secure.

Aligned with how European auditors work. Certifications issued by European certification bodies are highly valued by European clients. These auditors are also known for their thorough approach and high quality requirements. Dutch and German auditors don't just want to see that you've implemented a control—they want to understand why you chose this specific implementation and how it fits your organisation. Our platform helps you document and justify your choices in a way that convinces auditors. We don't just guide you through requirements, but help you build a narrative that shows you've worked thoughtfully and risk-based.

In summary

Europe offers unique challenges: less capital, fragmented market, early compliance requirements, and extra steps to win trust. But these challenges also create advantages. The poverty advantage makes us more resilient. The high-touch approach leads to better product. And local ecosystems enable collaborations that go deeper than pure commerce.

AI fundamentally changes the playing field. Small teams can now compete with large ones, and starting later means building without legacy baggage. For European startups who've always been forced to do more with less, this is particularly beneficial. Compliance that we build in from day one out of necessity proves a strategic advantage during international growth.

Compliance doesn't have to be an obstacle when you approach it smartly. Start early, use tools specifically built for European requirements, and see certification as foundation rather than endpoint. With the right approach, ISO 27001 certification is achievable within three months for small teams.

The key isn't trying to be a copy of Silicon Valley startups. The key is building on European strengths: efficiency, quality, and compliance as competitive advantage. We, European entrepreneurs, may build in a more challenging market, but we make it work by leveraging our unique strength.

If you want to know how other European startups have halved their certification time whilst spending 60% less than with traditional consultants, book a demo with Tidal. And yes, that last bit was a sales pitch. I already told you European founders need to be profitable earlier.