How many European startups are actually relocating to the US?

When Heart Aerospace closed its Swedish operations last year and moved its entire headquarters to Los Angeles, it sent shock waves through the European tech ecosystem. It also followed a predictable pattern of European startups moving to the US to scale.

But while Heart's move was a loss for Europe, new research suggests that such relocations are highly unusual.

Just 3.3% to 4.3% of European VC-backed startups relocate abroad, according to new research from the European Commission's Joint Research Centre, which tracked 16,595 VC-backed startups across 25 European countries between 2000 and 2021.

The US accounts for roughly three quarters of those relocations, the report finds, concentrated in San Francisco, Boston, and New York.

Full relocations are very uncommon

Of the startups that do relocate, 97% keep operations in their home country, according to the JRC.

For instance, German remote-driving startup Vay and Munich-based nuclear fusion company Marvel Fusion have both established US presences while retaining headquarters and R&D in Europe.

VC backing is the clearest predictor of a move, the report finds. Funded startups are ten times more likely to relocate than comparable non-VC-backed peers.

That points to investor pressure, particularly from US funds, as the structural driver behind European startups moving across the Atlantic. Some US investors require startups to incorporate under Delaware jurisdiction as a condition of financing, the report notes.

Nearly half of all relocations happen when a company is three years old or younger, according to the JRC.

Asset-light IT startups relocate at roughly double the rate of manufacturing firms, one reason Heart's complete departure stood out.

Rates vary by country. Romania sits at nearly 15%; Italy and Spain come in below 2%, the report shows. Larger ecosystems such as France and Germany fall closer to the 3.3% average.

Partial moves are better for Europe

Research by London-based Hoxton Ventures found that nearly all European startups with over $500m in revenue, including Spotify, Wise, and Adyen, succeeded by expanding into the US market. But that's not necessarily a bad thing.

A partial move that unlocks US capital while keeping R&D and jobs in Europe may net out as positive for the home ecosystem, the JRC research shows.

Complete relocation, like in the case of Heart Aerospace, is the scenario policymakers are trying to prevent.

Making it easier to do business in Europe

Access to late-stage capital remains the primary structural gap. Exit options, both IPO and M&A, are also thinner in Europe than in the US, the report notes.

The European Commission's recently proposed EU-Inc framework, which would allow founders to register a company online in 48 hours for €100, with full access to the single market from day one, is designed, in part, to address that friction.

But some impact investors are sceptical that EU-Inc goes far enough.

"If this ends up as an optional structure that coexists with national regimes, the real impact will be limited," Daniel Uusitalo, investor at Dutch impact investment firm 4Impact Capital, told Impact Loop.