Shortly after government was invented regulations or red tape came into event. A few weeks later somebody complained about the red tape because of the restrictions it imposed. Centuries later, red tape is still being complained about and every once in a while, a government wants to cut red tape.

In an article from the New York Times News Service, while those of not from Europe tend to think because of the European Union or EU status, there should be less regulations, but that is not the case. Cumbersome bureaucracy – covering everything from hiring requirements to financial regulations – can stifle companies wanting to grow.

The former President of European Central Bank, Mario Draghi, wrote a report recommending a single capital market.

Despite the challenges, 35,000 early-stage companies in the EU and Britain were established in 2024, more than 4 times as many as a decade ago. Venture capital firm, Atomico estimated investment of those 35,000 firms is $426 billion.

The downside according to Atomico is European companies raised 2/3’s as much funding relative to their American counterparts and achieved half their success.

Two examples among many are: a financial startup in Ireland to work on a standardized credit score. The company gained a foothold in Greece and Cyprus but failed to get into other markets. Part of the reason is the myriad interpretations of the trade bloc. The regulation functioned more as a legal framework than a technical guide, so it is open to hundreds of interpretations.

Another example is Gravity Wave, a Spanish clean-tech company that removes plastic from the ocean and recycles it into furniture or pellets. The founders visited dozens of plants to source local recyclers in Italy and Greece to avoid some of the regulations.

A problem is recyclers did not want Gravity Waste product because it contains both plastic and fishing nets. The fishing nets get stuck in the machines.

Even registration was a headache, the solution was to set up 3 companies: one for waste collectors, one for production and one for sales.

Every company tends to protect its own companies.

Linking to dividend paying stocks, once a company is established it likes regulations because regulations hurt the competition. When discussing cutting regulations one must ask who does it benefit and who does it hurt? There is a reason, cutting red tape has been an issue for generations.

There are more questions than answers, till the next time – to raising questions.