EU Scale and the Structural Reform of European Seed Funding

If you're a European founder scaling deep tech and stuck in the web of fragmented investment rules, here's your challenge: cross-border early-stage investments in Europe is painfully slow. Legal fees are high and standardized instruments are missing. Tomas Matsurik, co-founder and co-CEO of FundingBox and managing partner of FundingBox Deep Tech Fund, built and exited tech companies, now invests across Europe and leads the EU-funded DeepSafe project to create, to create what is called EU Scale, a pan-European convertible loan instrument.

Today we'll uncover how to navigate European startup funding, fix the cross-border investment gridlock, and unlock deep tech capital flows that could reshape the continent's innovation scene. Welcome to startuprad.io. Your podcast and YouTube blog covering the German startup scene with news, interviews, and live events.

Our guest today, Tomasz Mazuryk, brings a rare trifecta. He's a founder who built and sold NetSprint.pl, an investor deploying capital through Fundingbox Deep Tech Fund, and a builder designing the next layer of Europe's startup infrastructure. With a PhD in computer graphics from Wien, an MSc from IT - in IT from Warsaw Institute of Technology, Thomas has developed over 1,500 startups' access, acceleration, and funding through FundingBox.

Now, as technical coordinator of the DeepSafe project, he's steering the creation of EU-scale Europe's first standardized pan-European investment instrument for early-stage funding. So if you're a founder, investor, or policymaker wondering how do I raise or invest across Europe without drowning in legal fees and red tape, you come to the right place. Tomas, or Tomek, welcome to the show. Um, for everybody familiar with investment instruments, Would you say the EU Scale is like the European answer of Y Combinator SAFE?

Hello everybody. Hi Joe, thanks for having me here. Um, well, that's our mission. That's the mission we have onboarded on, uh, to create the pan-European instrument facilitating faster and more seamless investments at the early stage.

The issue that is pretty important right now in Europe, because the deals in Europe are happening on average 3 to 5 times slower than in the US, and I would assume that at the early stage the gap is even bigger, especially at the early stage where the deals should be happening really, really fast. I was just recently talking to one of the board members of the European Business Angel Association, and he told me about two valleys of death, one very early stage and one pretty late.

And I think you, you're, you're more or less also talking about the experience many founders have of the first valley of death, but there'll be a different interview. Um, you've built companies, you've invested across Europe. Take us back to your founder roots. What drove you to start netsprint.

pl, and how did that experience shape your later mission to rebuild Europe's startup funding infrastructure? Well, we are digging into the really, really past stories. Uh, we founded Netsprint in the, uh, so-called pre-Google era. So Google was the local player back then in on the US market, of course with the global ambitions.

Um, but we came on the mission, uh, within my current back then company with my business partner. We've been running the software house. So we created something that we know it's called nowadays incubation program. Back then we simply have announced, come to us with ideas and we are going, if we like the idea, we are going to fund it.

And support it. So back then I took the multiple roles, uh, of an angel investor, uh, but in fact it was also the venture building role. And we have incubated and venture built the startup called NetSprint. Again, back then we didn't know it's called startup.

It was supposed to be the company. And we were on the mission of building the first search engine of the Polish internet. Back then, Google didn't cover Poland in an efficient way. The AltaVistas and other search engines were really, really poor.

So we very quickly got the market traction. We created the company Just weeks before the dot-com bubble crisis. So after setting up the company, uh, we had a couple of conversations with investors, uh, from outside of Poland. They were very excited, but then the dot-com bubble crisis came and all the dreams about getting any money has gone bust.

So we went all the stages from the founding of the company with the really angel tickets coming from my pocket and of my partner's, business partner pocket. And then we have been developing the company without any external funding because on the local market, uh, there were no investors, no VCs back then. All the foreign investors after the crisis, dot-com uh, dot-com bubble crisis, have stepped back. So for the 6 years we've been running the company and growing this as in the bootstrap mode.

So when I look, uh, back and try to compare this to the nowadays, I must say that today founders are in the very luxury situation. They've got money available on different stages of the company development. They've got co-works. They've got venture studios.

They are just asked to come up with their ideas and develop them. So, you know, after 6 years of - 6 difficult years, we have been able to make an exit to the global player from the media space. And then after the exit, I got a little bit step back, time to reflect what to do in life. I did a bit of the consulting, but after some time I decided, well, it's time to do something next.

So on the other side of the barricade, which is the FundingBox platform and FundingBox company, that I'm developing right now is the platform to support startups. So we decided to, to, to support startups, uh, through the acceleration programs. And after some years seeing the great deal flow of startups coming from all over Europe, uh, I also founded the venture capital fund that is investing in the best startups, from the local ecosystem. You're getting a little bit ahead of me here, Tomas.

Um, let us walk through all the questions, and I'm sure we'll touch on everything of that. Um, let's talk a little bit about the current status quo. Everyday founders in Europe face different legal and tax reality in each country. How would you describe the current state of European startup funding, especially for deep tech and cross-border deals?

Well, the European startup scene is growing, but it cannot boom because the investment landscape, uh, is still broken. You've mentioned in the introduction about the two valleys of death, and here we are covering the first one at the seed stage. Let me come with an analogy. Probably all the listeners of this podcast still remember different chargers for every phone they've been getting.

I remember my every Nokia phone was coming with a different charger. And now if you've got a couple of phones in your family and then every phone has a different charger, it was a mess. You could not reuse your charger. Then the USB standard came, now the USB-C, and now you've got - you can have the same charger, same cable for your laptop, for your phone, for your electric toothbrush, for the Oura Ring, and all the other devices.

And I must say, it's a huge, huge relief. So now, how how to, to put this analogy into the startup ecosystem? Well, in Europe, startups are trapped within 27 different legal and tax systems. Uh, practically, uh, of course it's possible to make the cross-border investments, but it's making them slow, expensive, involving too much legal activities.

So it's making them expensive, and especially at the very early stage, the seed stage, those costs are relatively too high compared to the size of the ticket startups are getting. So that basically means in every of the 27 EU member states you have to deal with different laws regarding, uh, taxation as well as investment funding. So that means it makes cross-border transaction pretty expensive and inefficient, right? Exactly.

And that's why we are on the mission on bringing the US SAFE type of instrument to Europe that is universal, that could be applied almost on the spot to make the investment without too many work around it. I was wondering, at some point you you realizing - realize that copying just the US SAFE model just wouldn't work here. What was that moment of clarity, and what did you discover about why Europe isn't ready for US-style SAFE? And a little disclaimer here, I know there are always details making this impossible.

For example, in Germany, when you finally convert the safe, you still have to invest a little bit, which is not in the US legal tradition, and so on and so forth. So basically, they always needed to be adjusted, at least in Germany. Yeah, well, and the reality is, um, that there are some adjustments needed, uh, in every country, or almost every country across Europe. So We started our DeepSafe project, and after 9 months of making an effort to fit the US-style safe into the European reality, well, literally I can say that we have hit the wall because we have found out that this is not possible to make it in a simple way.

So We have confirmed, making the consultations with some selected investors, that basically Europe is not yet ready for the simple adaptation of US SAFE. The legal accounting tax realities and the no clear vision how to treat it, whether it's a debt or an equity. And on top of this, there are coming additional considerations, like for example, the so-called difficulty situation of the company. If you take the capital into the company, which you don't know how to classify, a debt or an equity, most of the accountants and tax advisors will say, okay, let's take it as a, as a debt.

This is sitting on your balance sheet. And too much debt, uh, after some time, like 3 years, is creating the so-called difficulty situation of the company, which doesn't allow the company to get any public help, any grant, any further investments that are backed by the public money. So there are many consequences of this status quo. So just to recap before we move forward, there is a lot of money in Europe, but it comes with the limitations of the public money also.

I mean the grants, but also the funds that are backed by public money. Because of that, many investors that are backed by public money are too risk-averse. So they are paying too much attention on the downside protection, and they are not paying enough attention to the upside potential that is coming with the deal. And basically, you know, the American way of investing is, uh, looking at the upside of the upside potential of the company.

So, uh, that's why our ecosystem is simply not ready yet, uh, for the full deployment and the growing in the way that we would be expecting to grow. That's, that's my take. So there are like two elements. One is the legal constraints, but also the readiness of the ecosystem.

Um, we've been talking a lot about different, different costs, especially, um, when investing cross-border. Can you share a story of a promising cross-border deal that fell apart because of legal or tax barriers? What did it cost the founder, not just in money but also maybe in lost momentum? Well, I think you've touched a very good point.

It's not about the money. It's mostly about losing the momentum. And well, I have seen in my life hundreds of the negative examples. A couple of them we have witnessed in our investment fund.

Once we have rolled out our fund, we have been using the full potential of the FundingBox Group to look into the European pipeline of projects. In the first 6 months of running the fund, we have found 3 excellent startups from Western Europe. But it ended up that due to the limitations, due to the costs, the potential costs of the transaction, uh, the cross-border transaction, those deals didn't happen. 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.

From the FundingBox acceleration platform, I can give one example of the startup, an Italian startup, Cognivix, that after 2 years of going back and forth with, with the lawyers, they finally set up the office in the US. And got the investment. But so this is the so-called Delaware flip. But you know, it was the time, it was the momentum, and it was really, really the complex operation.

But well, speaking about the positive examples, probably you, all the listeners have heard about the recent unicorn coming from Poland, 11Labs. Polish founders, uh, after 3 years of running the company, they have hit the valuation of $6.6 billion. But here is the twist: after analyzing the landscape, they decided to set up the company in the US and start fundraising into the US company from day one.

So It is the positive example of the company coming from or born in the CE, but the negative for the, from the EU ecosystem perspective is that they decided to go directly to the US. So those are the barriers, those are the limitations that we are working on to eliminate them. And that's our mission. I was wondering, instead of forcing a safe you pivoted towards a pan-European convertible loan as the foundation for EU scale.

Why was this the smartest starting point for Europe, and what lessons did you learn from the initial missteps? Yeah, well, as I said before, US SAFE adoption failed, the simple one. So we have pivoted and decided to concentrate on something that market already knows and is familiar. So all investors in Europe, all startups in Europe are familiar with the convertible loans.

Uh, still the convertible loans can be very complex. So we decided to onboard on a mission of creating the EU simple convertible loan agreement. We call it EU Scale, and we believe that this approach gives the chance to gain the traction and trust among the startups and investors and is going to, to help to facilitate the speed of the deals happening across Europe. So it is very simple, 2.

5 pages. Uh. No interest on the loan, no cash repayment, no specific guarantees for the investors, just the promise of the future most favorite nation of the shares at the future conversion, which is the standard when, when getting shares in future. And well, we stayed true to our goals.

So we wanted the standardized and simple agreement. We are using the convertible note as the true starting point. And just to remind That's how the US SAFE originally was born. It was the American adoption of the convertible notes that were very popular on the market.

So in, in the framework of our project, we plan to encourage some investors to start using our template and adopt it. And then hopefully the others are going to follow and we believe in the snowball effect on the market. So after a few positive examples, after a few examples that the deals can happen fast, we believe that it can become the new normal. So as I said at the very beginning, the US deals are happening 3 to 2 times faster than European.

So we are on the mission with this approach, with this template that everybody's on the, on the startup and investors seem familiar with to make this gap smaller or even liquidate it. In the founders world, you'll also tell some inside story about stories about that. But let us go into building trust. As you said, one adapts and then more people will adapt.

Um, you've said before European investors are distrustful of automation. How did that insight shape your approach, especially regarding AI funding platforms versus one-on-one, the, the typical human trust building? Well, our original plan within the DeepSafe project envisioned using our proprietary FundingBox-owned matchmaking AI platform, OnePass Bridge, to match investors and startups automatically. Uh, obviously We did not believe that the deals are going to happen automatically, uh, but the goal was to do the matchmaking and allow startups and investors sign the deals on the platform, uh, using the standardized template.

Uh, the platform recently won the Alastria Blockchain Award for the best Web3 project. So from the product perspective, um, it's ready to be deployed. But what we have found out, that there is no product-market fit, uh, because the investors, especially investors, are not ready, uh, to use it for the purpose of closing the deals. So The reality is that the EU investors are not ready for the so-called blind hype-based seed investments.

They are also distrustful of the new legal approaches, uh, and the so-called black box automation. So now we are pivoting this to one-to-one model, uh, meaning in the framework of the project, we are test driving matchmaking the investors also through the platform, but then taking this on the one-to-one basis to close the deals using the EU scale template. So we want to have the real-life proof that the deals, the signing of the investment agreement, can happen really, really fast.

And this is the first step that we are right now, uh, testing. I see that, that sounds pretty promising. You've been talking about DeepSafe before. Can you walk us through the structure of the DeepSafe project?

Who's involved? How decisions are made? And how founders, lawyers, and even VCs are contributing to the EU scale design? Yep, absolutely.

So the DeepSafe is the EU-funded initiative. Uh, it's consortium of experts doing the work. We are rather a small consortium of 7 partners led by FundingBox accelerator company based in Poland. In the consortium, we've got the Danish accelerator called Accelerace, seed fund from Latvia Overkill, South Moravian Innovation Center, BW.

CON, Baden-Württemberg Connected from Germany, and Techosystem in Ukraine. And on top of this, we've got a sister company from Spain, FundingBox Communities. So that's the consortium. That is helping us to get immersed into the different ecosystems, different legal ecosystems in different countries, to make the adaptations as fitting to the legal realities of different countries, different ecosystems.

While the European Simple Convertible Agreement for Loan to Equity EU Scale is the product. It's a contract template, uh, supported by the guidelines. And right now we are looking for the organizations willing to join us and help us build it together. We want to listen to the voice of the ecosystem because we are building this product for the ecosystem.

So if you are the lawyer, tax advisor, VC representative, angel investor, or experienced founder, we are opening a call for expressions of interest to recruit for our working groups. So you can visit our website eu-scale.eu to register, and, uh, we are definitely going to to involve everybody that is willing to contribute to this common goal that we've got in Europe. Um, we are focused on Founders here on Startuprade.

io, so let us dive in a little bit into the Founders Playbook. For founders listening today, admittedly we're recording this shortly before Christmas, but it will be aired only in February because we, we currently do have quite a backlog a backlog in content. So for founders listening today, say, when racing across Germany, Poland, and Czechia, what 3 practical steps should they take right now to prepare for cross-border round? Well, nowadays I think that the best approach is get the local lead investor and close with him a preliminary deal that he's going to lead the round.

Then search for the international investors who like the idea. Well, searching for investor is still the job that you have to do as the founder. And then once you convince them, ask them to join the round. Why the local lead investor?

To build the trust of the foreign investors that all the legal elements and the basic due diligence has been done properly under the local legislation. So that's the approach for now. For the future, once the EUSK will become the standard, it should be much easier because then you could be raising money independently for - from different investors and signing, uh, like the American companies are doing, signing SAFEs, each of them independently and up to some limit, and then with the promise of converting them at the next equity round.

But we are still not there as the ecosystem. And I was wondering for our audience if you ever paid a lawyer to translate a SAFE or convertible notes between EU jurisdictions. Drop a comment where you're based and let us know how common this is. We need to talk about the policy context here, the so-called 28th regime and EU-INC.

Yes, the European Union has currently only 27 members, and the 28th regime is part of growing political momentum in Brussels, um, a potentially new pan-European company structure that could - would let startups incorporate once and operate everywhere. But since this might take years to become real, how do you see EU Scale positioning itself as the bridge between solution founders and investors can use today? How has the shifting political climate influenced you? Well, the response coming from the European Union, European Commission, towards the initiative of creating the 28th regime is very positive.

EU-INC initiative is working on it. They have even developed the EUFAST. This is the advanced subscription template that is basically the US SAFE adoption in Europe. We believe it has still the flaws, that we have faced when trying to adopt American SAFE in the current European ecosystem.

So that's why we believe that the intermediary step, like the SCaLE, Simple Convertible Loan Agreement, is needed. Commission recently announced that the 28th regime is going to be the binding regulation. That's good. It's likely to be adopted in '27 but taken into force late '27 or even '28.

Uh, just to remind the listeners, GDPR was also the regulation, and there were many, many issues with the implementation, and there is usually the transition period allowing companies to get time to prepare. There are different interpretations of laws, different understanding what data protection was. GDPR was supposed to be universal but became very complex, and practically for the it, SMEs, uh, it hit the small companies with the disproportionately high costs. GDPR concept was born 15 years ago.

And very recently it got fully implemented. So, uh, that's why we believe that on the way of implementing the 28th regime, there will be some hurdles. Regarding 28th regime, there are more questions than answers. These questions are tax residency, social securities, labor laws.

It still might not be applicable for all companies, especially those that were established under different local laws. And that's why we believe that we need that bridge solution now. The EU scale, we believe, is something that is going to be the intermediary step, but we need it really now and fast in the European ecosystem. Guys, right after the break, we'll uncover the strategy that changed how FundingBox scales cross-border investments and how EU Scale could speed up your next round by months.

Guys, welcome back from the ad break. How, Tomasz, how do you balance national differences, say Poland versus France, while designing one instrument that fits everyone? It has to fit 27 legal regimes. Where do you draw the line between flexibility and standardization?

Well, convertible loans are widely used across Europe with relatively small differences between countries, but unfortunately, quite often they become bulky and too complex. So the primary challenge that we've got is to make it - make them simple enough to make them universal But on the other hand, we are working on creating a playbook set of rules on this, how to align existing accounting practices, tax, legal implications in different legal setups. So to address this, we'll develop the white paper that will highlight the required adjustments and interpretations and educational materials So it's like a playbook for this, how to use this EU scale depending on the setup.

Investor coming from this country investing in the startup in the other country. Let's look a little bit into the future, Tomas. If the EU scale becomes the norm, what we currently hope for, what will Europe's early-stage funding landscape look like somewhere around 2028? Will we finally see a true pan-European seed, pre-seed market?

We hope so. That's our goal and that's our mission. You, you guys are also working with DeepSafe. When is your next intake of DeepSafe for startups and investors, and can you explain the benefits for both?

Well, we expect to to launch the next cohort for about 20 startups in, in late February '26, with the deadline for applications being in April. April. In So after onboarding those 20 startups, we are going to support them with the Venture Readiness Program starting from May. We offer them the mentoring But also we are going to include the fundraising and actionable advices on how to use the EU Scale instrument.

Moreover, we are going to offer also the warm introduction to investors that are in our ecosystem. And we are looking for the high potential early stage startups active in the deep tech domain., established in the EU member states or Ukraine, uh, and we are looking for startups that are interested in piloting the EU Scale convertible, uh, deals. And obviously the expression of interest will be launched at the eu-scale.

eu, so we are inviting all the startups to mark this website and look for announcement of the open call in February. Um, your predictions for 2030 - what is your boldest prediction for Europe's deep tech ecosystem by 2030 in talent, capitals, and exits? Well, we believe that, um, the gap between EU and US and China will be minimized. Our goal is to reverse the trend, and we believe that reversing the trend, meaning that the gap is not growing and getting smaller, is going to be a success.

I would also be interested in your contrarian take. Many say Europe can't compete with the US. Um, I actually just read the, uh, State of European Tech from Atomikor. They say something different.

Um, but, um, you've argued that Europe's fragmentation might be actually its secret weapon. How so? Well, nowadays we definitely cannot compete in the volume and speed of investments. Not today and probably not in the short future.

But, and here are a couple of buts, we believe that the united defragmentation under the EU umbrella The fragmentation of the market, um, is giving a huge opportunity because Europe has the largest public grant ecosystem in the world. That is including grants on the different levels, including the cascade funding grants where we as FundingBox, for example, are one of the European leaders of distributing the cascade funding grants. Just to remind the audience, we have distributed and supported, uh, more than 1,500 startups in the last couple of years.

On top of this, well, Europe has the, uh, complex but more stable and predictable political and regulatory environment. Still lower costs of accessing talent, for example, from CEE or Ukraine, and Just to mention, numerous technology and competence centers, uh, that hold untapped advantages. Once fully unlocked, they could significantly strengthen the deep tech ecosystem. So Europe may not be the most competitive now, but it's likely the most steady market.

We believe that all those elements are the counterarguments that Europe will not be able to compete with the US and China. And we believe that the defragmentation is the key to unlock all those opportunities. Um, for our audience, if you're a founder or investor in Europe, we would be interested give us a comment of your country pair, the two markets you're trying to bridge with funding, say Germany, Poland. We'll highlight some of your cases in future episodes.

Tomas, you have any advice for founders? Because looking back to your first startup days and your early investor experience, what two things would you do differently today? And what should founders focus on when raising cross-border? Well.

Back then there was literally no VC ecosystem in Poland, so we had to bootstrap. Due to the lack of capital, we got stuck in Poland. We simply didn't have the capacity to go beyond. So nowadays I would raise funds from, from abroad and start scaling from day one with the global mindset.

Today, the mindset should be global and not local, not even regional, from day one. And only those companies have the chance to be a true success, uh, the founders that are born with the global mindset and go with this setup, uh, of conquering the world. That's the only way forward in my view nowadays. Let's talk about a hidden gem as the last question.

What's one little-known legal or tax tip every European founder should know before signing the next term sheet? Well, I guess there are many, many tips and tricks. I believe that founders should be really careful when making - signing their first investment agreement. I would say, first of all, conduct the due diligence of your future investor.

Investment agreement, especially at the very early stage, is the long-term contract. So be sure with whom you are onboarding on your mission. More practical things: do not make any guarantees on your personal property. Still, such elements are happening from time to time.

And this can potentially lead to a lot of tensions and a lot of unnecessary pressure on the founder. Early-stage deals, it's known to everybody that are very risky and then can often fail. So you as the founder shouldn't be putting more pressure on yourself than needed. And The last thing, quite obvious, but unfortunately still too often overlooked: do not give away a large portion of your equity for the seed investment.

We have seen so many broken cap tables that companies became uninvestable, and it's a big pity. Tomasz. Awesome closing words. Thank you very much.

It was a pleasure having you as a guest. Thank you, Joe. It was also a pleasure having me with you. That's all, folks.

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