For several reasons, it is impossible to build a successful global start-up company in Slovenia. Slovenian entrepreneurs, therefore, establish companies abroad, mainly in London and Delaware. They set up "cost+" operating companies in Slovenia, which receive as many funds from abroad as they have costs. In the long term, this isn't good for the development of Slovenia. Cyprus, Croatia, Malta, Lithuania, Latvia, Italy, Ukraine, Luxembourg, Portugal, Belgium, Czech Republic, Finland, Estonia, Austria, Ireland, Switzerland, Norway, Spain, Denmark, Netherlands, Sweden, France, Germany and England have multiple unicorns, while Slovenia has none.
Start-ups have significant positive effects on the local economy. They attract talent and capital, are innovative, have high added value, and some become highly profitable. In 2019, 39 billion USD of venture capital was invested in Europe, followed by 37 billion USD in 2020. In 2021 the amount of invested capital already grew to a record high of 103 billion USD. The countries where these companies will be established will feel the positive effects of their success.
With Brexit, the EU lost London, one of the world's two most important centres for start-up companies and venture capital. None of the EU member states has yet positioned itself as the most suitable for building start-up companies and managing venture capital. This is an opportunity for a bold vision - to become a centre for start-ups and venture capital in the EU. To achieve this goal, Slovenia does not have to give up anything, but we must eliminate many of the shortcomings of our business environment faster than other member states. It will not be enough if we are as bad as Germany, but we will have to be significantly better than any other EU member.
A limited liability partnership is too rigid for start-ups, and a joint-stock company is too complex. The establishment of an additional form, a lean (non-public) limited liability company modelled after the English limited liability company, would solve the existing problems. Due to numerous bureaucratic obstacles, doing business from Slovenia is significantly more difficult. A typical example is an obligation to fiscalize invoices for online business, which is not required in many other countries, so we should also eliminate it. Let's bring back tax relief for investing in start-ups inspired by the English SEIS/EIS. We already had them years ago. With this measure, we would encourage investment and also attract new tax residents. Fast-growing companies need staff, but the approval of a residence and work permit for a foreign expert takes almost a year. Since talent doesn't wait, attracting quality foreigners to Slovenia is practically impossible. Finally, it is necessary to change the taxation of the inclusion of employees in the ownership structure of companies. Employees should be taxed when they receive cash proceeds from the shares and not when they receive the shares themselves. Economic diplomacy can then work on promoting the Slovenian business environment in Europe and beyond. Sounds easy, doesn't it?
Fifteen years ago, Luxembourg was not the centre of alternative investment funds, the headquarters of Bugatti was not in Croatia, and European unicorns were only in fairy tales. If Slovenia decides to become the centre of the EU with start-up companies and venture capital, it can succeed.
This blog was initially published by the Managers' Association of Slovenia https://www.zdruzenje-manager.si/sl/novice/nejc-novak-slovenija-bi-lahko-bila-sredisce-eu-zagonskih-podjetij/