Europes startup scene has entered troubled waters. Long overshadowed by Silicon Valley and now being chased down by China,thecontinent is urgently looking for boosts. Increasingly, the search is leading to ecosystems.The ecosystem model creates networks of individuals, organisations, and resources. Their shared expertise and resources can produce a multiplier effect, driving innovation and accelerating growth.A core component of European ecosystems is the EU. While its tech strategy often faces criticism, the bloc has also played a key role in driving startup success.Just ask Nicolas Benady, the CEO of Swan, a thriving banking-as-a-service (BaaS) fintech based in France.Our company wouldnt exist without the European Union, he says.The of EU techThe latest rumblings from the EU tech scene, a story from our wise ol' founder Boris, and some questionable AI art. It's free, every week, in your inbox. Sign up now!Benady points to the impact of the Payment Service Directive, an EU law that established standardised rules for electronic payments. The legislation sparked the success of many global fintech leaders, from Revolut to Adyen. They finally had a chance to compete with banks in payments.Swan has reaped the benefits. Last month, the startup announced it had raised 42mn the second part of a Series B round that brought Swans total funding to an estimated 100mn.Without this directive, I dont think wed have so many fintechs today in Europe, Benady says.Fintechs are far from the only beneficiaries of the EU ecosystem but the network still needs work.At TNWs Nurturing Scaleup Success webinar on Tuesday, Benady joined a panel of European tech experts to explain the power and peril of ecosystems. Their message was clear: no startup scales alone. Their success depends on a thriving ecosystem of partners.4 pillars of a thriving ecosystemJason Lynch, CEO of quantum computing startup Equal1, has firsthand experience of the power of ecosystems. His company has partnered with Arm on computing breakthroughs, collaborated with Nvidia to blend hardware with software, and teamed up with the Netherlands Organisation for Applied Scientific Research (TNO) on product development.Equal1 also recently secured investment from TNO. To strengthen the alliance, the startup has set up shop in another component of the Dutch ecosystem: the House of Quantum in Delft, a national campus for quantum startups.Lynch has high hopes for the relocation. Being in a centre of excellence is a critical piece of an ecosystem, he says.At the TNW webinar now available to watch on-demand Lynch broke down four crucial benefits of an ecosystem.1. TalentAs Silicon Valleys network effects continuously prove, startups benefit immensely from proximity to talent. The House of Quantum provides another promising example. With a steady stream of experts flowing through the site, the centre is giving Equal1 a fresh talent pipeline.2. InfrastructureComputation costs for startups can be astronomical. With access to shared infrastructure, startups can achieve dramatic savings.3. PartnershipsTech firms often rely on complex supply chains. Ecosystems offer a route to bring each component together. What a centre of excellence like Delft offers is an ability to work very closely with companies that are just across the corridor, says Lynch.4. CustomersEnd users are drawn to areas with substantial expertise and companies. They help startups to validate and commercialise their products more quickly. A hub like this really attracts in those end users, says Lynch.Yet Lynch also has concerns about EU ecosystems. Chief among them is a failure to commercialise ideas.Its well-recognised that European research is leading the world. People would probably say that bringing that research to market is where Europe has more of a challenge. For me, thats about speed, getting out of the way of startups, and trying to lower the barriers as much as possible.The money streamsEU policymakers are often slated for providing insufficient support to startups. There are growing signs, however, that their attitudes are changing.Clotilde Hocquard, Public Affairs Lead at France Digitale, a European organisation that connects startups and investors, points to several positive developments.One is an expansion of funding streams, such as a new EU initiative to mobilise 200bn for AI investments. Another is Frances Tibi Initiative, which brings institutional investors together with accredited VC firms to encourage tech investing. It should be replicated at the European level, Hocquard says.Big ideas like this have been hard to bring to life, but theyre now attracting growing support. Hocquard noticed the momentum shift after last years publication of the Draghi Report, which revealed alarming problems for European innovation.Policymakers are starting to realise that they need to do something to make sure startups can thrive in Europe, she says.Despite the positive signs, Hocquard wants faster progress. She points to another example set in the US.We have to make sure to mobilise pension funds and insurers, like in the United States. And we have to make sure the money is targeted towards VC funds and to finance innovation.But funding isnt the only challenge for EU ecosystems.The double-edged sword of regulationSwan may only exist thanks to EU rules, but the blocs regulation is a double-edged sword.One big problem is the diversity of laws. Despite the single market, the EUs legislation is fragmented. We dont have anything single, says Hocquard. We have 27 member states doing what they want with their rules.This smorgasbord of laws raises barriers to scaling across borders. If the ecosystem could harmonise the rules, startups would face smoother paths to expansion.Hocquard points to company law as a powerful and straightforward initial target. She also urges member states to stop twisting EU rules in different directions.If theres a European law, it should be applied in a uniform way across the continent, she says.Ecosystems for scaleThe urge to scale can lead to premature decisions. Benady advises early-stage founders to first focus on the product-market fit.Once you start to see commercial traction, then you have to scale your company and this is a totally different game, he says.At that point, ecosystems become a key player. For Swan, they provided a vital boost to the companys progress.At first, however, Benady underestimated the value of two essential supporting structures.Even though my investors warned me, I paid attention a little bit too late to HR and finance, he admits. When you scale, you cant mess with HR and finance.Benady compares their impact to musicians in a band.Finance and HR are the drum and the bass. Thats not what you hear; you hear the singer, you hear the guitar but if you dont have a perfect drum and bass, you wont scale your company. So pay attention to finance and HR.To make sweet startup music, ecosystems need an orchestra of instruments. They require one section for talent, a second for infrastructure, another for partnerships, and a fourth for customers.They also need the public and governments to hum along. The goal now is convincing citizens that investing in innovation is actually investing in the future of Europe, Hocquard says. Once we have the citizens with us, we need the policymakers to make all the legal changes.With that support, Europes band of startups could be heading for the world stage.Ecosystems will be a hot topic at TNW Conference, which takes place on June 19-20 in Amsterdam. Tickets for the event are now on sale. Use the code TNWXMEDIA2025 at checkout to get 30% off the price tag. Story by Thomas Macaulay Managing editor Thomas is the managing editor of TNW. He leads our coverage of European tech and oversees our talented team of writers. Away from work, he e (show all) Thomas is the managing editor of TNW. He leads our coverage of European tech and oversees our talented team of writers. Away from work, he enjoys playing chess (badly) and the guitar (even worse). Get the TNW newsletterGet the most important tech news in your inbox each week.Also tagged with