With Leo Ringer, Form Ventures: From Obstacle to Opportunity — How Regulatory Engagement Could Reshape European Venture Capital
Leo Ringer, founding partner at Form Ventures, has built one of Europe's first venture capital firms centered on regulated markets. Our paths have crossed in efforts to reshape how VCs engage with policy - from efforts to create a dedicated policy track at Slush to co-hosting together the VC & Policy track at VentureESG's FRAME conference in London this year, which drew 300 investment firms and institutional LPs. Few people have thought as much about VC and regulation in Europe. This piece distills dozens of hours of conversations between us and key insights from our discussions at FRAME 2024 by VentureESG in London on why venture capital must fundamentally rethink its approach to regulated markets.
As European lawmakers finalized the AI Act or the UK the Online Safety Act, venture capital firms were notably absent from the discussion. This wasn't surprising — the relationship between venture capital and policymaking in Europe is dysfunctional at best, broken at worst. VCs typically see regulation as something to be avoided, while policymakers rarely understand how venture capital drives innovation and helps companies scale.
The Great Divide: How Europe's VCs and Regulators Lost Each Other
When the two sides meet, it's usually VCs lobbying for lighter regulation while policymakers focus on passing new laws, neither side devoting enough energy to understanding the other. VCs have unique insights across their portfolios regarding what makes innovation work and what holds it back, and influence over good governance - but neither are leveraged by policymakers. Meanwhile, policymakers are driven by a range of incentives and requirements beyond simply promoting innovation, which investors often fail to appreciate. The tired narrative that "Europe regulates while the US innovates" masks both a problem and an opportunity.
Beyond Resistance: The Business Case for Regulatory Engagement
For European VCs, continuing to treat regulation as merely an obstacle ignores a crucial reality: tech is now regulated, and this will not change. Successful ecosystems will not be those that resist regulation or innovate despite it, but those that successfully harness the interplay between regulation and tech as a competitive advantage. Rather than trying to copy Silicon Valley, Europe has the opportunity to carve its own path, leaning into the reality of regulation and innovating in light of it.
The business case for regulatory engagement is compelling, though often overlooked in venture capital. At a VC & Policy session we hosted together at VentureESG’s FRAME conference, gathering 300 investment firms and institutional asset owners, this reality became particularly evident. Backing frontier technologies that are just about to be regulated holds big financial risks, as well as opportunities. Legal certainty creates tangible advantages: regulatory clarity enables faster scaling, clear frameworks reduce market risks, and predictable rules improve portfolio management and drive better fund returns. It’s no surprise that Elon Musk is spending so much time in Washington DC these days.
Two Ways VCs Are Reshaping Their Policy Approach
Two distinct strategic approaches are emerging in how VCs engage with policy. The first, "Direct Corporate Operating Environment," focuses on creating optimal conditions for startup growth and scale. This track tackles fundamental business conditions that directly impact returns: optimizing stock options, enhancing talent mobility, and improving capital formation or incorporation modalities — essentially making Europe competitive globally. Atomico with its State of European Tech report, Index Ventures through its #notoptional campaign, and others like the recent EU.inc campaign are great examples of what can be achieved when VCs really dig in on policy.
The second approach, "Leaning into Regulated Market Building," involves strategic engagement in shaping emerging regulatory frameworks for entire market segments that can make or break the trajectory of portfolio companies. Think verticals such as food, health, AI, dual-use, or energy. A small but growing number of leading firms and specialized funds are already showing the way by leaning into policy engagement, hiring specialists on their teams, or launching dedicated institutes.
Breaking the Cycle: Moving Past Crisis-Driven Engagement
Beyond this handful of examples, venture capital and regulators have fallen into dangerous patterns of pendulum swings. On the VC side, engagement tends to occur only when risks materialize: a startup faces a privacy breach, and firms scramble to understand data protection laws; a crypto project implodes, and investors rush to influence hasty regulations. Otherwise, the reflexive response is to lobby aggressively against all regulation, creating a cycle of confrontation rather than collaboration. Meanwhile, regulators swing between extremes: a decade of inaction on cross-border enforcement of national jurisdictions for content and data issues suddenly gives way to sweeping frameworks like the DSA or GDPR. Both sides oscillate between minimal engagement and overreaction, creating an environment of perpetual uncertainty.
The famous risk researcher Ulrich Beck captured this dynamic perfectly in his concept of the "Risk Society" — modern economies that organize themselves primarily around managing risks rather than creating value. For venture capital, this paradox is particularly striking. VCs are in the business of capturing unbounded upside, consistently pushing portfolio companies to maximize their growth and value-creation potential. Yet when it comes to regulation, the industry suddenly shifts to a defensive, risk-focused mindset, abandoning its natural orientation toward opportunity. The recent AI Act exemplifies this pattern — born from crisis-driven dynamics between tech and regulators, with VCs largely absent from the early, constructive conversations that could have transformed regulatory constraints into competitive advantages for innovative companies.
Moving fast: Three first steps to fix VC and policymaker relations
The way forward requires three fundamental change:
Truly agile regulation that works for both portfolio companies and policymakers, through what Form Ventures have argued is the three “Rs”: resources, to properly fund regulators to understand innovation; risk appetite that avoids a “no failure” mindset; and rules that are flexible enough to evolve as technology evolves.
Sustained dialogue mechanisms that transcend crisis-driven engagement, creating permanent venues for VC-policy exchange and building shared understanding of innovation cycles. Think of it as building regulatory product-market fit before scaling, rather than trying to retrofit compliance after the fact.
A new mindset where policy becomes opportunity not obstacle, while helping regulators understand startup realities and innovation timelines. This requires infrastructure: permanent forums for VC-policy dialogue, regular knowledge exchange programs, and shared platforms for understanding innovation cycles.
With growing geoeconomic competition globally from China to the US, Europe's VC industry needs to overcome the stagnation of the status quo. A new paradigm of responsible technology innovation that bridges venture capital with policy could demonstrate that a third way is possible — one that builds a principles-based, high-performing new economy at the intersection of values, policy priorities, innovation, capital, and infrastructure.
None of this will be easy. It requires sustained effort from both sides and a willingness to move beyond entrenched positions. But the alternative — continuing the current dysfunctional relationship — serves neither investment returns nor the public interest. The result could be transformative: a thriving tech ecosystem that proves Europe can lead in both regulation and innovation.
