Why immigration will be the deciding factor in Europe’s innovation race

This article was originally published in EU-Startups.

By Semyon Dukach, Founding Partner of One Way Ventures, a VC firm funding exceptional immigrant founders. A Ukrainian-American, he came to the US as a child refugee in 1979. He is the former Managing Director of Techstars (Boston), and an angel investor in over 100 companies.

Countries around the world are locked in a race to develop the smartest AI, the most advanced semiconductors, and the greatest space exploration capabilities. What I find ironic is that, at the same time, many are actively resisting one of the greatest drivers of innovation a nation could hope for: immigration.

The rising popularity of far-right politics and sentiment in many countries across Europe has gone hand in hand with more severe anti-immigration attitudes. France has just passed a restrictive immigration law, and despite opening its doors during the refugee crisis a decade ago, Germany’s rhetoric around immigration is becoming harsher. Anti-immigration politicians have risen to power in Italy, the Netherlands… I could go on.

Within just seven years, the working-age population of Europe will shrink by 1M people every year.

Yet this is happening against the backdrop of ageing populations across Europe’s economic powerhouses. Without immigration, these countries will have to reckon with a decline in labour and talent in the next few decades.

This is not just a question of the labour force. Over my decades of work with startup founders across the world, I’ve seen immigrants show the strongest attributes for building disruptive businesses. Studies in Europe and beyond show that they have a greater impact on entrepreneurship than natives. Yet still, they face higher barriers to success.

Here are my thoughts on why Europe should welcome immigration from all corners of the world to bolster progress.

Dissuade immigration now and regret it later

Decreasing populations lead to a shortage of workers, a struggle for skills, and economic turmoil—all of which drain momentum for innovation, research, and development. The EU has expressed concerns about its shrinking populations specifically hampering digitalisation, the green transition, and EU competitiveness.

Within just seven years, the working-age population of Europe will shrink by 1 million people every year, the European Commissioner for Home Affairs, Ylva Johansson, warned recently. The populations of Romania, Bulgaria, Georgia, Greece, and Hungary are already in decline, according to new PEW research spanning 2000 to 2020. Italy, Germany, the Czech Republic, Portugal, and others would be going in the same direction if not for newly arriving foreigners. The continent needs immigration to buck this trend.

Many European countries are thinking about this issue politically rather than logically.

The EU as an organisation seems to agree and has turned directly to immigrants as a potential solution, recently presenting a new service to connect non-EU workers with EU jobs. However, this reality is harder to swallow for certain governments, especially as the far right grows. Instead, countries like France, Italy, Hungary, and Poland are promoting pronatalist policies to try and get more natives to have children, though the impact of such strategies is likely to disappoint. In Italy, years of fruitless pro-fertility campaigns have not dented a declining birth rate.

Ultimately, many European countries are thinking about this issue politically rather than logically. To sustain a thriving economy and business ecosystem long term, without which innovation flatlines, they need to be bringing people in and filling jobs, not putting up barriers based on where people were born.

Make the most of immigrants’ huge potential

Innovation doesn’t just depend on having a robust, vibrant economy. It is driven by the ambition, talent and grit of the individual scientists, engineers and entrepreneurs on the edge of new discoveries.

A 2022 European study found that immigrants are more inclined to become entrepreneurs than natives.

In my years working with immigrant and non-immigrant entrepreneurs, I’ve realised that the strongest common denominator for success is typically having overcome the hardship of embarking on a one-way journey to a new country.

A 2022 European study found that immigrants – both EU and non-EU – are more inclined to become entrepreneurs than natives. However, non-EU entrepreneurs had a lower chance of success. That suggests that despite being more willing to start a business, non-EU immigrants are facing higher barriers to their business taking off compared to natives and intra-EU migrants, who benefit from similar legal treatment to natives.

Other research also shows that the value of European immigrants is underappreciated. Between 2017 and 2022 in Europe, half of immigrants with degrees were employed in jobs they were overqualified for, compared to just one in three natives. They were also twice as likely to be unemployed.

The US example supports the idea that it pays to nurture immigrant entrepreneurs. They’re responsible for over half of unicorns, a third of innovative output, and one in four patents – despite representing only 14% of the population.

That data is echoed in some European countries where relevant research has been carried out. In Germany, which over the past few years has become one of the world’s primary destinations for immigrants, 2023 Global Entrepreneurship Monitor (GEM) data shows that over a quarter of all entrepreneurs are immigrants or children of immigrants, and they have a higher entrepreneurial activity than native-born Germans. 

Despite the turmoil of Brexit and changes in migrant flows, immigrant and non-white ethnic populations have consistently been the most entrepreneurially active groups in the UK, 2024 GEM data shows.

But the more nations close off accessible paths to residency or citizenship, or encourage anti-immigration rhetoric, the less likely it is they’ll attract migrants moving forward. For countries who want to have a horse in the global tech race, they should be placing far more value in nurturing immigration rather than dissuading it.

Not just the ‘highly skilled’ immigrants

While it’s easier to talk about the perceived benefits of attracting “skilled” immigrants, countries shouldn’t just assign value to people who have higher education or an existing trade.

All immigrants are a gift to nations. The journey they take to set themselves up in a foreign land – often perilous and uncertain – is not to be underestimated as a show of strength and determination.

So many of the qualities that come with being an immigrant end up translating into forceful entrepreneurship. I’ve found that immigrants are less likely to give up when they come up against tough obstacles, as they already know they have it in them to overcome what is seemingly impossible. They are able to twist and turn their trajectory until they emerge on the other side.

As an example of that resilience, a UK study found that at the height of the pandemic, early-stage entrepreneurial activity of UK natives fell from 9.8% in 2019 to 6% in 2020, while for immigrant entrepreneurs, the rate of activity actually rose by a percentage point.

Diverse populations are a core ingredient for innovation. Without that dynamism, a country is less likely to be an engine of new research, groundbreaking solutions and disruptive ideas.