The recently passed EU AI Act is encountering strong resistance from the startup ecosystem. Founders and venture capital leaders are urging a pause in implementation, citing operational and financial strain.
Open Letter Highlights Urgent Concerns
Over 30 leading European tech founders and VCs have signed an open letter, calling for a temporary halt to the AI Act’s immediate enforcement.
They warn the regulation could hinder innovation, discourage investment, and drive startups to relocate outside the European Union.
Lack of Regulatory Clarity
At the heart of the issue is the absence of clear guidance, particularly regarding general-purpose AI (GPAI) systems and foundational model compliance expectations.
The European Commission has yet to finalize the Code of Practice, essential for companies building AI infrastructure across sectors.
Costs Could Deter AI Innovation
Many startups express concern over escalating compliance costs, with some estimating expenses between €160,000 and €330,000 to meet basic regulatory obligations.
For early-stage ventures, these costs may not be sustainable, potentially forcing them to pivot or abandon core AI development.
Patchwork Enforcement Across Member States
Another key issue is regulatory fragmentation. The AI Act allows some national flexibility, leading to fears of inconsistent enforcement across EU member countries.
Startups argue this could lead to a complex patchwork of rules, further complicating cross-border operations and product rollouts.
Political and Industry Voices Join the Call
Sweden’s Prime Minister Ulf Kristersson publicly noted the regulations were “confusing” and required reconsideration ahead of their August 2025 implementation.
Major industry groups, such as the Computer & Communications Industry Association, also support delaying the rollout to allow time for refinement.
European Competitiveness at Risk
Critics argue that the EU risks falling behind global AI leaders, particularly the U.S. and China, if the Act slows down innovation.
Startups already face challenges competing internationally, and this added regulatory pressure could further widen the gap.
Proposed Reforms Include Sandboxes and SME Exemptions
To address concerns, some experts suggest regulatory sandboxes, allowing startups to test AI models without full compliance obligations during early development.
The Commission has also proposed lighter obligations for SMEs, aiming to reduce administrative burdens and encourage participation in the AI ecosystem.
August Deadline Creates Pressure
The EU AI Act is set to take effect starting August 2, 2025. The final draft of the GPAI Code of Practice is expected imminently.
However, many in the tech sector argue this timeline is overly ambitious and risks unintentional consequences if guidance remains incomplete.
Conclusion: A Strategic Pause May Be Necessary
The growing call for a pause in the AI Act’s implementation reflects the importance of aligning regulatory goals with Europe’s innovation agenda.
A measured and flexible approach could ensure that Europe retains its competitive edge in AI while safeguarding responsible development.