One year into the implementation of the Digital Markets Act (DMA), the European Union’s ambitious effort to regulate competition in the digital economy, startups are seeing more challenges than benefits. The DMA was introduced with the promise of ‘levelling the playing field’ by reining in more dominant technology companies. In practice, however, it has created new barriers for small and medium-sized enterprises (SMEs), adding compliance burdens, disrupting established distribution models, and creating uncertainty in an already challenging funding environment.
Startups already faced an uphill battle
For startups, the ability to efficiently bring products to market and scale quickly is critical. Before the DMA, European tech startups already lagged behind their global counterparts. The United States has nearly three times as many startups, and venture capital investment in the EU (at $34.3 billion in 2022) remains significantly lower than in the United States ($116.7 billion) and Asia ($62.5 billion).
This investment gap was already a concern under the EU’s Digital Decade goals, which aim to strengthen Europe’s digital sovereignty and create a more competitive digital market. However, rather than unlocking new opportunities, the DMA’s rigid regulatory framework threatens to further constrain growth by forcing curated online marketplaces to overhaul their business models in ways that disrupt existing developer ecosystems.
Has the DMA created new market opportunities?
Much of the focus on the DMA has been on the impact on larger companies, but the reality for startups is that these changes have made the market more fragmented and difficult to navigate. Instead of creating a wave of new, specialised app stores, the few new entrants have mostly concentrated on gaming, leaving developers in other sectors without meaningful alternatives. The removal of long-established security and trust mechanisms has also made consumers more wary of downloading apps from unknown developers, making it even harder for startups to build a user base.
Beyond app distribution, the broader consequences of the DMA are already being felt. Apple and Google delayed launching new AI-powered features in the EU, limiting startups’ access to cutting-edge tools that could help them compete. At the same time, compliance costs are rising as developers are forced to adapt to different digital marketplace rules, submission processes, and legal requirements across multiple app stores. The evolving nature of DMA enforcement has also created uncertainties. Startups that once relied on a straightforward submission process to reach global markets now face a patchwork of shifting regulations that slow down product launches and increase overhead.
What’s next for startups under the DMA?
As the EU looks ahead, and as other countries explore similar regulations, startups and SMEs need a more straightforward path forward. Promoting competition is important, but it must be implemented in a way that enables companies of all sizes to innovate and scale. The first year of the DMA has raised serious questions about whether it is achieving this objective. We will continue to monitor its enforcement and advocate for policies that support our small tech member companies around the globe.
Read our full white paper here for a deeper dive into the specific challenges startups face under the DMA and what comes next.