Exactly this happened to European hardware startups. So many certifications and directives, weee, rohs, reach, red, supply chain, sustainability, etc. Logical step as an investor is to avoid ventures, that are burning tons of money just to comply with regulations. The company I work for right now has healthy cashflow and people for regulatory topics, but it would be impossible to re-create this electronics business today.
Even if you get EU grant, you can't run a startup that way. You have to basically have full plan set in stone, and you will be checked if it was fulfilled to avoid waste of EU money.
The problem is that you cannot pivot easily, you cannot change a lot of things in it - and even things like your potential hire bailing last minute can be devastating, paperwork wise.
Sadly this + unsustainable love for social welfare will lead Europe to lose long term life quality and possible wealth. They don't like innovators there now, that is for sure.
