Capture and build on the best examples of entrepreneurship

Start-ups matter: at a time when Europe is going through one of the deepest crises in its history they have the ingenuity and flexibility to capture the best ideas, turn them into new products and services, and generate economic growth.

Big companies need start-up SMEs to help them with ideas too, says Nani Beccalli-Falco, President and CEO of GE Europe and CEO of GE Germany. “Size can be a burden; things stiffen up. We promote internal entrepreneurialism, but many times you need to have a breath of fresh air and capture ideas from the outside,” Beccalli-Falco told delegates at the Science|Business Academic Enterprise Awards, held at the European Parliament on 4 June 2013.

SMEs are more than a source of inspiration for others, they are backbones of the economy. “They are our customers, partners, targets for acquisition. We work with big companies, but a large chunk of our sales is with SMEs,” Beccalli-Falco said.

The need to craft policies that help high-tech start-ups and fledgling SMEs is one of the few issues that is not contested in the European Parliament, with backing from across the political spectrum, noted Maria da Graça Carvalho, MEP. As a result of pressure from MEPs, two significant amendments have been made to increase support for SMEs in the European Union’s next R&D programme Horizon 2020, which will run from 2014 – 2020.

One amendment will increase the level of participation of SMEs, while the second will increase the share of the budget to be devoted to small companies. “In terms of Horizon 2020, probably the most significant contribution from Parliament is the emphasis on SMEs,” Carvalho said. This matters because SMEs “have a difficult life in Europe” and things are getting worse as the financial crisis drags on.

In particular, small companies face excessive bureaucracy at member state and European Union level, difficulties in accessing finance, and heavy taxation, Carvalho noted.

Appetite for innovation is falling

Another - fundamental - problem threatens to reduce the flow of start-ups that are needed to capture the value that is inherent in the university research base: in the face of recession and frightening levels of youth unemployment, young people’s appetite for innovation is going down.

The problem, says Joanna Drake, Director, SMEs and Entrepreneurship, DG Enterprise and Industry at the European Commission, is that there is not the right environment in Europe. The study and culture of entrepreneurialism is not part of education, with the only course on this subject likely to be part of business studies. “Students from [age] 7 – 8 should be introduced to the entrepreneurial mindset,” Drake said.

Children who take part in exercises such as running a project for a charity, “are 20 – 30 per cent more likely to entertain being an entrepreneur,” Drake told delegates.

ETH Zurich – with its rich flow of start-ups – underlines the importance of creating an entrepreneurial culture. “We are spinning out 20 companies per year, but it wasn’t always like this. What we did in the last 20 years was to make the entrepreneurial spirit a part of the spirit of the university,” said Roland Siegwart, Vice President of Research and Corporate Relations.

“Entrepreneurship is something you have to live,” Siegwart said. As an example, 40 per cent of third year engineering undergraduates are involved in the classical entrepreneurial activity of developing prototypes. But, noted Siegwart, “We don’t call it entrepreneurship.”

The role of open innovation

Amidst the gloom and doom, one positive change is the rise of open innovation and the move to a more collaborative environment this is promoting. As Beccalli-Falco noted, big companies are looking outwards to collaborate with universities and SMEs, and joining peers in performing pre-competitive research. “It used to be that companies like ours were jealous about technology and didn’t share. Then openness came into the picture, and this can create opportunities for growth,” Beccalli-Falco said.

Carvalho believes another positive element is the beginning of coordinated EU policy. “Much of SME policy is at member state [level]. But the EU has started to coordinate structural reforms in member states and deal with macroeconomic issues,” she said.

In addition, Carvalho said she has “more hope this time” that in negotiations over the multi-annual financial framework in which the EU budget for 2014 – 2020 is being set, money from the €110 billion structural fund can be applied to support SMEs.

Should this happen, it may go some way to solving the biggest constraint facing start-ups, which is that they are cash-strapped. “Access to finance is the real issue,” Drake said. Encouraging start-ups is not enough. You’ve got to support them to scale-up,” she said.