EU start-up strategy gets warm welcome, but now founders want action

The European start-up community has praised the European Commission’s start-up and scale-up strategy, published on May 28, and called on policymakers to take concrete steps to make the plans a reality.

David Hanf, president of the European Startup Network, welcomed the “ambitious” strategy, which covers five thematic priorities: innovation-friendly regulation; access to finance; faster market uptake and expansion; talent; and access to infrastructure, networks and services.

“If even a third of its measures are successfully implemented, it will mark a significant step forward,” he said. The Network also noted the positive impact of the public consultation prior to the strategy’s publication, and urged the Commission to continue its dialogue with industry.

Marianne Tordeux, director of public affairs at France Digitale, called the publication a “major achievement” for the network of start-ups and investors. “We are looking forward to seeing ambitious and concrete initiatives, such as a European company regime, a European preference in public procurement and the mobilisation of private capital to invest in innovation,” she said.

The broad goal of the strategy is to help innovative companies scale up without having to leave Europe, with a particular focus on strategic sectors including defence and dual-use technologies.

“We are home to 35,000 early-stage start-ups. We don’t lack talent, we don’t lack ideas, and now we need a plan for how to maximise this potential,” said Ekaterina Zaharieva, commissioner for start-ups, research and innovation, as she presented the strategy.

Scaleup Europe Fund

Among the Commission’s headline proposals is a plan to work with private investors to deploy a Scaleup Europe Fund as part of the European Innovation Council (EIC) Fund. This would make direct investments in strategic sectors such as artificial intelligence, quantum, cleantech including nuclear energy, security, defence and dual-use technologies.

More start-ups are launched annually in Europe than in the US, but these companies often struggle to secure the large investments they need to scale up. “For financing rounds above €50 million, the European Union offers one seventh of the capital available in the United States,” said Zaharieva.

As part of the Strategic Technologies for Europe Platform, the EIC recently raised its ceiling for equity investments to €30 million, and the idea is for the Scaleup Europe Fund to provide even larger ticket sizes, Zaharieva explained. She said she could not provide details of the potential budget, but said: “The goal is really to be much bigger than what we have now in the European Innovation Council [. . .] It has to be big to be sustainable.”

The privately managed and privately co-financed fund will be “market-based and profit making,” the commissioner added. It is meant to complement the activities of the European Investment Bank (EIB) Group, though an earlier draft of the strategy suggested the Commission would work directly with the EIB on the new fund, with no mention of the EIC Fund.

The EIC itself will expand and focus more on “challenge-driven, staged funding for high-risk innovations,” taking inspiration from the US Advanced Research Projects Agencies.

The Commission also wants to introduce new instruments to invest in security and defence start-ups and scale-ups, including equity and debt instruments. The EU already funds collaborative projects through the European Defence Fund, but a broader range of tools could include targeted support for single entities.

28th regime

The strategy identifies regulatory fragmentation across EU member states and slow regulatory approval for new technologies as additional barriers to growth for innovative European companies.

At the heart of the effort to simplify the regulatory landscape is the so-called 28th regime, a single set of rules to help companies scale quickly across EU borders. The proposal, due next year, will address aspects including insolvency, labour and tax law.

“By attracting investors and simplifying the processes for scaling up in Europe, the 28th regime can help our companies become more competitive against Chinese and American giants,” said Renew Europe MEP Pascal Canfin, who is shadow rapporteur for the European Parliament’s forthcoming report on the 28th regime. “We must unlock this growth potential. It is an issue of economic and political sovereignty.”

The Commission has been touting the benefits of a 28th regime since its new mandate began last year, but the idea of a Europe-wide company status is much older. It now faces the challenge of convincing member states to agree to harmonise their rules. Areas such as labour and tax law are governed at national level, but governments could agree on the point at which shares should be taxed, for example, which would make it easier for companies to operate in several countries.

Cecilia Bonefeld-Dahl, director general of trade association DigitalEurope, said the Scaleup Europe Fund and 28th regime are “exactly what our start-ups have asked for,” but it will also be crucial to create market demand. “Without large-scale public procurement and targeted investment, even the best-funded start-ups won’t scale in Europe, they’ll scale somewhere else,” Bonefeld-Dahl wrote on social media.

Start-ups also want to see progress towards faster regulatory approval times, however most of the concrete proposals in this area will have to wait until sectorial initiatives such as the Biotech Act are published.

Related articles

• EU start-up strategy will aim to bridge gap from lab to market
• EU will focus funds on strategic technologies to boost competitiveness
• Europe has ‘mountain to climb’ over EU-wide company status

According to Anna Handschuh, managing director of strategic advisory and advocacy firm Future Affairs Consulting, the new strategy correctly recognises the severity of the challenges facing start-ups and scale-ups and has the potential to be a turning point. However, she said the proposals fail to acknowledge the lack of alignment between regulatory pathways for strategic technologies with investment criteria and funding.

“The proposed Scaleup Europe Fund is urgently needed, but we can have the biggest fund without any impact if it is not agile enough to fund the best projects [. . .] rather than turning them away simply because they do not yet have EU market approval, which takes many years to obtain,” Handschuh said. If Europe only invests in scaling up strategic technologies once they have been approved for the European market, by this point, “they will have left the EU.”

Right direction

When it comes to accelerating market uptake, there are plans for a lab-to-unicorn initiative to support the commercialisation of research results and a revision of EU public procurement directives to simplify access for start-ups and scale-ups. For defence procurements, the Commission will consider introducing an EU preference.

The strategy is “a strong step in the right direction,” said Ronan Cunningham, director of DCU Invent, the technology transfer office at Dublin City University. “It rightly emphasises regulatory agility, better incentives for those building new markets on disruptive technologies, and the need for rules that adapt to different stages of innovation.”

Cunningham is encouraged by the promise to clarify how universities and public research organisations can comply with state aid rules. However, he urged the Commission to go further and consider exempting the licensing of university intellectual property (IP) at low technology readiness levels and access to university infrastructure for early-stage technology development from the rules altogether.

“These are critical enablers to increasing the commercial exploitation of university-generated inventions both through formation and incubation of spin-outs, and the licensing of university IP to established companies,” he told Science|Business.

Most of the proposals in the strategy are due in 2026, with the Commission promising to report on the implementation of its plans by the end of 2027.