What does the European Innovation Agenda mean for startups?

European policymakers are going to publish the most comprehensive plan so far for how to help European startups grow and compete globally.

The stakes are high — Europe wants to produce its own deeptechs to compete with innovations coming from the US and China — and the EU realizes that it will need home-grown solutions to pursue its ambitious digital and green agendas.

But for now, Brussels is only halfway there.

Early-stage investment in European startups is comparable to that in the US and the number of unicorns in Europe doubled in 2021. Yet Europe still has a “scaleup gap”, with significantly fewer growth-stage tech businesses than the US and China. It’s also behind on deeptech investment; the US and China combined provided about 81% of global private investment in the sector between 2015 and 2018.

To accelerate the change, the European Commission is going to present a policy roadmap dubbed A New European Innovation Agenda, a draft of which has been seen by Sifted. The plan will focus on five pillars:

  • Linking up innovation ecosystems;
  • retaining talent;
  • Improving existing policies with a data-driven approach;
  • Amending risk-averse and fragmented regulatory frameworks;
  • Improving access to finance.

The roadmap is due to be officially published on July 5 — but we’ve prepared the main takeaways for you below.

1/ Developing regional clusters and “deeptech valleys”

Brussels wants to help regions specialize in specific tech sectors — such as AI, blockchain, quantum and cleantech — by mobilizing funding and creating policies. This builds on an existing ideas of “Partnerships for Regional Innovation”.

These are supposed to turn into up to 100 “deeptech valleys” across Europe — local innovation ecosystems that will provide financial and business support to founders. The “valleys” will be connected by “deeptech corridors” that will coordinate activities between the centers to build pan-European technological and industrial value chains.

Unlike the US, which has a few mighty innovation centres, the EU is hoping to provide innovation boosts equally across the continent.

But for now, Europe is struggling: its highest performing regions are up to nine times more innovative than the lowest performing ones, which weakens the European ecosystem as a whole. The Commission notes that some local innovation clusters also currently lack the incentives, experience and resources to engage more actively with researchers and founders.

2/ Training 1m deeptech employees

Brussels is aware that it’s losing its top talent to other innovation centres, like the US, Australia and Canada — the Commission says young European researchers are encouraged to go abroad by higher salaries, better financing opportunities and fairer recruitment procedures.

And yet, plenty of talent remains almost entirely unrepresented in Europe: in 2020 85% of startup funding on the continent went to all-male founding teams, for starters.

To address these challenges, Brussels is tasking its agencies to train at least 1m people with deeptech skills over the next three years. It will also set up an innovation intern scheme for 600 researchers and innovators, as well as a separate training scheme for early-stage female founders.

The Commission will also draft concrete recommendations on how to establish a pan-European framework to retain entrepreneurial talent. That should make it easier for innovators to travel and work across the EU through, for example, recognition of research professions and comparability of careers across EU countries.

3/ Agreeing on definitions and improving existing policies

To measure the growth of European startups, the Commission needs to know what exactly it is analyzing — and so wants to come up with concrete definitions for startups and deeptech by 2023. It’ll also consider incorporating those benchmarks into the European Innovation Scoreboard — the EU’s tool that compares innovation performance in EU countries and their neighbours.

The Commission also wants to track the uptake of innovative solutions and services in public procurement. While 81% of countries in the OECD — which represents the majority of the world’s advanced economies — have developed policies on including innovative businesses in public tenders, fewer than half of these countries are measuring the impact of this policy.

4/ More sandboxes and better regulatory frameworks

The EU’s single market helps a lot with trading goods, but when it comes to regulation it remains fairly fragmented: Individual EU governments have their own approaches to tech policies and taxation, which can be challenging for businesses that want to scale up across the continent.

To share best practice, the Commission plans to gather good examples of regulatory sandboxes and flexible legal frameworks from across the EU and issue guidelines for governments on how to use them. It’ll also present special regulatory frameworks for testing innovations in the hydrogen and govtech sectors.

5/ Improving access to financing

Keeping in mind the scaleup gap, the Commission wants to see more public and private money put behind developing the most promising businesses.

To achieve that goal, officials in Brussels are hoping to simplify certain procedures: reducing the cost of new equity across the EU, allowing the use of IP as collateral and proposing a new listing law that would make IPOs quicker and cheaper.

It is also betting on the outcomes of the European Innovation Council — an innovation program targeting and financing strategic European deeptech startups — and its recent initiative to finance the EU’s 100 most promising scaleups. Here, the Commission needs to be careful: the activity of the Council has recently come under fire for the never-ending bureaucratic processes that have left many startups waiting for the money in limbo.

Zosia Wanat is Sifted’s central and eastern Europe reporter, soon to be based in Warsaw but currently in Brussels. she tweets from @zosiawanat

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