Dear EU: It's Time to Get a Grip - Opinion

The European Union and the Path to Startup Success

Despite its perceived shortcomings and bureaucratic tendencies, the European Union remains a fundamentally sound concept. While 64 years have passed since the inception of the European Common Market, and 29 years since the EU’s formal establishment via the Maastricht Treaty, the organization often behaves with the indecision characteristic of a modern millennial, frequently shifting focus between various tech policy initiatives.

A Unique Moment for European Tech

The COVID-19 pandemic has undeniably accelerated the global adoption of technology, particularly within Europe. Fortunately, the tech sector and startups have demonstrated greater resilience compared to many traditional industries. Consequently, European political leaders are increasingly recognizing the innovation economy as crucial for a sustainable future.

This realization, however, is overdue.

Lagging Behind Global Competitors

The European tech landscape currently trails behind the United States and Asia in key metrics, including the number of startups founded, the availability of tech talent, the volume of funding rounds, and the frequency of IPOs and exits. The fragmented nature of the European market further exacerbates these challenges.

Nevertheless, the EU has a clear obligation to enact reforms concerning startup legislation, taxation, and talent development, aiming to create a more equitable competitive environment against US and Asian tech leaders.

A History of Proposals and Initiatives

The EU’s struggle to effectively support startups is evident in the multitude of proposals that have emerged over the years.

Initiatives such as the Start-Up and Scale-Up Initiative (2016), the Scale-Up Manifesto (2016), and the Cluj Recommendations (2019) demonstrate a consistent, yet often disjointed, effort to address the needs of the European startup ecosystem. The Not Optional campaign for options reform in 2020 further highlighted these concerns.

The Startup Nations Standard: A Potential Breakthrough

Portugal, holding the European presidency in the first half of the year, spearheaded the development of a comprehensive draft outlining the EU’s necessary steps. Following extensive consultations with stakeholders, eight best practices were identified to level the playing field, encompassing areas like rapid startup creation, talent acquisition, stock options, regulatory innovation, and access to finance.

These practices were formalized in the Startup Nations Standard and presented to the European Council on Digital Day (March 19th), alongside the European Commission’s DG CNECT and Commissioner Tierry Breton.

Initial Optimism and Subsequent Complications

Initially, 25 member states endorsed the declaration, signaling a potential consensus on this policy. The establishment of the European Startup Nations Alliance was even announced by Portuguese Prime Minister António Costa, tasked with monitoring progress, collecting data, and reporting findings bi-annually.

However, this momentum was disrupted by the emergence of the Scaleup Europe initiative, led by Emmanuel Macron, which convened a group of over 150 tech leaders for further deliberation. The Global Powerhouse Initiative, spearheaded by Commissioner Mariya Gabriel, added another layer of complexity.

A Recurring Cycle of Consultation

This situation risks repeating a familiar pattern, with the EU demonstrating a limited attention span. Instead of implementing the Portuguese proposals, stakeholders must now await the outcome of deliberations during the French presidency next year.

Despite this setback, the possibility of a centralized body overseeing tech startup policy, potentially comprising organizations like La French Tech, Startup Portugal, and Startup Estonia, remains within reach.

Reasons for Hope and Continued Concerns

Commissioner Mariya Gabriel, responsible for innovation and startups, has a reputation for effectiveness and enjoys the support of President Van der Leyen. Significant budgets are allocated through the EIT (€3 billion), the EIC (€10 billion), and the EIE (€500 million) to foster a pan-European Innovation Ecosystem.

Nevertheless, the ongoing policy debates suggest that progress may be slow. The competing visions of ‘La French Tech for Europe’ and the existing ESNA initiative highlight a lack of coordination.

The Need for Decisive Action

Ultimately, startup founders and investors are indifferent to the origin or launching country of any new governing body. After years of input and consultation, the time for concrete action is now.

EU member states must reach a unified approach and assist lagging regions in adopting established best practices. The emergence of European Tech Giants capable of challenging US dominance is vital for Europe to assert its influence on the global stage.