An independent report highlights the positive impact of EU R&I Framework Programmes on startups, despite this target group only receiving 5% of EU R&I funding.
Dealroom.co, dealflow.eu and EU-Startups just published the second report of a trilogy shedding light on the EU state of affairs in innovation funding and related policies. The first publication “Accelerating Europe” came out in late February 2025 and provided evidence of the state of growth in Europe and its relationship with innovation, competitiveness, entrepreneurship and venture capital (VC).
The second report “Startups backed by the EU’s Framework Programmes”, which will be this article’s focus, is a deep dive into the EU Framework Programmes (FPs) for Research and Innovation (R&I) providing data-driven evidence on the impact of such FPs on startups, innovation and value creation. This publication takes into account the standards of excellence established by the European Startup Nations Alliance (ESNA).
The publication starts by analysing the complex EU system, which is funnelling money towards innovation. Across the different spending categories of the European Commission (EC), innovation gets a fair share of 10% (besides the 30% each going to the two EU-funding behemoths – Cohesion and Regional Development, and Common Agricultural Policy). Those 10% are then divided into different pots, with approximately 5% going to the FP and the remainder distributed to other programmes, such as InvestEU, Digital Europe, and the European Space Programme. The report then focuses on the two preceding FPs and the current one, Horizon Europe, thus providing comprehensive data on funding going to startups and its generated impact.
Since 2007, approximately 5% of the total available funding for R&I went to startups. This represents around €12 billion in support for over 13’600 startups on the overall budget pot of €225 billion for R&I. The startup category in this report includes companies designed to grow fast that are generally VC-backable, meaning they meet the criteria for VC investments. It excludes non-startup SMEs, such as consulting firms, agencies, etc. Overall, those companies accounting for the €12 billion backed by the FPs managed to raise around €70 billion from VC and created a total enterprise value of €520 billion, generating a mind-blowing 43x Return On Investment (ROI) on public funding. Moreover, most of those startups strongly focus on deep tech, climate tech and biotech, thus aligning with the current EU priorities.
The report also shows that many EU-backed startups are spinouts from universities and research institutes, and the report illustrates, for instance, that ETH Zurich and EPFL are both leading the way in this sector with respectively 110 and 91 EU-backed spinouts, according to data from Dealroom.co. It is also worth noting that, amid the current debate for the next FP to cover the full R&I continuum and not only innovation and applied research, many top European deep tech companies, including companies such as Climeworks, have their roots in academia and benefitted from those EU grants allowing them to grow over the years. Despite the reassuring figures and the increasing activity of private investors towards EU-backed companies in the early or breakout stage, it comes as no surprise that the late-stage funding available remains mainly driven by non-European investors; indeed, only 3 private investors out of 10 are European. On a last data-driven positive note, many EU-backed startups are still young and, therefore, have an untapped potential to grow, presenting sound investment opportunities for European VC and other private or institutional investors.
Based on their observations, the authors come up with a set of recommendations for EU policymakers across three areas: (i) Financial Allocation, (ii) Organisational Design, and (iii) Building Momentum. The first recommendation builds on Draghi’s call to double the FP’s budget. Here, the authors see an opportunity to substantially increase the amount allocated to startups based on their proven impact. In the next FP, the definition of a “startup” category should also be distinguished from the “SME” classification. They also encourage more cooperation between science and startups to create more spinouts and improve the commercialisation of research results. Finally, more funds should be allocated to loans and equity funding for startups. The second recommendation builds around simplification, including: a single entry point for startups to enter the FP, a streamlined application procedure with rolling submissions instead of deadlines and initial review and decision between 2-4 weeks, and secured swift follow-on investments to improve the scaling up of startups. The authors also support the idea of having more expert-led programmes (VC experts and thematic experts) and creating better conditions for applications from universities facing prohibitive demands from Technology Transfer Offices (e.g., to retain more equity). The last recommendation is two-fold: ensuring enough risk capital for the EU-backed startups and strengthening their visibility and impact. For the first part, since the EIC does not take the role of lead investor when it supports startups, the report suggests the European Investment Fund – which provides funding to VCs – should explicitly “invest in VC funds that focus on EU-backed frontier tech” on the model of Ventures.EU. For the latter point, the EU should strengthen its community-building efforts by providing more prominent summits and pitch competitions for European startups. It should improve its access to data building on the Innovation Radar and Dealflow to provide almost real-time data on EU-backed startups. Finally, the EU should consistently provide the large public with success stories, building up the EU innovation brand.
While the Commission is looking for feedback on its future EU Startups and Scaleups Strategy, this report comes at the right time and provides clear evidence of the added value of backing EU startups via the R&I FPs. The startup community will have to wait a few months to see if more funding will be directed through EU startup support, and, hopefully, in a more streamlined manner.
A word about the authors: Dealroom.co is a “global data platform for intelligence on startups, high-growth companies, ecosystems and investment strategies”; Dealflow.eu is the “first European portal that connects thousands of EU-funded innovations with Investors & Corporates”; and EU-Startups is “the leading online publication with a focus on startups in Europe”. ESNA is an “organisation dedicated to propelling Europe to the forefront of the global startup ecosystem”, funded as a direct result of the EU’s “Startup Nations Standard” declaration in March 2021.