A Commission-funded initiative sheds light on the importance of startup mobility and proposes strategies for a more resilient startup ecosystem in the EU.
The StepUp Startups’ report is the first deliverable from a Commission-funded initiative aimed at “developing a series of data-driven deep dive policy reports on key issues and challenges that the EU’s Startup ecosystem is facing”. This edition focuses on what concrete measures policymakers could take to “foster a more connected and resilient ecosystem across the continent” based on the challenges faced by European startups.
Despite the steady growth of the European startup ecosystem, there are still several issues hindering the full potential of the European market to unfold: regulatory complexity coupled with national specificities, challenging corporate laws for cross-border investments, incompatibility of labour laws and social security plans, to only name a few. While national nuances could be beneficial, access to a more unified economy would be highly welcome to solve the fragmentation issues. With startups being hyper-mobile, this report affirms that “the solution lies in fostering connectivity that binds European Ecosystems together, creating open regions”. Indeed, according to the Startup Heatmap Surveys 2016-2023, 73% of start-ups have presences in more than one country (transnational structures), over 50% of accelerator participants moved from their own regions to participate, and 30% of founders in Europe are foreign-born. This shows that European startup ecosystems are more than the sum of their parts but benefit from the strengths of several ecosystems to thrive.
After thoroughly assessing the different gaps, the authors introduce the “Open Ecosystem” concept, building on the idea of Open Regions, which promotes an open-ended approach to regional policies. This ecosystem promotes better connectivity among the different hubs, thus supporting the key element of mobility in the entrepreneurial journey. Three key steps are required to develop an Open Ecosystem: (i) growing entrepreneurs, (ii) accelerating startups/market access, and (iii) boosting of scaleups.
The report’s last part delves into concrete recommendations articulated around the author’s four main findings: (i) legal and regulatory fragmentation limits the ability to take advantage of the EU27 diverse ecosystem, (ii) Mobility is a key factor to reinforce the EU way, (iii) Encourage investment mobility across borders by creating incentives towards a more even distribution, and (iv) Foster a more distributed network of infrastructure for entrepreneurship. For each category, several actions are recommended to be pursued. The recommendations use the already established Startup Nations Standards developed by the Europe Startup Nations Alliance (ESNA), which are helpful tools for measuring the impact of the recommendations.
Actions to tackle the regulatory framework include, among others, the clear definition of a startup, scaleup, and the different stages they go through. It also reiterates the need for a harmonised regulatory framework, allowing companies to operate in the internal market without facing the administrative burden of each country they operate in. The latter action, understood as the “28th regime”, has already been actively discussed (see SwissCore article) and is currently being assessed as part of the EU Strategy for Startups and Scaleups. The second finding focuses on mobility, and here, the authors suggest a simplified EU-wide Startup Talent Visa Programme, as well as a talent “back home” programme to create an incentive for innovators to move back to their region and promote their homegrown ecosystems. Other actions also suggest immersion programmes for students and PhD (funded via Erasmus+ and other programmes). The latter actions have already been addressed with calls under the EIC next generation talents or the EIT Deep Tech Talent Initiative, but these actions should be reinforced in the future. The third action aiming at facilitating cross-border investment should address the fragmentation of tax systems. With a more unified tax framework for VC investments, a streamlined tax declaration, or addressing the high costs for legal and tax advisory, the authors claim that this would enhance the collaboration rather than having competition between Member States and their tax incentives. Furthermore, institutions such as the European Investment Fund or National Promotional Institutions should continue pooling resources, but the EU should also create a single common platform to facilitate intelligence sharing and financing opportunities. The last finding focuses on infrastructure. The authors suggest the EU should co-fund Regional Innovation Infrastructure, for instance, by using the European Regional Development Fund to stimulate entrepreneurship in less innovative regions. The commission should also create Multi-Regional Acceleration Programmes building on the evidence gathered that innovators are highly mobile and could benefit from this connectivity by gaining the right skills thanks to diverse expertise and market cultures. Finally, the report also suggests continuing Horizon Europe’s European Innovation Ecosystem CONNECT destination, as this allows for piloting cross-border innovation ecosystems over two to three years.
Echoing the Letta report, calling for a “fifth freedom” for education, research, and innovation, the recommendations provided in this report will – together with the other stakeholder’s claims (see SwissCore article) – contribute to shaping the next generation of innovation programmes in a spirit of openness and collaboration, thus driving innovation and contributing to Europe’s global race for competitiveness.