Start-ups and SMEs, especially in the deep tech and digital sectors, are crucial to the European economy, growth, innovation and employment. To ensure that conditions remain favourable to businesses that are starting and growing, the European Union (EU) has introduced a range of measures to speed up the growth of start-ups all over Europe. In fact, the EU is focusing on maintaining the technological competition edge and investing across numerous key technological domains, such as cyber security, autonomous robotics, AI, high-performance computing and quantum technologies. The EU has quite a number of initiatives that are positively pushing start-ups to a level playing field; this write up shows some of the currently active EU initiatives for start-ups:
1. The European Innovation Council (EIC) Accelerator Pilot
The EIC Accelerator Pilot supports high-potential start-ups and small and medium enterprises (SMEs) to develop and scale groundbreaking innovations. The pilot phase culminated with funding for 38 of Europe’s most promising start-ups and SMEs, receiving between €1 and €17 million. This initiative emphasized the development of innovative technologies, including rapid sepsis detection devices, robotic sorting technology, and energy-efficient indoor plant lights. The program also offered coaching, networking, and business acceleration services. The EIC Accelerator has funded 293 companies since December 2019, with a total funding exceeding €1 billion. Post the pilot phase, the fully-fledged EIC was launched in 2021 with a budget of €10 billion. It focuses on simpler applications, improved funding opportunities, and a wider range of supporting services and networks under the Horizon Europe program (2021-2027).
The “Seal of Excellence” recognition is awarded to start-ups and SMEs that meet all criteria for EIC funding, aiding their access to other funding sources. This initiative signifies the quality and potential of these companies, even if they do not receive direct funding from the EIC.
2. Digital Markets Act (DMA) and Digital Services Act (DSA)
The DMA and DSA, enacted in 2022, are significant for tech start-ups. The DSA imposes transparency requirements on online platforms regarding their algorithmic systems and enforces content moderation rules. It necessitates compliance and reporting, with varying deadlines based on company size. While DMA primarily targets large tech companies (“gatekeepers”), it indirectly benefits start-ups by leveling the competitive field.
3. AI Act
The AI Act, a landmark legislation, aims to harmonize AI regulations across Europe. It focuses on ensuring safe and trustworthy AI systems, potentially banning certain AI applications deemed harmful. The Act will also create a framework for AI regulatory sandboxes, enabling innovators to test solutions without legal repercussions. The final text of the AI Act was expected to be completed in 2023.
4. Data Act
The Data Act is designed to regulate the handling of industrial data. It will require companies to share some of their data with other businesses, governments, and end-users. This Act is seen as beneficial for start-ups, as it would allow them better access to data, crucial for innovation and meeting consumer demands. However, the finalization of this Act may extend beyond 2023.
5. Platform Work Directive
This directive is crucial for start-ups in the gig economy. It aims to improve working conditions for platform workers by defining employment status and ensuring labor and social rights. This could lead to a significant reclassification of workers, impacting companies like food delivery apps and ride-hailing services. Negotiations on this law are ongoing, with hopes for an agreement in 2023.
6. European Innovation Agenda
The European Innovation Agenda, introduced in 2022, includes various proposals to support start-ups, such as employing 1 million people in deep-tech and launching a new venture capital investment program. Key features include creating deep-tech innovation valleys, an intern scheme, and an innovation gender and diversity index. The agenda aims to clarify definitions for start-ups, scale-ups, deep-tech companies, and unicorns.
The Future
With a forward-looking approach, the EU’s future orientation is reflected in its ambitious initiatives, encompassing a wide range of priority areas — from funding scale-ups to fostering innovation through experimentation. Mobilising private investment in European deep-tech start-ups in order to scale up their businesses is one of the commission’s goals.
Seeking to improve access to finance and investment within the European Innovation Council, the EU is also pushing for the establishment of regulatory sandboxes, test-beds and living labs. The reasoning behind these innovation-friendly environments is to enable entrepreneurs to experiment with novel ideas, technologies and business models with fewer regulatory constraints and thus come up with breakthrough solutions.
The EU is also keen to create vibrant entrepreneurial ecosystems across Europe, by funding regional innovation valleys and supporting substantial interregional innovation projects. By doing so, the EU hopes to build upon Europe’s diversity, promote collaboration among different regions and develop a world-leading, interconnected innovation landscape across Europe.
As talent is such a key driver of innovation, the European Innovation Council is planning on piloting an ‘innovation intern’ programme to provide students and young graduates from a wide variety of disciplines with hands-on experience of innovation. According to the European Innovation Council’s future strategy, a proposal for an EU talent pool is likely to be put forward, with the aim of guaranteeing a steady stream of passionate and talented people to drive innovation in Europe. Furthermore, the EU hopes to introduce a scheme for women’s entrepreneurship and leadership so as to foster entrepreneurial mindsets and promote gender equality in entrepreneurship.
Examining on how we design policies also offers scope for improvement. This includes clarifying objectives as well as creating robust and comparable data sets and appropriate definitions that can ground and improve policymaking. In addition, coordinating policies at EU level that impact innovation through the forthcoming European Innovation Council Forum will ensure that the commission’s policies are well informed, internally coherent and mutually reinforcing to boost the innovative strengths of the EU.
In the second part of this tribute we will address a series of upcoming EU initiatives for startups. Stay tuned!