Commission gives boost to start-ups in Europe
The Commission’s Start-up and Scale-up Initiative aims to give Europe’s many innovative entrepreneurs every opportunity to become world leading companies. It pulls together all the possibilities that the EU already offers and adds a new focus on venture capital investment,insolvency law and taxation
There is no lack of innovative ideas and entrepreneurial spirit in Europe. But many new firms don’t make it beyond the critical first few years, or they try their luck in a third country instead of tapping intothe EU’s potential 500 million customer base. The European Commission is determined to change that and help start-ups deliver their full innovation and job creation potential.
Vice-President Jyrki Katainen, responsible for Jobs, Growth, Investment and Competitiveness, said: “Today’s local start-ups could become tomorrow’s global success stories. We want to help start-ups stay and grow in Europe. By helping them navigate the – often perceived – regulatory barriers to fully benefiting from the Single Market. By making it easier for them to have a second chance, without being stigmatised if their idea doesn’t succeed the first time around. And by improving access to funding by boosting private venture capital investment.”
Commissioner Elżbieta Bieńkowska, responsible for Internal Market, Industry, Entrepreneurship and SMEs, said: “Today start-ups do not fully take advantage of the opportunities of the Single Market. Starting and scaling up a company across Europe has to become simpler. Europe needs to become the first choice place for great business ideas to grow into successful companies. This is about new jobs, innovation and competitiveness for Europe.”
The Initiative brings together a range of existing and new actions to create a more coherent framework to allow start-ups to grow and do business across Europe, in particular:
- Improved access to finance: The Commission and the European Investment Bank Group are launching a Pan-European Venture Capital Fund of Funds. The EU will provide cornerstone investments of up to a maximum budget of €400 million and the fund manager(s) must raise at least three times as much from private sources, triggering a minimum of €1.6bn in venture capital funding. It will be managed by one or more professional and experienced fund managers ensuring a real market approach. This complements existing EU funding instruments such as the European Fund for Strategic Investments (EFSI), Europe’s programme for small and medium-sized enterprises COSME and the EU’s research and innovation funding programme Horizon 2020.
- Second chance for entrepreneurs: The Commission has tabled a legislative proposal on insolvency law. It will allow companies in financial difficulties to restructure early on so as to prevent bankruptcy and avoid laying off staff. It will also make it easier for honest entrepreneurs to benefit from a second chance without being penalised for not succeeding in previous business ventures, as they will be fully discharged of their debt after a maximum period of 3 years.
- Simpler tax filings: The Commission is also working on a range of taxation simplifications including the recent proposal for a Common Consolidated Corporate Tax Base (CCCTB), which proposes to support small and innovative companies that want to expand their business across borders. Other initiatives include plans for a simplification of the EU VAT system and broadening the forthcoming guidance on best practice in Member States tax regimes for venture capital.
The Initiative also puts emphasis on helping navigate regulatory requirements, improving innovation support through reforms to Horizon 2020, and fostering ecosystems where start-ups can connect with potential partners such as investors, business partners, universities and research centres. Changes to Horizon 2020 will pave the way towards a European Innovation Council and include using €1.6bn over 2018-2020 to provide bottom-up support for breakthrough innovation projects by start-ups with potential to grow. The Startup Europe network will be reinforced to connect clusters and ecosystems across Europe. In 2017, the Commission will put forward proposals for a Single Digital Gateway that provides easy online access to Single Market information, procedures, assistance and advice for citizens and businesses. The Enterprise Europe Network (EEN) provide specific advisory services – through scale-up advisors – for startups including on funding opportunities, partnering and how to access cross-border public procurement. The Commission will adopt a set of measures to support the use of Intellectual Property Rightsby SMEs and take action to support access by start-ups to the €2 trillion European public procurement market.
Over recent years, the Commission has proposed a number of policies, such as the Capital Markets Union, the Single Market Strategy, and the Digital Single Market to benefit start-ups in Europe. Together with Member States’ actions, this has led to the creation of a number of market leaders, such as Spotify, Klarna, Adyen, Blockchain, Jobandtalent, N26, Algolia, Intercom, Cabify or Deliveroo.
The Initiative addresses three main obstacles to starting up and scaling up in Europe identified in a recent public consultation:
- Access to finance is the biggest problem for entrepreneurs whether starting up or scaling up;
- Complying with regulatory and administrative requirements diverts too much energy from growing the business – particularly cross border;
- Connecting to right business partners, markets and skilled workers, despite the availability of 500 million people European Single Market is still too difficult.
East or West: Western Europe dominates digital startup city ranking
Eastern European cities rank outside the top 15 in Nesta and European Digital Forum’s second startup city ranking
London remains best for startups and scale-ups with Stockholm in close second
Tool helps policymakers map improvements to attract digital businesses
Despite investing heavily in their digital infrastructure, Eastern European cities still lag behind their Western counterparts in the European Digital City Index – a ranking of the best cities in Europe for startups and scale-ups, launched today.
The second ranking of 60 cities from UK innovation foundation Nesta and the European Digital Forum (EDF) accounted for 40 separate measures that span ten core themes, including access to finance, entrepreneurial culture and talent supply, with varying weightings for startup and scaleup businesses. Nesta has also published an accompanying policy booklet which details what policymakers should do to encourage digital startups and scale-ups according to the themes measured in the ranking.
Unveiled at the Startup Nations Summit in Cork, the Index reveals that Eastern European cities dominate the top ten for digital infrastructure but score much lower overall in the ranking on account of their lack of knowledge spillovers, poor entrepreneurial culture, small local market size and Western Europe’s better access to capital.
The continental divide means that Eastern Europe ranks outside of the top 15, with Tallinn in 18th position for startups ahead of Budapest (33) and Prague (37). This is in spite of a significant number of digital businesses being based there such as mobile TV projector app Flipps (Sofia), Skype (Tallinn) and cloud-based presentation platform Prezi.com (Budapest).
London again ranked number one for both startups and scale-ups, with a narrow lead over Stockholm, owing to its excellent access to capital, vibrant entrepreneurial culture and skilled workforce.
Visitors to www.digitalcityindex.eu can search the Index and attribute more or less weighting to the factors they consider important to their business needs to establish the best city for them.
Top 10 European Cities for Digital Startups and Scale-ups
Chris Haley, head of startup and new technology research at Nesta, comments: “While European cities must keep pace with the likes of China and the US and continue to invest in their digital infrastructure, digital entrepreneurs need much more. It’s also important that cities offer skilled talent, opportunities for experimentation and a positive attitude towards entrepreneurship. As the UK embarks on a ‘hard Brexit’ it remains to be seen how the UK will retain its business allure.”
Jonathan Ortmans, president of the Global Entrepreneurship Network and chair of the Startup Nations Summit, comments: “Digital advances continue to disrupt traditional industries across all sectors throughout Europe – and on all continents. This is transforming our economies and making vast improvements in our lives but it will require leaders from all parts of the entrepreneurial ecosystem – entrepreneurs, investors, policymakers, researchers and more – to be nimble and adapt in order to seize the opportunities in front of them.”
Nesta and the EDF published the first European Digital City Index in 2015 when it included 35 capital cities and known innovation hubs. In addition to featuring 25 new cities, the measures in the Index have been updated in 2016 to include the availability of business angels funding and crowdfunding, entrepreneurial education and training, and a culture and recreation popularity scores. Nesta also sourced bespoke data sets from Crowdsurfer, Ookla, Statista and FollowtheHashtag.
The 2016 European Digital City Index is published after the European Union launched a venture capital fund of 400 million euros to help regional startups grow and address a capital shortage in Europe for such firms compared with the United States.
The Startup Nations Summitis a gathering of policymakers, advisors and entrepreneurship experts from more than 75 countries. The annual event will this year be held in Cork, Ireland on November 18-20.
- Broadband Coverage in Europe 2014: Mapping progress towards the coverage objectives of the Digital Agenda
About Nesta: (www.nesta.org.uk) is the UK’s innovation foundation. We help people and organisations bring great ideas to life. We do this by providing investments and grants and mobilising research, networks and skills. We are an independent charity and our work is enabled by an endowment from the National Lottery. Nesta is a registered charity in England and Wales 1144091 and Scotland SC042833
About the European Digital Forum: The European Digital (www.europeandigitalforum.eu) is a think tank dedicated to empowering tech entrepreneurs and growing Europe’s digital economy. It is led by the Lisbon Council, Open Evidence and Nesta, in collaboration with the European Commission’s Startup Europe initiative. It was inspired by the Leaders Club, an independent group of founders in the field of tech entrepreneurship, and first called for in the Startup Manifesto for entrepreneurial excellence. The European Digital Forum has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 645099.
For all media enquiries please contact Laura Scruby in Nesta’s press office:
+44 207 438 2697