Boosting innovators, and creating the environment for them to thrive
To unlock Europe’s full potential, we need to empower young talent, bridge the funding gap for innovative businesses, normalise risk-taking and potential failure as a learning experience, and incentivise cross-border investments.
We must create the conditions for young Europeans to use their talent to make a difference.
We must allow businesses that receive equity funding to remain eligible for public support.
We must recognise that failure can be a step on the path to success.
Today entrepreneurs across the EU struggle to find the right conditions to start their business journey, partly due to the number of requirements that are attached to setting up a company, partly due to the difficulties in marketing their products and ideas beyond their national borders.
As a continent, we are increasingly failing to put start-ups and scale-ups in a place where they can mobilise public and private resources, leading to significant gaps in funding for growing companies.
To overcome this situation, we need to give entrepreneurs the necessary tools to nurture their businesses, from their companies’ inception up until the moment they reach a size where they can become viable on the global stage. Changes to entrepreneurship culture, easier access to talent and reduced red tape are all aspects that need to be further examined if we want EU businesses to have the chance to become tomorrow’s international champions.
Value sharing
Value sharing mechanisms have become increasingly important for private equity managers, ensuring that the growth of businesses benefits all contributing employees. We suggest that the EU considers incentivizing these mechanisms to foster long-term employee commitment. This could involve implementing new taxation rules for stock options or promoting best practices in participation mechanisms. Such initiatives not only enhance the EU start-up ecosystem but also ensure equitable distribution of value among creators.
Priority 7
Develop a program of EU regulations to promote talent mobility and the digitalization of Europe
Priority 8
Reshape EU company law to incentivise equity holdings
Priority 9
Develop a programme or EU regulations to promote talent mobility and retention, as well as the digitalization of Europe
Priority 7
Priority 8
Priority 9
Priority 7
Priority 8
Priority 9
Develop a programme of EU regulations to promote talent mobility and the digitalisation of Europe
Recent Commission programmes designed to support a “Start Up Union” have yielded results – but there remain many roadblocks before the EU can be competitive on a global scale.
Losing talent: During the last decade almost 30% of all EU unicorns relocated their headquarters abroad.
When creating new EU law, policymakers should put themselves in the shoes of innovators and determine, at every step of a young company’s life, which changes would help, and which would hinder. From giving founders the ability to attract the best talent to their firms to improving their ability to develop their products in specific innovative sectors, there is a lot that can be done for start-ups to convince them that Europe is the best place for them to build their business.
Required changes
- Streamline start-up visas to help attract talent to Europe.
- Create a “competitiveness test” for EU laws to ensure they do no prevent start-ups and scale-ups from operating.
- Develop programmes for young people to boost entrepreneurship skills and culture.
- Promote tax incentives for investments in start-ups and scale-ups, including taxation of stock options designed to attract or retain talent.
Success criteria for EU economy
By 2029, increase by 30% the amount of start-up creation in Europe.
Reshape EU company law to incentivise equity investments
The size and level of independence of a business is key to determine whether a company, including start-ups and scale-ups, is eligible for eased regulatory requirements and funding programmes.
Unfortunately, EU law considers companies that receive equity investment from third parties as being part of the same trade group as that investor. This then leaves many innovative businesses supported by venture and growth capital unable to benefit from proportionality rules or, as the case may be, public funding.
Back of the pack: Europe’s 147 unicorns are a far cry from the 641 based in the US.
Separately, the wide diversity of company structures in the EU also makes it harder for growing EU businesses to operate across EU borders. Taking example of what has been done in the past, lawmakers should consider the opportunity of extending the concept of a Societas Europaea to start-ups.
Required changes
- Change the SME Definition and use an appropriate definition of ‘control’ in sectorial law to help ensure that companies can receive backing by venture and growth funds without losing access to the benefits of being an SME.
- Consider whether a Societas Europaea specific to start-ups could help EU businesses to operate cross-border.
Success criteria for EU economy
By 2029, 10% of EU start-ups created as Societas Europaea.
Develop a flexible, opt-in EU insolvency law on top of the existing EU wide rules
Differences in EU insolvency laws create a lot of uncertainty for investors in businesses and act as a disincentive to cross-border investment.
Investors can be reluctant to commit capital to innovative businesses – or to businesses in difficulty looking for a second chance – unless they know for certain what type of insolvency proceedings will apply. This is all the more true when it comes to risk-willing capital with diversified investments across Member States.
Starting again: Twice as many founders in the US (30% vs 15%) have had previous experience founding other companies than in Europe. (Source: JRC Technical Report)
Irrespective of the reasons for differences between markets, it is vital to have – to the widest possible extent – an EU-wide system in place that would give investors a better assessment of these worst-case implications of their investment. Without this, divergences will continue to act as a disincentive to investors, to the detriment of firms in difficult circumstances.
Required changes
- Create a flexible European opt-in insolvency model, which companies with a European focus could choose as an alternative to their national model (with the ultimate aim of developing a truly integrated EU regime).
Success criteria for EU economy
By 2029, 10% of all newly established EU companies should be using an EU insolvency regime.
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Explore our 12 priorities
Priority 1: Take down barriers that prevent pension funds and insurers from financing our digital and climate transition
Priority 2: Redirect EU citizens’ savings to productive asset classes through changes to EU passport and reporting requirements
Priority 3: Attract foreign capital to the Union
Priority 4: Complete the Capital Markets Union
Priority 5: Leverage existing funding initiatives and create an EU Champions Fund
Priority 6: Secure tax policies that are simple to adhere to, promote growth and incentivise cross-border fundraising & investments
Priority 7: Develop a programme of EU regulations to promote talent mobility and the digitalisation of Europe
Priority 8: Reshape EU company law to incentivise equity investments
Priority 9: Develop a flexible, opt-in EU insolvency law on top of the existing EU-wide rules
Priority 10: Ensure there is a straightforward, seamless, and compatible EU sustainability disclosure framework
Priority 11: Attract private capital finance to the EU’s most critical sectors, from infrastructure (digital, climate, transport, energy) to defence
Priority 12: Improve the cross-border EU investment environment
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Key policy areas for private equity and venture capital