Standardising Europe’s Start-ups

Editor’s Blog: Produced in collaboration with the EU Buzz team 

On 19 March 2021, at its annual Digital Day, the European Commission finally took a serious step towards advancing the startup culture among its member states by launching a “legislative initiative” called the EU Startup Nations Standard (SNS). 

Twenty-four countries; Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden and Iceland; all signed the EU Startup Nations Standard of Excellence, to ensure that all startups and scale-ups can benefit from the best practices underpinning successful startup ecosystems.

For decades, the European Union’s startup scene has lagged behind its competitors in both the US and Asia. Despite numerous funding programs and initiatives, incubators and accelerators projects, networks, private investors, and business angels’ set-ups, Europe has failed to transform itself into an environment conducive to entrepreneurship and business growth and, as a result, European start ups have migrated overseas to find more friendly ecosystems.  

Access to finance, relevant and timely business support, and international markets are key support mechanisms for start ups, alongside a positive environment that embraces entrepreneurship. Europe has been unable to deliver in any of these areas and has instead chosen programs that support the few. Start up and growth programmes have been tailored to the elite and those with university qualifications, and the platforms which were established to attract others have fail to attract interest due to their irrelevance. Financing and investment has come with prejudice and criteria which immediately excludes the already discriminated. Scaling up businesses on top of the start up challenges, and expensive bureaucracy to protect intellectual property rights,  makes the US and Asia a more viable option. 

Playing safe, avoiding risks, making rules and stigmatising failure are all parts of EU culture that do not correspond to the innovation process. Furthermore, the markets for capital and talents are fragmented across the European Union and these regulatory regimes discourage the innovative entrepreneur. This makes it hard to set up and scale up for any individuals with the goal of turning their ideas into commercial, or even social, ventures.

In the joint declaration on the EU Startup Nations Standard of Excellence there is evidence that the business startup and growth culture has been analysed and that serious changes will be made to ensure that there is a business culture transformation. A fast startup creation procedure will allow companies to be established in one day at the cost of €100 and lighter visa procedures for startups and talents from third countries will be implemented. Stock options, something the EU startup sector has long been calling for, are also on the “recommendation phase” list and there is hope this will soon become part of national legislation. The Startup Nation’s hub and the common data platform will become a valuable resource of data for both successful startups and not so successful ones, if the project is properly implemented as it will give factual insight into Europe’s entrepreneurial ecosystem. 

The average success rate of European startups is just 11%. If parallels are made with medical and pharmaceutical research then it is understandable that trials and errors, failings and successes, are all part of the establishment and growth of fruitful innovation. Thus, business startups in all sectors need to be given opportunities and investment without judgement or condemnation. As with the medical sector, information must be documented and shared among colleagues for everyone to benefit from the learning, experience and findings. Failure cannot be stigmatised, the blame culture must be eradicated and the data must be collected and analysed for its value from which everyone can learn.  

When European and international investors recognise that the EU is changing its entrepreneurial journey, and that it is more open to creativity and risk, then they too will fund and embrace innovation as they have in other parts of the world from which they are now reaping rewards. This will open opportunities for new investments led by the principle of growing and development, instead of immediate revenue generation as the only outcome.

Whilst the coronavirus pandemic has done enormous damage to the world, it could that the pandemic become the step change necessary for the EU startup ecosystem, and maybe Europe’s bureaucratic decision makers will finally realise that progress is achieved by the brave risk-takers who are changing the world, thus valuing the added benefit that startups can bring to the economic and social fabric of the European Union. .

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