The European Union has a series of “Commissioners” who are responsible for crafting proposals for EU legislation while implementing the policies of the European Parliament and the EU Council. Each Commissioner is designated a portfolio of responsibilities. Last month, for the first time, the EU nominated its a Commissioner for Startups.
Ekaterina Zaharieva, a former MP from Bulgaria, will step into the new role that aims to improve Europe’s competitiveness. Recently, a report by Mario Draghi lamented that Europe is falling behind when it comes to innovation and entrepreneurship. This new Commissioner is expected to put “research and innovation, science and technology at the centre of [the EU] economy.”
“This will entail more investment and cooperation, the right conditions for researchers to thrive and develop new skills, and a clearer focus on the most important and disruptive innovation needed for our competitiveness, security, and sustainability goals.”
Some of the goals are to reduce reporting obligations for companies by at least 25%. For SMEs even more – 35%. Rules must be “fit for purpose.”
An annual report is required to provide an update on progress on the startup ecosystem.
While the mission is ambitious and laudatory, and mitigating expensive and cumbersome regulations that inhibit smaller firms should be a top priority, tax policy can play a key role. This includes lower capital gains, competitive corporate tax, and possible exemptions that encourage investors to take risks. The UK’s EIS, SEIS, and VCT programs are worth a review.
Europe has fallen behind the US and the UK. The Googles, Apples, Nvidias, and Metas of the world all started in the US. The EU has become better known for its policies of attacking successful firms, each one a risky startup at one time, as opposed to creating them. While all of the tools are available in Europe, it is yet to be seen if the commitment is sufficiently profound to support risk-taking by investors, including retail, and if policymakers are willing to step aside and allow most early-stage firms to fail.
In innovation-driven economies, most startups collapse, and investments are wiped out. But the lessons learned and the benefits of economic activity prevail. These risk-taking entrepreneurs tend to do it again, and the ones that succeed and hit it big end up financing the next big thing. And this is a good thing.
Dr. Ursula von der Leyen, President of the EU Commission, has told the new Commissioner they must hit the ground running on day one. We look forward to the first EU startup report.
