Startups and Scaleups in Europe

Context 

Startups and scaleups are the backbone of innovative ecosystems in every advanced society. 

The European innovation landscape presents both lights and shadows in this respect: over the past decade, the European startup and scaleup ecosystem has experienced remarkable growth, establishing Europe as a significant player in the global tech arena. Since 2015, European tech companies have attracted approximately $426 billion in venture capital, marking a tenfold increase from the preceding decade. In 2024 alone, investment levels are projected to reach $45 billion, underscoring sustained investor confidence in the region’s innovative ventures. 

This expansion is mirrored in the talent pool, with Europe’s tech workforce expanding to 3.5 million individuals, achieving a 24% annual growth rate comparable to that of the United States. Notably, Europe now hosts more early-stage startups than any other region globally, with over 35,000 such companies, reflecting a vibrant entrepreneurial spirit. European startups have demonstrated particular strength in sectors such as fintech, artificial intelligence (AI), and sustainability-focused technologies.  

Despite these achievements, challenges persist. The funding gap between Europe and the United States remains notable, particularly in scaling companies to later stage investments. In 2021, EU companies spent about half as much on R&I as share of GDP as U.S. companies, a gap driven by much higher investment rates in the US tech sector. In the same year, later stage Venture capital investments injected in the EU amounted to around 20 billion US $, against 103 billion in the US. As a result of this gap, around 60% of all global scale-ups are based in North America, while only 8% are based in the EU.     

Additionally, while the number of startups has surged, the ecosystem faces hurdles in areas such as regulatory fragmentation and access to large scale capital, which are essential for nurturing the next generation of tech giants. Addressing these issues will be crucial for Europe to fully realise its potential as a leading hub for startups and scaleups, and to address the growing innovation gap with other areas of the world. 

The EU Startup and Scaleup Strategy that the Commission will present in 2025 will address these challenges and will identify a set of policy, regulatory and financial measures.  

Questions for discussion 

Guiding questions for the structured debate might be: 

Access to finance  

• How can the EU - and national - public institutions encourage investments from European VC funds in startups or scaleups?
• What can incentivise startups and scaleups to choose to list on European stock markets?
• How can the European Innovation Council (EIC), together with its Trusted Investors Network, develop further?
• How to attract more institutional investors, such as insurances and pension funds, as Limited Partners in VC Funds?

Access to talent 

• How much does your company suffer from a skills shortage and what can be done to find and recruit the right profile and talent both in Europe and beyond?
• How could the use of employee stock options facilitate the recruitment and retention of talent? What are the obstacles to their use?
• Do you detect a gender gap within your company/sector and how could this issue be addressed?

Access to markets, Regulatory framework and fragmentation 

• Do you encounter regulatory or other obstacles to access European infrastructures or data? Which ones? 
• How could startups and scaleups make better use of regulatory sandboxes in the EU? 
• Which measures could be proposed to reduce bureaucratic burdens for startups and scaleups?
• What have been the main obstacles to move or expand your startup in another EU Member State?
• How could a European ‘innovative company status’ (or ‘28^th regime’) help overcome some of the current administrative, regulatory or fiscal obstacles hindering your expansion?
• (if relevant) Why did you relocate (or you are planning to relocate) to another continent?
• How could collaboration between startups/scaleups and corporates be improved, including through private procurements, joint ventures and others?
• How could the participation of startups and scaleups in public procurement be increased?

Additional hurdles? additional proposals?

During the discussion, indications of existing good practices that could be replicated in other EU Member States, regions or sectors would be particularly welcome. 

Background documents  

Mission letter from President von der Leyen to Commissioner for Startups, Research and Innovation Ekaterina Zaharieva: https://commission.europa.eu/document/download/130e9159-8616-4c29-9f61-04592557cf4c_en?filename=Mission%20letter%20-%20ZAHARIEVA.pdf 

Report by M. Draghi on “The future of European competitiveness”, 2024, https://commission.europa.eu/topics/strengthening-european-competitiveness/eu-competitiveness-looking-ahead_en#paragraph_47059 

InvestEurope, “Investor reporting 2024”  

State of European Tech 2024, https://www.stateofeuropeantech.com 

The European Innovation Council (EIC): https://eic.ec.europa.eu/index_en 

The Trusted Investors Network: https://eic.ec.europa.eu/eic-fund/trusted-investors-network_en 

The New European Innovation Agenda (NEIA), implementation report: https://op.europa.eu/en/publication-detail/-/publication/a879719c-e4ec-11ee-8b2b-01aa75ed71a1/language-en 

Commission staff working document “Guidance on regulatory sandboxes, testbeds and living labs in the EU”: https://research-and-innovation.ec.europa.eu/document/download/fc6f35cd-a8d6-4770-aefe-c09ca85cff8c_en?filename=swd_2023_277_f1.pdf