The European economy is currently under a considerable structural adjustment pressure. Against the backdrop of rapid technological change, diverse geopolitical tensions, an increasing shortage of skilled workers, and global competition, particularly in the areas of deep tech and artificial intelligence, it is clear that the EU must significantly increase its innovative strength if it wants to remain economically sovereign, competitive, and secure its current level of prosperity.
Startups and scale-ups have an important role to play in this regard. They are considered a driving force for innovation and creativity, are key drivers of disruptive technologies, new business models and dynamic employment impulses, and are well placed to significantly increase productivity, create high-quality jobs and attract talent and investment. It is precisely this ability to attract new talent and workers that makes startups and scale-ups particularly valuable for aging economies. Startups and scale-ups also stand out because they offer novel solutions to their customers' needs, serve niche and emerging markets, and tackle problems that are often overlooked or not addressed by larger companies. By promoting startups and scale-ups in the EU, new markets can be created that will enable the European Union to take on a global leadership role and reduce dependencies.
Despite these various advantages, the innovation ecosystem in the EU has remained fragmented for years. Numerous reports diagnose structural barriers to growth in the European economy, for example based on insufficient capital availability, regulatory complexity, and fragmented markets. The EU Commission's new strategy now aims to address these weaknesses and specifically improve the conditions for business growth. This should ensure that the existing solid foundations for innovation from startups and scale-ups in the EU, such as access to a single market of 450 million consumers, effective and fair competition, and a predictable investment and business environment based on the rule of law, can be used efficiently.
The Commission's new strategy to promote startups and scale-ups is primarily motivated by the following developments and issues.
Currently, there is a real danger of the EU becoming dependent on China or the US, particularly in the field of strategic technologies/key technologies (e.g., artificial intelligence, quantum technologies, advanced semiconductors, medical technology, biotechnology, clean technologies, energy, robotics, etc.). In view of increasing global tensions, the EU aims to strengthen its ability to develop and scale key technologies independently. Startups and scale-ups are an essential means of securing the EU's independence and competitiveness in these promising areas.
In the past, many European startups have relocated to the United States in later phases because of better conditions for growth capital. The new strategy aims to curb this capital flight, or "scale-up exodus," as effectively as possible. The exodus of talented founders and developers to more innovation-friendly environments (known as “brain drain”) is also to be prevented.
The potential of the single market is to be better used by harmonizing different regulatory requirements in the member states. EU-wide uniform procedures simplify scaling and thus enable the (also geographical) development of startups in the EU without incurring disproportionately high costs.
In recent years, a veritable "system competition" with authoritarian states has unfolded in the global economy in the field of innovation development. Against this backdrop, the EU is forced to prove its economic innovation capacity and shape its technological resilience in order to defend its position in this environment.
The strategy takes a holistic approach based on five key pillars.
Better Financing and Easier Access to Capital for Startups and Scale-ups
In this context, the European Innovation Council (EIC), currently the largest European venture capital fund for advanced technologies, is to be expanded and simplified, with a focus on challenge-oriented, step-by-step financing for high-risk innovations. In addition, a "Scaleup Europe Fund" is to be set up to facilitate growth financing. The aim is to pool private and public funds under one roof and close the existing financing gap for the growth of startups and scale-ups (especially deep-tech scale-ups). Furthermore, a European Innovation Investment Pact is to be developed to encourage institutional investors to invest in EU funds and scale-ups. European business angels and their networks are also to be supported in order to offer young startups more growth opportunities.
Regulatory Harmonization and Simplification
The Commission plans to create uniform rules for companies in the EU to reduce bureaucratic burdens, simplify the legal framework, and lower costs related to insolvency, labor, and tax law. In addition, legislative proposals are to reduce regulatory burdens in strategic sectors. Specifically, the introduction of a European "business wallet" shall serve to facilitate digital interaction between market participants and public administrations. Regulatory "sandboxes" are to be promoted to give innovators the opportunity to test innovative business models in real-life environments. Further, a voluntary "innovation stress test" is to be recommended for EU member states to assess the impact of new legislation on innovation.
Supporting and Attracting Talent
The "Blue Carpet Initiative" aims to attract and retain highly skilled professionals from the EU and third countries. In particular, it aims to facilitate cross-border mobility for startup employees and founders and to create faster visa procedures and uniform recognition systems for qualifications. Entrepreneurial education and further training are also to be promoted, and tax barriers for cross-border workers are to be removed.
Rapid Market Acceptance and Expansion
The public sector shall be encouraged to open up access to public procurement for innovative companies through targeted procurement reforms. In addition, the "Lab to Unicorn" initiative aims to accelerate the commercialization of research results by supporting startup hubs rooted in strong university ecosystems in cross-border networking and cooperation and by developing licensing frameworks.
Better Access to Infrastructure, Networks, and Services
Startups are to be given easier access to infrastructure and services through targeted support measures. A "Charter of Access" and the European Innovation Act are intended to facilitate access to research and technology infrastructure for startups and scale-ups. In addition, guidelines on state aid rules shall be provided to clarify the conditions of access to state aid for universities and public research organizations and to promote financial support.
The Commission's efforts to develop a new strategy to promote startups and scale-ups in the EU are an important signal for founders and investors and are also of great significance against the backdrop of current geopolitical developments. The commitment to promoting innovation and the efforts to initiate economic structural change represent a milestone and an important statement to secure the EU's independence and competitiveness for the future and to create an attractive environment for startups and scale-ups, that not only promotes their establishment and sustainable development, but also prevents them from leaving later.
Just recently (on July 8, 2025), the Commission called for comments on the European Innovation Act and launched a public consultation. On the same day, the Commission launched a second public consultation for the 28th regime, as part of the strategy. Both the European Innovation Act and the 28th regime are part of the efforts to implement regulatory harmonization and simplification in the EU. With these public consultations on the planned measures, the EU is taking the first practical steps to work on creating the best possible framework conditions for innovators and giving them a real opportunity to choose Europe as their base.
It remains to be seen to what extent the objectives outlined above can actually be enshrined in law and become part of economic reality, so that the intended goals can be effectively implemented and the intended structural change can be achieved. However, the fact that the strategy still lacks binding legislative initiatives means that the achievement of these objectives currently remains uncertain. This is particularly true given the different legal, economic, and factual situations in the EU member states, which create certain implementation hurdles.
The actual extent of private participation will certainly play a key role in assessing the success of the strategy. For example, the goals pursued by the Scaleup Europe Fund and the European Innovation Investment Pact can only have a significant impact if sufficient private and institutional co-investments are available. Furthermore, it seems sensible to supplement the strategy with evaluation and monitoring instruments in order to review the achievement of the strategy's objectives and make adjustments if necessary.
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