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27/09/2016

European Commission intensifies charm offensive to court startups

Digital

European Commission intensifies charm offensive to court startups

Commissioner Oettinger, Vice-President Ansip and former Commissioner Neelie Kroes all attended the Startup Europe summit in Berlin earlier this year.

[European Commission]

The Commission’s initiative on startups has revamped its image, and is speeding up a campaign to catch the attention of Europe’s entrepreneurs.

With initial plans for the Capital Markets Union coming into view, officials behind the Commission’s Startup Europe programme say its stepping up efforts to boost startup growth in Europe.

At a day-long workshop in Brussels on Thursday (1 October), Commission officials promoted new projects that aim to connect European startups with investors and set up entrepreneurs with a network of likeminded company founders, legal advisors and policymakers.

Startup Europe, the Commission’s division dedicated to startup companies, was set up under former Digital Commissioner Neelie Kroes. Yesterday, the programme launched the Startup Europe Regions Network, a spinoff group tasked with getting local and regional governments to cultivate a similar support network for startups.

As Startup Europe expands and tries to raise its visibility, the programme is attempting an image makeover to win over entrepreneurs often pegged as young and tech-savvy. One Commission official boasted about the sleek design of Startup Europe’s websites targeting entrepreneurs and investors, and its quick-running, unbureaucratic programmes.

“It’s the startup of the Commission,” the official said.

Startup Europe has been working at a faster pace since early this year, when the programme organised a Startup Summit in Berlin. Another conference, Startup Olé!, followed last month in Salamanca.

Last week, Startup Europe facilitated a mission with the organisation Mind the Bridge, to send entrepreneurs from 14 startups from around Europe on a week-long visit to Silicon Valley. The programme has another conference on ICT and startups planned for later this month in Lisbon.

“Startup Europe is now in the process of acceleration. We’re now reaching out to more stakeholders across Europe and more startups than ever before,” said Isidro Laso Ballesteros, head of sector for Startup Europe.

And startups are taking notice of the Commission’s rebranding.

“The Commission is taking a new approach to the startup scene and it’s highly appreciated,” said Kaidi Ruusalepp, founder of Tallinn-based startup Funderbeam, which analyses other startups’ performance and funding. Ruusalepp attended Startup Olé! last month and called the networking event “crucial for the European startup scene.”

Ruusalepp said the one negative aspect she sees in the Commission’s work on startups is that its funding programmes pay out grant money the way you might expect from a large public institution: slowly, at least compared to funds from venture capital firms.

Among the Commission’s several programmes that give funding support to startups, the Horizon 2020 programme has to date given money to 168 startups in the growth phase, according to Commission figures. An EU official told EurActiv that most of the 500 million in the SME instrument fund launched last year is going to startups.

Carmen Bermejo, who runs the Spanish Startups Association and Madrid-based startup school Tetuan Valley, said several of the startups she’s advised have applied for the SME instrument.

“The feedback we get from them is that the process is complex and hiring a specialist consultant company looks like a must if you want to have a chance,” Bermejo said. The application process to get funds from the SME instrument is still less complicated than for other Commission programmes, Bermejo added.

>>Read: Commission presents piecemeal Capital Markets Union strategy

Waiting for the Capital Markets Union

Plans for the Capital Markets Union, which the Commission announced earlier this week, have sparked interest among startup associations that want to see an easing of venture capital regulation around Europe.

Laso Ballesteros said he thinks the Capital Markets Union could be the right tool to bring a wave of investment money to European startups.

“If this is done correctly, it could be a great opportunity for all the startups and investors in Europe,” Laso Ballesteros told EurActiv.

“The most important point that should be focused on is exit. If we don’t have exit opportunities in Europe, investors will not invest in startups. Investors think from day one about exiting. If you don’t have exit opportunities here, or they’re very low, it doesn’t matter how good the structure is of the Capital Markets Union. They will never invest.”

Laso Ballesteros suggested the Capital Markets Union could address exit strategies for startup investors, like IPOs and mergers and acquisitions.

>>Read: Berlin outranks London in start-up investment

Scaling up—in Europe

At yesterday’s workshop held at the Committee of the Regions in Brussels, Commission Vice-President Andrus Ansip emphasised that startups need to be able to grow in Europe.

“We need to create better environments for our startups to scale up here in the European Union,” Ansip said.

“Why are we not capable of keeping our smart brains?” Ansip asked, referring to startups that have moved to the US or completed funding rounds there.

Startup entrepreneurs and local government officials in charge of promoting innovation were quick to offer their advice yesterday on what’s missing in the Commission’s plans to help startups grow. Often, they focused on boosting European companies to compete with Silicon Valley.

“With startups, it’s us against the rest of the world. We have to think of ourselves as European and cooperate better,” said Jean-Pierre Leac of innovation agency NFID in the northern French region of Nord-Pas de Calais.

Leac argued that part of the reason European startups struggle to scale up is that they don’t work together or attract employees or funds from other European countries.

“Most of the startups we support have international potential but it’s not supported as much as it should be.”

“Some startups are inhibited because they have competitors in other parts of Europe that they’d be better off collaborating with,” said Ricardo van Loenen, founder of B. Amsterdam, an office space and hub offering services to startups.

Van Loenen is planning to launch a European startup union next year, which he said will start as a platform giving information to startups. “The whole of Europe is not transparent and there are startups that are similar to each other,” he said, adding that if entrepreneurs “know what is going on in Europe” they’d be more fit to compete with American companies.

Startup Europe recently set up a website that documents data about startups in ten European cities where they’re concentrated: Berlin, Brussels, Bucharest, Helsinki, London, Madrid, Manchester, Munich, Paris and Stockholm.

Officials insist that Startup Europe will maintain a ‘soft’ approach focused on coordinating networking events and granting funds and that the programme won’t be involved in legislation.

But startup associations say the Commission needs to make sure its new enthusiasm for supporting startups doesn’t fall flat.

“We would like that spirit to survive the legislative process and translate into a better legislative framework for startups, innovation and digital growth in the EU,” said Lenard Koschwitz, director for European affairs at advocacy group Allied for Startups.

The Commission said in a statement sent to EurActiv, “We aim to address obstacles (fragmentation of EU rules, notably related to e-commerce, or high parcel delivery costs for example) and put forward ways to ease startups’ access to finance in our plans to create a Digital Single Market and a Capital Markets Union.”

>>Read: Web startups offered EU funding worth €80 million

Background

In February 2015, Lord Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union (CMU), unveiled a green paper as part of the process to establish a Capital Markets Union.

The aim is to develop a financing system to complement the banking system, unlock capital across Europe giving more investment choices, and establish a market whereby investors can use their funds across borders without hindrance. One of the concrete proposals is to make it easier to raise funds for the bloc's flagging economy through markets, rather than banks.

Startup companies have expressed high hopes about the CMU's potential to generate more venture capital investment in Europe.