Brussels launches its offensive to prevent startups from fleeing Europe

In a context of economic transformation and growing global competition, the European Commission has launched a new Strategy for startups and scaleups, the term used in English for expanding companies. It is a roadmap with 26 actions aimed at removing barriers that hinder the growth of these companies within the European single market, with the objective of creating a more favourable environment for technological innovation, talent attraction, and access to funding.

The initiative comes following the publication of the Draghi Report, which identifies innovation as one of the strategic pillars for ensuring European competitiveness in the coming decades, and is part of Choose Europe, a broader plan driven by the President of the European Commission, Ursula von der Leyen, to attract and retain scientific talent.

The document underscores the need to act urgently in the face of current challenges and highlights startups as key drivers for strengthening the resilience, strategic autonomy, and economic sustainability of the Old Continent.

Five areas of action

The new EU strategy revolves around five main areas: improving the regulatory environment for innovation, increasing available funding, facilitating market entry, retaining highly skilled talent, and ensuring access to technological infrastructure and services.

The initial diagnosis, however, is not new. Experts affirm that Europe has long been burdened with a series of structural obstacles that prevent innovative companies from achieving sustained growth. “In practice, many startups develop their business model in Europe, but when it comes time to scale, they seek capital and opportunities outside the EU,” explains Sara Mateo, head of the Entrepreneurship knowledge area at Zabala Innovation. “The problem is not just funding, but also regulatory fragmentation and the lack of an efficient common framework among the different EU Member States,” she adds.

Brussels aims to tackle these problems with measures such as a new optional European regime for startups, which would include simplification proposals in areas such as taxation, labour legislation, or insolvency procedures. It even contemplates allowing a company to be established in Europe within a maximum of 48 hours.

A funding gap at a critical stage

One of the main obstacles for startups in Europe is access to capital during the growth phase, also known as the scaleup stage. The EU strategy proposes a series of reforms to address this gap, including strengthening the European Innovation Council (EIC) and creating a Scaleup Europe Fund, to be privately managed but co-financed by Brussels. “These initiatives are welcome, but the challenge is considerable: we’re talking about competing with giants like the United States or China, which have much more dynamic and industry-connected funding ecosystems,” Mateo points out.

Another key element of the Strategy is attracting and retaining talent. The European Commission proposes the creation of a “blue carpet” to facilitate residence and work permits for founders of highly innovative startups or for cross-border remote working, thus ensuring the recruitment of high-level talent beyond the EU’s borders. It also plans to review the tax treatment of employee stock options, a common tool in ecosystems such as the United States but still rarely used in Europe due to its fiscal complexity.

“Talent mobility is essential, but we cannot ignore the administrative burden that many startups still bear. To compete on equal terms, Europe needs not only flexible legal frameworks but also digitised and responsive public administrations,” Mateo emphasises.

In this regard, Brussels proposes developing a European business portfolio that would allow startups to interact digitally with public administrations via a unified digital identity.

From research to market

In this context, an innovative aspect of the Strategy is the promotion of the Lab to Unicorn programme, an initiative aimed at transforming scientific research into scalable business models. The idea is to strengthen the link between universities and the private sector through European innovation hubs and measures to facilitate licensing, revenue sharing, or the creation of spin-offs.

“The step from the laboratory to the market remains an unresolved issue in Europe. High-quality scientific knowledge is not enough; an entrepreneurial culture and effective mechanisms to transfer it are also needed,” says Mateo. In this sense, Brussels also aims to facilitate startups’ access to public research infrastructures and clarify under what conditions this can be done without violating EU State aid rules.

“The path to market is often too long, causing companies to lose competitive advantage,” Mateo acknowledges. In this respect, the creation of the Innovation Act legislative framework “will facilitate the creation of spaces such as so-called regulatory sandboxes — inspired by children’s sandpits — where entrepreneurs can experiment with their innovations in controlled conditions, without having to immediately comply with the full regulatory framework,” she concludes.