EU launches initiative to challenge Silicon Valley’s start-up culture

The EU has announced the launch of its ‘Start-up and Scale-up’ initiative to support entrepreneurs in the region as it mounts a challenge to the tech friendly US.

Jamie Davies

November 23, 2016

4 Min Read
EU launches initiative to challenge Silicon Valley’s start-up culture

The EU has announced the launch of its ‘Start-up and Scale-up’ initiative to support entrepreneurs in the region as it mounts a challenge to the tech friendly US.

After conducting yet more research, is starting to wonder what the EU does aside from research, the gaggle of bureaucrats have identified several key factors in supporting the growth of small scale businesses and entrepreneurs in the Union. Although no verticals have been restricted from the support, the technology-orientated businesses have been singled out and prioritized as the gaggle are seemingly on a mission to create an alternative to Silicon Valley.

“High-growth firms create more new jobs compared to other firms. Start-ups scaling up into bigger firms form a large share of these businesses,” the gaggle’s report reads. “They increase EU innovation and competitiveness, strengthening the economy. Such “scale-ups” can also provide social benefits, including offering more flexible and modern working arrangements.

“In the Single Market Strategy, the Commission announced that it will look at how to make the Single Market more efficient for start-ups and scale-ups. Ultimately, improving the ecosystem for start-ups and scale-ups in Europe will have a direct beneficial effect on jobs and growth in the EU.

“Start-ups, often tech-enabled, in general combine fast growth, high reliance on innovation of product, processes and financing, utmost attention to new technological developments and extensive use of innovative business models, and, often, collaborative platforms.”

The Single Market has been put in place to create a European wide economy to stimulate growth for European businesses through the ‘sum of parts’ theory. However, the gaggle notes that while the conditions in individual European states may offer the same benefits as Silicon Valley, the red tape and jurisdiction complications between individual nations negates any benefits put forward at EU level.

This can translate in any growing business having to set up subsidiaries or hire local staff, which contradicts the fast and lean scale up mentality which many tech entrepreneurs have. For an enterprise scale organization these challenges are nominal (to a degree), however for a start-up Silicon Valley may be a more attractive proposition as expansion throughout the US, a market which can be measured against the EU’s Single Market, removes a number of these pain points and barriers to growth.

When you combine expansion complications with challenges accessing the best talent (immigration), funding (different finance laws), benefits (different employment laws), tax (there are 28 different tax laws in the EU) and remaining compliant under a horde of different national regulations, it’s no wonder more technology start-ups succeed in Silicon Valley.

The gaggle’s initiative is a move to make sure the Single Market works as a single market and supports the growth of start-ups which will stimulate higher levels of growth and employment than the enterprise scale organizations, who are already benefiting significantly from the Single Market due to volume of staff and expertise.

The initiative itself will focus on a few key areas:

  • Removing administrative and regulatory barriers at local, regional, national and European level to stimulate the appetite for growth with the EU

  • Modernise and simplify the VAT system applying to cross border trade within the EU by creating a Single VAT Area

  • Better use of accelerators and incubators, as well as creating a EU-wide platform to connect start-ups with potential partners (alongside existing public and private platforms)

  • The European Institute of Innovation and Technology (EIT) will explore the setting up of schemes to invest directly in the scaling up of existing innovative companies by attracting additional investment from public and private sector sources and existing instruments

  • The gaggle will use the Innovation Radar to connect potential business partners and investors with Horizon 2020-funded innovators to support them to scale up

The gaggle and the European Investment Fund will make the cornerstone investments in 2017 through a new, independently managed Pan European Venture Capital Fund of Funds. The fund will work alongside major private investors to increase the size of Venture Capital Funds in Europe and overcome current fragmentation. The EU cornerstone investments of up to €400m will be capped at 25% of the total capital in the Funds of Funds, bringing a potential of at least €1.6bn additional investments to Venture Capital in Europe.

Overall, the gaggle is concerned the Single Market is not the most attractive place for technology start-ups to begin their journey. They are mostly correct, and while the initiative will go some way to remove some of the barriers to growth, the gaggle may struggle to replicate the culture and atmosphere of innovation which is so attractive to entrepreneurs in Silicon Valley. gets the feeling the gaggle may struggle to understand the importance of this culture however.

It is a solid start to rectifying complications in the market, but the culture of innovation will be key. London is on its way to creating a tech hub (which must tick off the gaggle following the Brexit vote) with Google, Facebook and Apple all stepping up their presence in the city. The presence of these organizations will start to create the culture of innovation which may provide an alternative to Silicon Valley. Pity it’s going to be outside the EU before too long…

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