Opinion Article by IE.F Managing Director Clark Parsons at Table Briefings
Table Briefings / Date: 04.11.2024 / Opinion Article/
© Table Briefings
Read the Article on Table Briefings
Clark Parsons, CEO of the European Startup Network, believes it is a good sign that an EU Commissioner for startups has been appointed. This would allow Europe to rediscover its ability to shape globally successful companies in new tech sectors.
Today marks the start of a marathon week that is akin to the Super Bowl for those inside the Brussels Bubble. The European Union’s Commissioner-designates for cabinet positions will take turns being “grilled”, four nominees per day, in a marathon seven days of testimony to the European Parliament.
For some of us, one position, which many observers have overlooked, is especially noteworthy: veteran Bulgarian politician Ekaterina Zaherieva is nominated as Commissioner for Startups, Research, and Innovation.
We have long had Commissioners for Research and Innovation; the Commissioner for Research, Science, and Innovation began in 1967 and was held by three Germans in a row through 1981. This mandate was changed in 2019; Science was dropped and replaced by three more titles: Culture, Education and Youth. The post was given to a young, hard-working Bulgarian named Mariya Gabriel.
Startups want a seat at the table
However, it was a mammoth slate of five responsibilities, and even though Commissioner Gabriel was generally applauded for her term, it’s clear that the role spread her too thin. Her early resignation – to take a leadership position in her national government – left her successor Iliana Ivanova with only one year to make a mark.
Leading up to this Fall’s nominating process, multiple agendas were in play. Universities called for Education, Research and Innovation to be kept together in one Commissioner. Likewise, organizations such as mine were hopeful that Startups – the innovative, fast-growing companies that drive economic growth and build new industries – would finally be given a seat at the table. And advocates hoping for more focus on sovereign European technology pinned their hopes on an experienced member of Parliament, Finland’s Henna Virkkunen, to help make Europe technologically relevant again; would she get Innovation in a super ministry?
Von der Leyen's decision surprised
President von der Leyen surprised us all with her decisions.
-
She peeled Education away from Research & Innovation, placing it with a Commissioner-designate from Romania.
-
She created a Vice President role for Tech Sovereignty, Security, and Democracy for Ms. Virkkunen, to the delight of many.
- She then took the Research & Innovation activities, including oversight of the gigantic Horizon Europe R&D budget, and nominated Ms. Zaharieva to be the third consecutive Bulgarian Commissioner in this role. But a new title was added too: Startups.
World champion at invention
Why is this important? There’s an old saying: “Invention is turning money into ideas, while Innovation is turning ideas into money.” By that definition, Europe is a world champion at invention. We have an incredible landscape of universities and research institutions producing world-class talent, patents, and breakthrough ideas.
But compared to the US, we are terrible at turning those ideas into money. Research projects often fail to become businesses. Professors or researchers are not equipped or incentivized to become entrepreneurs, and universities are often hostile to such notions, or make their intellectual property impossible to license. Our top talent or startups often decamp for Silicon Valley, where capital is easier to raise.
Europe must launch global champions in new tech sectors again
Anyone familiar with the reports from Enrico Letta or Mario Draghi knows that our structural deficits in both innovation and competitiveness have significantly weakened Europe’s geopolitical and economic might. So it was predictable to read last week when the European Council’s eight-page document called on the new Commission to increase the “economic valorization” of Europe’s research. Amazingly, however, that document left out one word: “startups.” The hoped-for “valorization” will seemingly materialize as if by magic.
That’s why it is all the more important that President von der Leyen went out of her way to add Startups to the title of the new Commissioner. She has signaled yet again that she knows what can help cure Europe’s ills. Simply put, if Europe is ever going to become relevant again on the global stage, it will have to rediscover its ability to launch global champions in new technology sectors. That can only come from Europe’s startups.
Startups: missing link between ideas and innovation
Luckily, in one of the most underreported stories of the last decade, Europe has built a thriving and dynamic network of startup ecosystems, powered by thousands of startups in sectors such as AI, climate & energy tech, Fintech, deep tech, and many more. They’re backed by nearly 1,000 EU-based venture capital funds and a generation of successful founders who are reinvesting and nurturing the next wave. My association now boasts more than three dozen member startup organizations.
And Germany can take heart: in the third quarter of 2024, German startups received 2.7 Billion US-Dollars in venture capital investment according to Dealroom, 2nd place in Europe, and ahead of France. Germany is a startup nation wider willen // in spite of itself. In the last two months the federal government has hosted both a (first!) Startup Summit and a (17th) Digital/IT Summit, and both events – with programs suddenly packed with startups – showed that more of Germany’s leaders recognize that startups are the missing link between Ideas and Innovation.
What is missing: Capital Markets Union and a genuine single market
So, from the Bundesregierung all the way to the EU Commission, the message has arrived. But there is still much to do. Atop the agenda, the European startup ecosystem could perform way better if two key problems were fixed:
- The lack of a Capital Markets Union means that capital, especially in growth phases or when it's time to have a stock-market exit, is much more difficult to obtain.
- The “single market” is relatively nonexistent for startups trying to scale quickly across Europe. Instead of having to form 27 companies (a bureaucratic nightmare), everyone agrees on the need for a “28th regime.” Our startups should be able to spread as rapidly as young US companies can do across their own continent.
Both of these topics have been on the EU agenda forever, but fixing them is still the fastest route to making Europe competitive. Ironically, the two Commissioners who will most likely be tackling these most important problems are NOT the Startup Commissioner.
-
The CMU is to be addressed by Portuguese Commissioner-designate for Finance, Maria Luis Albuquerque.
- The “28th Regime” is likely to fall under the purview of the Irish Commissioner-Designate for Justice, Michael McGrath.
Luckily, Commissioner-designate Zaharieva has already pledged to work closely with these two other Commissioners.
Educational institutions must go beyond teaching and research
So is her role just that of a cheerleader? No. Having a Startup Commissioner means that someone in the cabinet is finally going to stand up for this crucial piece of the economy, and also be measured on how well Europe’s startup ecosystem develops. Many countries, including Germany, have officials in charge of startups (like State Secretary Anna Christmann). But imagine a world in which each national government had someone responsible for this at the cabinet level; here President von der Leyen has set a great example.
Putting Startups alongside Innovation and Research sends another strong signal too: our educational institutions have to go beyond just teaching and research. Lab innovations have to succeed in the marketplace. Otherwise we’re all just funding a giant charity program to train America’s future talent pool.
Zakharieva needs to mobilize her colleagues in the cabinet
We don’t know what we’ll get when Commissioner Zaharieva unveils a European Innovation Act or delivers her planned Startup & Scaleup Strategy.
Pessimists will say her focus will skew to the budget for research at universities and institutions, leaving startups to be forgotten. Ms. Zaharieva has little to no track record of expertise in any of her three mandated topics. Even the European Parliament seems uninterested in quizzing Ms. Zaharieva about startups; almost none of the vetting questions submitted to her in advance even mentioned them.
Optimists like me will say it’s great to have a highly capable politician who can mobilize her colleagues in the cabinet and advocate for startups across a wide spectrum of sectors. Here’s hoping she can help convince Europe that startups are so crucial for our future that someday even Germany would want the Innovation Commissioner post again. Now that would send a signal.
Clark Parsons is CEO of the European Startup Network, a network of European startup associations, and Managing Director of the Innovate Europe Foundation. The foundation acts as a think tank, forum, and dialogue partner for the concerns of the German and European digital and innovation ecosystem.