COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS The EU Startup and Scaleup Strategy Choose Europe to start and scale
Date: 2025-05-28
Institutions: Directorate-General for Research and Innovation, European Commission
Subjects: EU growth strategy, aid to undertakings, business start-up, company growth, innovation, scale-up company, single market, start-up, technical barriers to trade

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.5.2025  SWD(2025) 138 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS  The EU Startup and Scaleup Strategy                     Choose Europe to start and scale {COM(2025) 270 final}  
 
 
Contents 
1. INTRODUCTION ....................................................................................................................... 3 

2. INNOVATION-FRIENDLY REGULATION .............................................................................. 4 

2.1. Current landscape and challenges ........................................................................................ 4 

2.2. Key Barriers ......................................................................................................................... 6 

2.2.1. Regulatory uncertainty and fragmentation as an obstacle to both international and within 
the EU cross-border expansion................................................................................................ 6 

2.2.2. Regulatory capacity and responsiveness ....................................................................... 7 

3. BETTER FINANCE FOR STARTUPS AND SCALEUPS ........................................................ 8 

3.1. Current landscape and challenges ........................................................................................ 8 

State Aid rules ...................................................................................................................... 12 

3.2. Key Barriers ....................................................................................................................... 13 

3.2.1  The  structure  of  the  European  financial  market  and  the  limited  role  of  institutional 
investors ................................................................................................................................ 13 

3.2.2. Market fragmentation and the role of foreign investors .............................................. 14 

3.2.3. Limitation of exit possibilities ..................................................................................... 15 

3.2.4.  Missing  framework  conditions  to  bolster  intellectual  property  rights  (IPR)  backed 
finance ................................................................................................................................... 16 

4. FAST MARKET UPTAKE AND EXPANSION ....................................................................... 17 

4.1. Current landscape and challenges ...................................................................................... 17 

4.2. Key Barriers ....................................................................................................................... 21 

4.2.1. Infrastructure and market demand constraints ............................................................ 21 

4.2.2. Limited access to non-EU markets .............................................................................. 22 

4.2.3. Lack of collaborations between startups and corporates ............................................. 23 

4.2.4. Limited access to innovation procurement .................................................................. 24 

5. SUPPORT FOR THE BEST TALENT IN EUROPE ................................................................ 28 

5.1. Current landscape and challenges ...................................................................................... 28 

5.2. Key Barriers ....................................................................................................................... 30 

5.2.1. Skills shortages and mismatches ................................................................................. 30 

5.2.2. Issues related to social security ................................................................................... 31 

5.2.3. Taxation challenges in Employee stock options (ESO) ............................................... 31 

5.2.4. Limited career mobility for academics ........................................................................ 31 

5.2.5. Gender gap in technology in the EU ........................................................................... 32 

5.2.6. Gender gap in intra-European talent mobility (geographical) ..................................... 33 

6. ACCESS TO INFRASTRUCTURE, NETWORKS AND SERVICES .................................... 35 

6.1. Current landscape and challenges ...................................................................................... 35 

6.2. Key Barriers ....................................................................................................................... 39 

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6.2.1. Limited access to research and technology infrastructures ......................................... 39 

6.2.2. Limited access to data and fragmented support mechanisms ...................................... 40 

6.2.3 Access to knowledge and knowledge valorisation ....................................................... 41 

6.2.4. Weak commercialisation of results/academic inventions ............................................ 41 

6.2.5. Lack of resources and skills of knowledge and technology transfer offices (TTOs) .. 42 

6.2.6. Fragmented university support for startup creation ..................................................... 43 

6.2.7. Limited financial and non-financial commercialisation incentives for researchers .... 44 

6.2.8. Hurdles for spinoff/startups access to IP and knowledge ............................................ 44 

7. CROSS-CUTTING ISSUES ..................................................................................................... 45 

7.1. Current landscape and challenges ...................................................................................... 45 

Annex 1: Synopsis Report of Stakeholder Consultation ............................................................... 48 

2 

 
 
 
 
 
1. INTRODUCTION 
The  Competitiveness  Compass  and  the  2025  Commission  work  programme 
underlined  the  EU  startups  and  scaleups  as  a  priority  for  contributing  to  EU’s 
competitiveness. To deliver on this priority, the Commission is putting forward an EU 
Startup and Scaleup Strategy.  

A vibrant ecosystem of startups and scaleups is essential for driving economic growth and 
market development. These companies’ contribution to the economy reinforces the EU’s 
industrial strength and helps decrease reliance on critical sectors and technologies, thereby 
playing a crucial role in enhancing the EU’s strategic autonomy. 

The  European  innovation  landscape  presents  both  lights  and  shadows  as  regards  the 
European  startup  and  scaleup  ecosystem:  over  the  past  decade,  it  has  experienced 
remarkable growth,  establishing Europe as a significant player in the global tech arena. 
Since 2015, European tech companies have attracted approximately USD 426 billion in 
venture  capital,  marking  a  tenfold  increase  from  the  preceding  decade.  In  2024  alone, 
investment levels are projected to reach USD 45 billion, underscoring sustained investor 
confidence in the region’s innovative ventures.   

This expansion is mirrored in the talent pool, with Europe’s tech workforce expanding to 
3.5  million  individuals,  achieving  a  24%  annual  growth  rate  comparable  to  that  of  the 
United States. Notably, Europe now hosts more early-stage startups than any other region 
globally,  with  over  35,000  such  companies.  European  startups  have  demonstrated 
particular strength in sectors such as fintech, artificial intelligence (AI), and sustainability-
focused technologies.    

Even  though  a  Startup  and  Scaleup  Initiative1  was  adopted  in  2016  aiming  to  remove 
barriers  for  startups  to  scaleup  in  the  Single  Market,  the  regulatory  and  business 
environment in the EU is still not sufficiently conducive for bringing innovative products, 
services and solutions to users at the necessary scale. It has now become urgent to address 
the financial, regulatory and administrative obstacles that limit or slow down startups from 
scaling up into mature, profitable companies in the Single Market and to incentivise them 
not to relocate out of the EU. 

This  Staff  Working  Document  is  accompanying  the  EU  Startup  and  Scaleup  strategy 
communication  which  is  addressing  these  challenges  and  identifies  a  set  of  policy, 
regulatory  and  financial  support  measures  to  improve  the  framework  conditions  for 
startups and scaleups in order to close the innovation gap with the EU’s global competitors, 
which has been identified as the first pillar of the Competitiveness Compass.  

The Staff Working Document aims to present a set of five key areas of obstacles identified 
that startups and scaleups encounter in Europe: i) innovation-friendly regulation, ii) better 
finance, iii) fast market uptake and expansion, iv) support for the best talent, v) access to 
infrastructure, networks and services.  

The Annex to this Staff Working Document includes a report of the outcome of the call for 
evidence conducted to inform the work on the Strategy. 

1 https://digital-strategy.ec.europa.eu/en/news/new-initiative-startups-start-and-scale-europe 

3 

 
 
 
 
2. INNOVATION-FRIENDLY REGULATION  

2.1. Current landscape and challenges  
Throughout  their  lifecycle,  European  startups  and  scaleups  face  a  fragmented 
landscape that imposes significant administrative burdens. In the early stages, startups 
struggle with navigating diverse registration, certification, and compliance requirements 
across  Member  States,  or  burdensome  authorisation  procedures  at  EU  level.  This 
heterogeneity slows their ability to enter new markets. As regards setting up of companies, 
the  so-called  incorporation  requirements  (i.e.  requirements  for  setting  up  a  company) 
remain largely defined by national law. Entrepreneurs who want to set up companies in 
different countries across the EU, need to adopt in each country a company form governed 
by that country’s national law (e.g. GmbH in Germany). The only EU level legal form for 
limited  liability  companies  is  the  Societas  Europae  (SE),  which  is  a  European  public 
limited  liability  company  with  a  minimum  subscribed  capital  of  EUR  120  000  and, 
therefore, it is most often used by large companies.  

Furthermore, as they grow, scaleups need to allocate significant financial and human 
resources  to  managing  multiple  national  tax  systems,  labour  mobility  and  social 
security systems, and reporting obligations, diverting focus from innovation, expansion, 
and market competition. In addition, complexity of sector specific regulations and variety 
of national derogations in MS create additional burdens for cross-border operations, with 
disapplication of host Member State rules in temporary cross-border services, as per the 
fundamental freedom to provide services, almost inexistent in practice.2 

This regulatory fragmentation also poses major obstacles for investors and continues 
to undermine the creation of a truly integrated Single Market for capital. Despite the 
achievements of the past years, the Single Market for capital in the EU is still not complete. 
Across the EU Member States, investors face different national legal systems, including 
within the areas of securities law, taxation,  company law and foreign  direct  investment 
restrictions at national level. This lack of harmonisation results in significant additional 
costs and legal uncertainty, which further limit investment. 

Companies  also  often  raise  the  lack  of  an  easily  recognisable  EU  company  brand, 
which would be trusted by public authorities or investors and not being able to develop a 
“pan-European”  company  from  the  outset.  The  most  recent  calls  from  the  startup 
community3 also stress that current procedures for setting up and investing into companies 
are  not  sufficiently  digital,  easy  and  quick  and  not  sufficiently  available  in  English. 
However, some of these calls do not reflect the latest developments in EU company law - 
which provides  for digital solutions,  including  fully online procedures for setting  up of 
companies - or could indicate challenges in the transposition or implementation of such 
EU provisions by Member States. 

2 As demonstrated by the very limited use of the case-by-case derogation mechanism of Articles 18 and 35 of Directive 
2006/123/EC (the “Services Directive”), made operational through the Internal Market Information System (IMI) as per 
Regulation (EU) No 1024/2012 (the “IMI Regulation”), which seems to point to the (nearly) full application of host 
Member  State  rules  to  incoming  temporary  cross-border  providers,  which  consultations  with  stakeholders  further 
demonstrated – see below point 3.2. 
3 EU-Inc (2025), EU-Inc Policy Proposal An industry blueprint for the upcoming 28th regime. 

4 

 
 
 
 
Figure 1. Administrative costs and regulatory burdens across startups and scaleups’ 
lifecycle 

Note: These phases are not always linear, and startups may go through them multiple times 
or in a different order. The specific challenges and opportunities at each stage will also 
vary depending on the industry, the company's business model, and other factors. 
Source: European Commission services 

Tax compliance burdens disproportionally affect small medium enterprises (SMEs) 
as compared to large companies. SMEs face disproportionately higher compliance costs 
than larger enterprises (which can benefit from economies of scale in relation to regulatory 
expenses).4  While  larger  enterprises  have  higher  absolute  costs,  SMEs  bear  a  greater 
relative burden, thus struggling proportionally more than larger enterprises with complex 
EU  and  national  tax  rules  and  dealing  with  multiple  tax  authorities  and  their  relative 
compliance burden is larger. 5 

These  difficulties  are  to  a  large  extent  applicable  to  both  startups  and  scaleups. 
Startups and scaleups operating across multiple EU jurisdictions may face significant tax 
compliance complexity and reporting burdens, including multiple tax filings requirements, 
fragmented R&D tax incentives, different tax treatments of various assets or transactions 
and tax reporting standards.  

Furthermore, the degree of efficiency of justice systems varies across Member States, 
with  some  countries  experiencing  prolonged  case  durations.6  Lengthy  legal 
proceedings  can create uncertainty for startups, particularly  in  intellectual property (IP) 
disputes or contract enforcement, discouraging investment and innovation. For startups, 
extended  legal  battles  over  intellectual  property  rights  can  delay  product  launches  and 

4  European  Commission:  Directorate-General  for  Internal  Market,  Industry,  Entrepreneurship  and  SMEs,  European 
Innovation Council and SMEs Executive Agency, Di Legge, A., Ceccanti, D., Hortal Foronda, F. et al., Tax compliance 
costs  for  SMEs  –  An  update  and  a  complement  –  Final  report,  Publications  Office  of  the  European  Union, 
2022, https://data.europa.eu/doi/10.2873/180570. 
5  European  Commission:  Directorate-General  for  Internal  Market,  Industry,  Entrepreneurship  and  SMEs,  European 
Innovation Council and SMEs Executive Agency, Di Legge, A., Ceccanti, D., Hortal Foronda, F. et al., Tax compliance 
costs  for  SMEs  –  An  update  and  a  complement  –  Final  report,  Publications  Office  of  the  European  Union, 
2022, https://data.europa.eu/doi/10.2873/180570. 
6 2023 EU Justice Scoreboard. 

5 

 
 
  
 
 
reduce competitiveness, while slow contract enforcement can disrupt cash flow and strain 
business relationships. These uncertainties deter potential investors, who may perceive a 
higher risk in jurisdictions with inefficient legal systems, ultimately hindering innovation 
and growth within the startup ecosystem.7 8 

2.2. Key Barriers 

2.2.1. Regulatory uncertainty and fragmentation as an obstacle to both international and 
within the EU cross-border expansion 
Startups and scaleups developing innovative technologies often encounter significant 
regulatory challenges that impede their growth and competitiveness. A key challenge 
is  regulatory  fragmentation,  as  emerging  technologies  frequently  span  sectoral  and 
territorial boundaries that may not align with existing legislative frameworks. This can lead 
to regulatory gaps or duplications. Another area of legal uncertainty is how the existing 
legal framework should apply to innovative digital technologies and business models. 

Regulatory ambiguity, or the perception of regulatory complexity, can thus also have 
a constraining effect on innovation. In many sectors, market entry is contingent on prior 
authorisation,  certification,  or  compliance  with  harmonised  standards.  Where  the 
applicable regulatory processes are lengthy or unclear, inconsistent across Member States, 
startups and scaleups may face delays or barriers in bringing new products and services to 
market.  This  is  particularly  problematic  for  innovative  firms  that  rely  on  rapid  market 
access and investor confidence to grow. For startups and scaleups, whose business models 
depend on speed and investor confidence, the absence of a clear regulatory pathway can 
represent a critical barrier.  

The issue is further exacerbated by the risk that regulatory responses - introduced 
prematurely  or  without  sufficient  adaptability  -  may  inadvertently  entrench 
approaches  that  are  disproportionate  to  the  actual  level  of  risk.  While  intended  to 
provide clarity, such measures can lead to rigid frameworks that hinder appropriate and 
responsive  regulation.  As  a  result,  even  high-potential  technologies  may  remain 
underdeveloped  or  commercially  unviable—not  due  to  shortcomings  in  their  design  or 
functionality, but because of regulatory uncertainty and an absence of clear pathways to 
market. 

Startups  face  growing  regulatory  complexity  around  data  governance,  data 
processing, and cross-border transfers. Next to the General Data Protection Regulation, 
which became a global standard for privacy and human rights protection, the EU adopted 
various acts, aimed at: enabling the reuse of public sector data (Data Governance Act) and 
data  generated  through  the  use  of  smart  objects  (Data Act);  reuse  of  high  level  value 
datasets  from  public  sector;  ensuring  fair  digital  markets  and  online  content  (Digital 
Markets Act,  Digital  Service Act)  to  name  just  few.  In  parallel,  some  Member  States 
adopted  national  derogations  from  the  established  EU  rules  (e.g.  GDPR),  creating  a 
regulatory  challenges  for  operators.  Differences  in  the  national  interpretations  by  the 
national  data  protection  authorities  create  additional  hurdles  for  European  innovators 
operating at European and global markets.9 Startups and scale ups often lack in house data 
protection expertise and do not receive sufficient tailor-made support from the national daa 

7 European Commission – EU Justice Scoreboard  
8  https://www.europeansources.info/record/2023-eu-justice-scoreboard;  https://ec.europa.eu/info/policies/justice-and-
fundamental-rights_en 
9  Second  report  on  the  application  of  the  General  Data  Protection  Regulation,  COM(2024)  357  final:  https://eur-
lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52024DC0357 

6 

 
 
 
protection  authorities  in  terms  of  tools  such  as  templates,  helplines,  checklists  and 
guidelines which can be easily understood by those without legal training.10  

Furthermore,  despite  the  existence  of  a  comprehensive  EU  legal  framework  aimed  at 
protecting the social security rights of mobile workers, the existence of different social 
security  systems  remains  a  challenge,  particularly  for  cross-border  teleworkers. 
Rather  than  a  unified  regime,  EU  law  in  the  field  of  social  security  provides  for 
coordination of the national social security schemes, which may result in administrative 
burdens for remote workers (see section 5). 

2.2.2. Regulatory capacity and responsiveness 
Well-designed  legislation  can  facilitate  innovation,  but  badly  designed  legislation  can 
hamper innovation. The challenge of regulatory pacing is increasingly evident, as the 
speed of technological innovation often outstrips the ability of regulatory systems to 
adapt. Compounding this issue, many Member State regulators face persistent difficulties 
in attracting and retaining specialised expertise, particularly in high-demand areas such as 
digital technologies, data science, and artificial intelligence11. This lack of internal capacity 
limits  the  ability  of  regulatory  bodies  to  keep  pace  with  emerging  trends  and  engage 
meaningfully with innovators. 

When  EU  legislation  is  prepared,  the  Commission  performs  checks  about  possible 
interactions  of  legislation  with  emerging  innovations  in  line  with  the  innovation 
principle12. However, when EU legislation is transposed into national legislation or when 
other national legislation is created that does not derive from EU legislation, there is not 
always  such  a  check  at  national  level.  Improving  the  assessment  of  the  potential 
innovation impacts of upcoming legislation when it is under preparation could draw 
on  feedback  from  experts,  innovators  and  other  stakeholders  e.g.  through  public 
consultations or regulatory sandboxes. This could help regulators gather the necessary 
specialised feedback to ensure that new rules do not pose disproportionate restrictions on 
innovation and that, where possible, they make optimal use of available mechanisms to 
actively  stimulate  innovation.  This  could  reduce  the  need  for  revising  regulations 
afterwards. An innovation stress test could provide a simple checklist of questions to 
help legislators assess these types of impacts in a structured way. An innovation stress 
test could thus help make legislation more innovation-friendly in line with public interests.  

Institutional  incentives  within  regulatory  authorities  rarely  promote  proactive  or 
risk-tolerant  behaviour.  While  pro-innovation 
instruments—such  as  regulatory 
sandboxes, testbeds, and advisory hubs—do exist, their effective use is often hindered by 
staffing shortages and budget constraints13. Regulatory attention does not always align with 
the strategic or economic relevance of emerging technologies, especially in sectors with 
strong innovation potential. As a result, companies frequently face uncertainty, delays, and 
inconsistencies  when  attempting  to  navigate  regulatory  requirements.  These  challenges 
can obstruct their ability to scale and compete effectively within the Single Market. 

A lack of regulatory expertise also affects innovators directly. Early-stage companies 
often struggle to interpret how existing regulations apply to novel products or services—
particularly  in  cases  involving  cross-sectoral  or  entirely  new  domains.  For  genuinely 

10 Ibid 
11 European Investment Bank (2025), The state of local infrastructure investment in Europe, EIB Municipalities Survey 
2024-2025, https://www.eib.org/en/publications/20250028-eib-municipalities-survey-2024-2025  
12 EU Better regulation toolbox, tool #22. 

13 OECD/KDI (2021), Case Studies on the Regulatory Challenges Raised by Innovation and the Regulatory Responses, 
OECD Publishing, Paris, https://doi.org/10.1787/8fa190b5-en 
7 

 
 
 
disruptive  technologies,  there  is  often  no  clear  regulatory  pathway  or  guidance  on 
demonstrating  compliance.  This  regulatory  ambiguity  is  especially  burdensome  for 
startups  and  scaleups,  which  typically  introduce  untested  technologies,  new  business 
models,  or  unconventional  go-to-market  approaches.  Premature  regulation,  meanwhile, 
risks stifling innovation by locking in requirements that may not reflect evolving realities. 

3. BETTER FINANCE FOR STARTUPS AND SCALEUPS  

3.1. Current landscape and challenges 
With over 3.5 million of skilled tech professionals, the European tech ecosystem has 
experienced a trend of continued growth in the last decade.14 On average, the ability of 
Europe to create new tech startups exceeded that of the US, with around 15 200 new tech 
startups  founded per year against the 13 700 observed in  the US  between 2018-2023.15 
Furthermore, the number of early-stage companies in Europe has more than quadrupled 
between 2015 and 2024, increasing from 7 800 in 2015 to 35 000 in 2024. 16 

In order to thrive, startups founders need both financing resources and partners. In 
this regard, business angels play a central role in the early life of innovative companies, as 
they  do  not  only  offer  financial  support  but  also  bring  industry  expertise  and  valuable 
networks, thereby significantly enhancing the company’s chances of success.   

Since 2013, the size of the business angel investment market in Europe has more than 
doubled, increasing from EUR 550 million to EUR 1.25 billion in 2023. 17 Despite the 
significant  development,  Europe  underperforms  compared  to  the  US,  where  angel 
investment reached USD 18.6 billion in 2023.18 

One of the main challenges faced by business angels is the high risk associated to very-
early-early-stage investments. 19 Being the first line for private investment in startups, 
business  angels  grapple  with  significant  risk-reward  trade-offs.  These  difficulties  are 
further  compounded  by  the  lack  of  sufficient  early-stage  investments  from  institutional 
investors in Europe, which limits the flow of capital into strategic sectors.20 

Meanwhile,  venture  capital  (VC)  investments  into  EU  startups  reached  USD  51 
billion in 2024. 21 After the exceptional peak in 2021, European VC funding reverted back 
to their long-term growth and stabilised in 2024. Late-stage funding has plummeted the 
most  since  the  continent’s  funding  heyday.  The  post-2021  slowdown  in  investments  is 
comparable  to  global  developments,  where  investments  have  slowed  due  to  the  high-
interest rate environment, economic and geopolitical uncertainty as well as a slowdown in 
company exits.22  

Figure 2. Venture Capital investments in Europe, 2015-2024 (USD billion) 

14 Atomico (2024), State of the European Tech 2024. 
15 European Commission (2024), Science, Research and Innovation Performance Report of the EU 2024: A competitive 
Europe for a sustainable future. 
16 Atomico (2024), State of the European Tech 2024. 
17 EBAN Statistics Compendium – European Early Stage Market Statistics 2023. 
18 EBAN Statistics Compendium – European Early Stage Market Statistics 2023. 
19 EBAN (2024), Building a Vibrant Business Angel Ecosystem in Europe Recommendations for EU and National Policy 
Makers. 
20 EBAN (2024), Building a Vibrant Business Angel Ecosystem in Europe Recommendations for EU and National Policy 
Makers. 
21 Europe’s Startup Funding Stabilized In 2024, But Remains Far Off Market Peak 
22 Europe’s Startup Funding Stabilized In 2024, But Remains Far Off Market Peak 

8 

 
 
 
Source: Crunchbase Database 

Investments by VC funds have improved significantly over the last decade. In 2024, 
VC investments in the EU were more than three times as large as in 2016 (USD 41.2 billion 
against USD 13.3 billion. Increased contributions from public funds, both at European and 
national level, were a primary driver of the increase in venture capital financing. These 
funds have been used to set up a number of venture capital funds across the EU, with public 
funds being used as an anchor to attract private investment. 23  

The geographic distribution of VC funds raised across the EU is vastly heterogenous 
and tend to concentrate in certain geographic areas. The European tech ecosystem is 
characterised by many different hubs and sub-regions, all at different stages of maturity. 
Germany and the Netherlands alone account for around 52% of total VC capital raised in 
2023, but only 30.4% of the EU GDP.24  

However,  investment  levels  into  European  tech  companies  continues  to  be  below 
investment  levels  in  other  global  jurisdictions.  When  looking  at  VC-backed  startups 
with valuations under USD 50 million, Europe has 50% fewer than the US.25 Furthermore, 
startups in Europe are 40% less likely than their US counterparts to secure VC funding 
after five years in operation.26 This suggests that early-stage companies in Europe either 
fail to reach scale for offering their products/services, choose to remain small, or do not 
have access to suitable financing opportunities to support their growth. The gap is even 
more pronounced when looking at the number of scaleup companies, with the EU reporting 
only 1/5 the number of scaleups27 as the US.28 

The EU underperforms also in terms of number of unicorns. At the beginning of 2025, 
there were 110 companies with a market valuation of USD 1 billion or above in the EU. 
significantly  lower  than  the  687  reported  in  the  US,  but  also  below  the  Chinese 
performance (162) (Figure 2). 

23 European Commission, based on PitchBook data, as of 11 February 2025. 
24 European Commission (2024), Science, Research and Innovation Performance Report of the EU: A competitive Europe 
for a sustainable future. 
25  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
26 Atomico (2023), State of the European Tech 2023. 
27 Defined as VC-backed companies with a market valuation between USD 500 million and USD 10 billion. 
28  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  

9 

 
 
 
 
Figure 3. Number of unicorn companies as of January 2025 

800

700

600

500

400

300

200

100

0

687

162

US

China

55

UK

110

EU

Note: The numbers refer to the number of unicorn companies headquartered in the different 
geographical reasons. 
Source: CB Insights, as of January 7th, 2025. 

There  are  a  number  of  factors  that  contribute  to  the  less  rapid  growth  of  EU’s 
startups. Remaining fragmentation of the EU’s Single Market for  capital, products and 
services  significantly  reduces  the  ability  of  its  companies  to  scale.  On  key  example  is 
taxation, where fiscal treatment differs widely across Member States and hampers cross-
border expansion of startups. Furthermore, another key obstacle is a lower risk tolerance 
of entrepreneurs and enterprises, resulting in a less growth-oriented approach to company 
building. On the supply side, this is also underpinned by lower amounts of financing from 
Europe’s generally more risk-averse investors.  

Some  evidence  suggests  that  European  startups  as  equally  efficient  as  their  US 
counterparts.29 Nevertheless, the EU attracts less VC in absolute terms, which leads to a 
smaller pipeline of high growth startups able to scale and reach billion-dollar valuations. 
US-based companies raised substantially higher  levels of VC capital (USD 932 billion) 
than the EU (USD 133 billion) over the entire period 2016-2024.30  

Furthermore, VC funds  in the EU remain smaller than in the US both in size and 
number. In terms of size, although the gap is observable across all size buckets, it increases 
with the ticket size (Figure 4). Furthermore, between 2016 and 2024, only 12 VC funds in 
the EU raised tickets above USD 1 billion, against the 157 in the US.31 

29 Dealroom (2025), Accelerating Europe – The State of European Innovation and Why It Matters. 
30 European Commission,  based on PitchBook data, as of the 11 February 2025. 
31 European Commission, based on PitchBook data, as of the 11 February 2025. 

10 

 
 
 
 
Figure 4. VC funds raise in the EU and the US between 2016 - 2024, by bucket size 

0

50

100

USD billion
150

111,54

200

250

300

153,76
155,4

182,01

277,41

52,57

29,74

46,54

26,14
13,40045
17,64

S
U

U
E

0 - 99M
100M - 249M
250M - 499M
500M - 999M
1B - 4.99B
5B+
0 - 99M
100M - 249M
250M - 499M
500M - 999M
1B - 4.99B
5B+

Source: European Commission, based on PitchBook data, as of 11 February 2025. 

The VC investment gap between the EU and the US  remains significant across  all 
growth stages and is particularly pronounced for later-stage financing. Despite some 
improvement over the last years, the amount of venture capital raised in the EU remains 
significantly  smaller  than  in  some  other  jurisdictions,  particularly  the  US.  Across  the 
company growth cycle, there is about 80-84% less capital available (Figure 5). In 2024, 
seed stage and early-stage investments in the EU were about 82% and 80% lower than in 
the US, respectively. The largest gap is observed for growth stage financing, for which the 
EU’s performance was 84% lower than in the US, with a total amount of later-stage VC 
investment of USD 21.3 billion against about USD 133 billion (Figure 5). 

Figure 5. VC invested in the EU and the US in 2024, by deal type 

11 

 
 
 
 
 
 
 
Source: European Commission, based on PitchBook data, as of 11 February 2025. 

There is overwhelming evidence of a market gap for larger financing rounds to scaleup 
companies in the EU. For funding rounds above EUR 50 million, there are at least seven 
times more funds in the US than the EU, and the majority of the capital for such rounds 
comes from non-EU investors creating a risk of relocation and loss of economic security32.  

The  EIC  Fund  has  been  successful  in  supporting  early-stage  startups  with  over  270 
investments,  catalysing investment  rounds with  four times the amount of the EIC Fund 
investment. However, the EIC Fund is not able to make larger investments needed for scale 
ups.  The  current  limit  is  EUR  30  million  per  company,  introduced  under  the  STEP 
regulation. The analysis of the EIB, in its role as investment adviser to the EIC Fund, has 
identified  approximately  40  companies  in  the  current  portfolio  that  will  require  further 
investment rounds of above EUR 50 million euro, and this number will grow over time. 
The Commission proposal to increase the budget of the EIC by EUR 2.7 billion as part of 
the  mid-term  review  of  the  Multiannual  financial  framework  was  rejected  by  the  co-
legislators.  

Invest  EU  has  instruments  to  meet  the  needs  for  debt  financing,  but  not  direct  equity 
financing. The indirect equity financing managed by EIF supports the investment strategies 
of private fund managers, and therefore does not allow the EU to steer the strategy towards 
technologies  that  are  critical  for  economic  security  or  to  put  in  place  safeguards  in 
investment agreements or through the selection of co-investors to mitigate the risks of the 
technology  and  company  being  acquired  or  relocating.  Experience,  including  from  the 
European  Tech  Champions  Initiative  that  supports  larger  private  funds,  shows  that  the 
private fund managers limit their exposure to the higher risk, longer term investments in 
technologies  critical  for  economic  security  (e.g.  quantum,  semiconductors, AI,  biotech, 
space, etc).  

IPR  backed  financing  is  also  underdeveloped  in  Europe.  Startups  and  scaleups  that 
achieve not only successful protection but also successful valuation of their IPR rights, are 
considerably  more  likely  than  other  startups  and  scaleups  to  obtain  financing  from 
investors and are also more likely to successfully exit via an initial public offering or a sale 
to  another  company.  A  European  Union  Intellectual  Property  Office  (EUIPO)  survey 
revealed  that  only  25%  of  medium-sized  IPR  owners  had  had  their  intangible  assets 
professionally  valued.  This  figure  drops  even  lower  to  20%  for  micro  and  small-sized 
entities. Among  those  SMEs  that  owned  IPRs,  only  13%  had  attempted  to  use  them  to 
access finance.33 

State Aid rules 
Scaling up a startup requires significant investment in technology, marketing, and talent. 
However, public funding often focuses on early-stage startups, leaving scaleups without 
comparable support.34  

To prevent market distortions and/or a subsidies race in the internal market, the EU’s 
State aid framework sets rules on both the type and amount of financial assistance 
governments can provide to startups with varying thresholds depending on the aid 
category. The de minimis  rule allows Member States  to  support companies up to  EUR 
300,000 each over three years without conditions. Under the General  Block Exemption 

32 European Investment Bank – The scaleup gap – Financial market constraints holding back innovative firms in the EU 
33 EUIPO. Intellectual property scoreboard 2019. European Union Intellectual Property Office (EUIPO). Available at: 
euipo.europa.eu/ohimportal/en/web/observatory/sme-scoreboard 
34 EU Startup Nation Standard https://digital-strategy.ec.europa.eu/en/policies/startup-europe 

12 

 
 
 
 
Regulation (GBER), the aid intensity is capped at specific percentages of eligible costs or 
maximum  amounts  of  aid  per  project/per  undertaking,  meaning  startups  may  receive 
partial support for R&D, environmental projects, or regional development. Article 22 of 
GBER facilitates the granting of aid to startups in different forms and with few conditions 
(e.g.  up  to  EUR  500,000  in  grants  and  even  higher  amounts  for  companies  in  assisted 
regions or for innovative companies). Larger aid packages often require prior notification 
and approval from the European Commission. Large-scale investments in sectors such as 
deep tech, clean tech, and biotech can now, under the recently revised and new State aid 
frameworks, receive support based on the funding gap methodology thereby incentivising 
startups  to  undertake  such  large  investments.  However,  stakeholders  perceive  State  aid 
rules as presenting constraints that make EU-based startups less competitive compared to 
those in countries with more flexible funding mechanisms, pointing to the need for more 
information and training on State aid.35 

3.2. Key Barriers 

3.2.1 The structure of the European financial market and the limited role of institutional 
investors 
The small size of the EU VC market can be attributed to many factors, including both 
the  characteristics  of  the  European  financial  sector  and  to  European  household 
financial behaviour. The dominant form of financing in the EU is bank-based financing 
(such as loans), which are not suitable for high-growth companies. This results in capital 
markets remaining fragmented and underdeveloped. Bank assets in the EU totals to 300% 
of GDP, compared to the 85% in the US. 36 Furthermore, household financial assets (e.g., 
currency and deposits, insurance, private pensions, equity) amount to only 2.3 times the 
Union’s GDP, whereas the same figure in the US is more than 5 times US GDP.37   

Venture  and  growth  capital  funds,  as  key  financing  vehicles  for  EU  startups  and 
scaleups,  struggle  to  attract  capital  from  institutional  investors.  Between  2013  and 
2023, private long-term financial investors in the EU accounted for only 30% of the VC 
funding, compared to 72% in the US (Figure 6). The difference is particularly pronounced 
for pension funds (7% in the EU vs. 20% in the US).38  

Public  funding  is  a  major  component  of  the  financing  made  available  to  the  EU’s 
startups and scaleups, either directly or through funds of funds scaling up venture and 
growth capital funding. Between 2013 and 2023, public entities played a more prominent 
role in the EU, providing 31% of total VC raised, against the 4% reported in the US (Figure 
6).39 

35 European Commission – State Aid and Competition Policy https://competition-policy.ec.europa.eu/state-aid_en 
36  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
37  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
38  France  Digitale  (2024),  Unlocking  investments  for  competitiveness:  How  can  institutional  investors  boost  the 
European innovation ecosystem? 
39  IMF  (2024),  Stepping  Up  Venture  Capital  to  Finance  Innovation  in  Europe.  IMF  Working  Paper  No.  2024/146, 
https://ssrn.com/abstract=4904562  or http://dx.doi.org/10.5089/9798400282669.001  

13 

 
 
 
 
Figure 6. Source of VC funds by investor type (average % of total VC raised), 2013-
2023 

EU

US

30%

30%

17%

4%

7%

9%

31%

72%

Private long-term
financial investors

Family offices and
private individuals

Public entities

Other LPs

Source: IMF (2024). 

3.2.2. Market fragmentation and the role of foreign investors 
Another compounding factor is the high degree of fragmentation of the EU’s smaller 
capital  pools  across  national  borders.  Institutional  investors  in  the  EU  appear  to  be 
driven to some degree by a home-country bias when making investment decisions. This 
can be due to unfamiliarity with foreign VC firms or unwillingness to sustain the necessary 
screening  costs  and  due  diligence  practices.  40  This  fragmentation  further  concentrates 
already limited resources into national markets, thereby reducing the capital available for 
cross-border VC funds and making it harder for European tech companies to raise funds 
from larger investors. 

The level of cross-border investments remains low. Between 2007-2020, cross-border 
VC investments within Europe accounted on average for only 23.1% of VC inflows41. In 
2023, cross-border VC investments within Europe amounted to 3.6 billion, significantly 
below the size of domestic VC flows.42 Besides GDP, market capitalisation and distance, 
the quality of institutions and especially the degree of global financial integration do play 
a role in shaping cross-border VC flows.43 

Fragmentation  and  lower  growth  perspectives  push  innovative  companies  to  seek 
financing outside Europe. This tendency has important economic costs both in terms of 
entrepreneurial brain drain and missed opportunities for the local ecosystem. If on the one 
hand, firms relocating abroad can benefit from the opportunity to tap into a wider pool of 
capital, on the other hand their relocation reduces the potential positive spillovers for other 
companies in the ecosystem. 44 

Foreign  VC  investments  in  European-based  firms45,  especially  from  the  US,  have 
been  increasing  since  2016.  In  terms  of  number  of  deals,  the  participation  of  non-

2023 

40  IMF  (2024),  Stepping  Up  Venture  Capital  to  Finance  Innovation  in  Europe.  IMF  Working  Paper  No.  2024/146, 
https://ssrn.com/abstract=4904562  or http://dx.doi.org/10.5089/9798400282669.001  
41  Asdrubali  P.,  “Patterns  of  Cross-Border  Venture  Capital  Flows  in  Europe”,  DG  ECFIN  Discussion  Paper  195, 
November 
https://economy-finance.ec.europa.eu/publications/patterns-cross-border-venture-capital-flows-
europe_en  
42 InvestEurope (2023), Investing in Europe: Private Equity Activity in 2023. 
43  Asdrubali  P.,  “Patterns  of  Cross-Border  Venture  Capital  Flows  in  Europe”,  DG  ECFIN  Discussion  Paper  195, 
https://economy-finance.ec.europa.eu/publications/patterns-cross-border-venture-capital-flows-
November 
europe_en  
44  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
45 EU plus the UK. 

2023 

14 

 
 
 
 
 
European foreign investors increased from approximately 16.6% in 2008 to 23.4% in 2022. 
In terms of investment volume, foreign shares increased from 32.6% to 42.4% over the 
same period.46  

Furthermore, scaleup companies in the EU are more likely to relocate than the US 
and the UK scaleups. 15% scaleup companies founded in the EU have relocated, against 
the 9% observed in the US and the 12% in the UK. 47 While US scaleups tend to relocate 
mostly  within  the  US,  74%  of  the  relocation  involving  EU  companies  targeted  regions 
outside  the  Union.  48 Additionally,  between  2008  and  2021,  40  out  of  the  147  unicorns 
companies founded in Europe have relocated their headquarters abroad (mostly to the US), 
whereas the number of foreign scaleups deciding to move their operations in Europe is 
significantly limited49. This suggests that lower levels of VC finance in Europe are not only 
a result of smaller-sized VC market, but also reflect lower level of demand for this type of 
finance.50   

3.2.3. Limitation of exit possibilities 
The volume of exits in Europe has significantly grown in the last decade. The total 
value of Initial Public Offerings (IPOs) in Europe  has increased to USD 321 billion, as 
compared  to  the  USD  100  billion  reported  in  the  previous  decade.  Nevertheless,  exits 
remain primarily concentrated in a few countries.51 

Additionally,  the  presence  of  exit  routes  for  investors  in  the  EU  is  still  limited  as 
compared to the US. Public offering represents only 10% of these exist routes, against the 
29% of sale to another equity firm, or 28% of trade sale.52 In general, the EU only accounts 
for 11% of the global IPOs, as compared to 38% in the US or 18% in China.53￼54 This gap 
is  even  more  pronounced  when  considering  strategic  technologies,  such  as  those  in  the 
clean energy domain.55 

Over  the  past  decade,  around  130  European  companies  moved  to  the  US  stock 
market.56 Nevertheless, these companies account of only 2% of the total number of listed 
companies  in  Europe,  and  4%  of  the  total  value  of  European  stock  markets.  Most  of 
European companies, thus, decided to list domestically. 57  

46 G Testa, C Johanyák, N Zhen, R Compañó, What attracts foreign venture capital capitalists to invest in EU regions? 
2025 forthcoming 
47  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
48  EIB  (2024), The  scale-up  gap:  financial  market  constraints holding  back  innovative  firms  in  the European  Union, 
European Investment Bank, https://data.europa.eu/doi/10.2867/382579  
49 OECD (2023), “Grow and Go? Retaining Scale-ups in the Nordic Countries”, OECD Regional Development Papers, 
No. 51, OECD Publishing, Paris, https://doi.org/10.1787/9be5339d-en.  
50 Draghi (2024), The future of European competitiveness. 
51 Atomico (2024), State of the European Tech 2024. 
52 InvestEurope (2024). 
53 European Commission (2022), SWD(2022) 762 final. 
54 Letout, S. and Georgakaki, A., Role of corporate investors in the funding and growth of clean energy tech ventures, 
European Commission, Brussels, 2024, JRC135443. 

55 Letout, S. and Georgakaki, A., Role of corporate investors in the funding and growth of clean energy tech ventures, 
European Commission, Brussels, 2024, JRC135443,  https://publications.jrc.ec.europa.eu/repository/handle/JRC135443  
56 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 
57 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 

15 

 
 
 
Nearly 80% of the companies that move are typically global in nature and often from 
tech and biotech sectors. 58 As an example, half of the European companies that decided 
to go public in the US were biotech firms, while the IPOs of biotech companies in Europe 
accounted  for  only  4%.  This  suggests  that  Europe  is  losing  some  of  its  most  dynamic 
companies to the US. 59  

Nevertheless,  the  common  narrative  according  to  which  the  US  market  is  more 
attractive due to its higher valuations and degree of liquidity can be misleading. The 
valuation gap between Europe and US stock markets is currently over 30%.60 However, 
this apparent  premium  disappears once  adjusted  for the fact  that US  companies tend to 
have higher growth expectations and stronger profitability. The same applies to the gap in 
liquidity, once differences in market structure and trading data are accounted for. 61 This 
suggests  that  the  besides  the  US  pull,  the  real  challenge  for  Europe  remain  its  internal 
weaknesses, including the fragmentation of its capital and equity markets.  

3.2.4. Missing framework conditions to bolster intellectual property rights (IPR) backed finance 

Various barriers hamper startups and scaleups to obtain IPR backed finance. As a 
result, startups and scaleups across the EU face difficulties to use their IPR as a collateral 
to secure more financing from financial investors. IPR is generally very difficult to value 
and such value can oscillate, complicating its use by lenders. 

Unlike in the other parts of the world, there is a lack of public financial guarantees to 
banks and other financial institutions engaging in lending to startups that have no 
‘hard collateral’ to provide, because their assets are mostly intangible. There are no clear 
incentives or training for banks and other institutional investors to engage in IPR backed 
financing  in  line  with  sound  financial  management  principles.  There  is  no  trustworthy 
widely accepted approach for IPR valuation nor model templates on how to apply it. IPR 
valuation can be costly. Small companies make only limited use of reporting IPR in annual 
accounting / financial reports.  

58 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 
59 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis  of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 
60 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis  of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 
61 W Wright, J. Thornhill, C. Breen and M. Hames (2025). A reality check on international listings. Analysis  of UK and 
European  companies  that  have  moved  their  primary  listing  to  the  US  market  over  the  past  decade,  HSBC  Global 
Research. 

16 

 
 
 
 
4. FAST MARKET UPTAKE AND EXPANSION  

4.1. Current landscape and challenges 

European  startups  and  scaleups  play  a  crucial  role  in  driving  innovation  and 
economic growth. However, their ability to expand their customer base is often hindered 
by  structural  challenges,  making  it  difficult  to  scale  effectively  compared  to  their 
counterparts in the US or China.  

One  of  the  most  significant  hurdles  is  the  operational  readiness  of  potential 
customers, particularly in traditional industries. Many businesses lack the expertise or 
investment  capacity 
industrial 
modernisation has progressed unevenly across Europe, with certain regions facing greater 
difficulties in adapting to new technologies. Addressing these constraints is essential to 
ensuring  the  competitiveness  of  European  startups  and  fostering  a  dynamic  innovation 
ecosystem. 

innovative  solutions.  Additionally, 

integrate 

to 

At the same time, startups and scaleups in Europe also face challenges in accessing 
international  markets.  The  EU  SME  strategy  adopted  in  March  2020  underlined  the 
importance of harnessing the benefits  of global  markets. Accessing markets  outside  the 
EU, be it in countries with whom the EU has a trade agreement, countries associated to 
Horizon  Europe,  neighbouring  regions,  or  global  innovation  hubs,  comes  with  great 
opportunities  for  EU  startups  and  scaleups,  such  as  expanding  their  customer  base, 
diversifying  their sources of supply and thus  making  them less vulnerable to  economic 
shocks and more competitive in domestic and international markets alike.  

Access to international markets can be an enabler for startups to scaleup to become 
global players. The internationalisation of EU innovative companies in turn contributes to 
productivity gains and competitiveness. Nevertheless, the uptake of opportunities created 
by the EU’s trade agreements by startups and scaleups notably are not fully exploited and 
should be improved. 

Significant opportunities for startups and scaleups do exist in other global  players 
markets  such  as  the  US,  and  Latin America.  In  the  US,  European  startups  can  have 
access  to  a  wide  range  of  opportunities  due  to  the  country’s  large  consumer  base, 
innovation-driven  economy,  and  business-friendly  policies.  With  over  330  million 
consumers and a high  demand for cutting-edge  solutions,  the US provides an attractive 
environment  for  startups  across  industries  such  as  technology,  healthcare,  fintech,  and 
sustainability. SelectUSA attracts and helps foreign companies and investors enter the U.S. 
market. Latin America presents significant opportunities for European startups due to its 
large and rapidly growing digital economy, increasing demand for innovative solutions, 
and improving business environments. Other regions offering growing markets across 
different sectors are India and Canada. India has a large and rapidly growing market 
with increasing demand for innovative solutions in sectors like clean energy, health tech, 
AI, and deep tech. Canada, that recently became a Horizon associated country, would be a 
natural destination for turning Horizon Europe research output into business operations for 
the benefit of EU and Canadian startups alike. The Chinese market potentially offers huge 
opportunities for startups and scaleups to grow. Many European companies already operate 
there. But there are significant risks to be managed and pitfalls to be avoided. 

Important  opportunities  also  come  from  collaborations  with  corporates.  The 
collaboration  between  startups  and  corporates  is  a  critical  driver  of  innovation  and 

17 

 
 
economic  growth.  However,  in  Europe,  this  collaboration  remains  underdeveloped 
compared to regions like the US and Asia.  

Corporate partnerships are not merely a source of funding for startups but also play 
a  critical  role  in  facilitating  market  access,  establishing  credibility,  and  enabling 
scalable growth. According to a McKinsey survey conducted in the DACH region, 87% 
of  startups  perceive  corporates  as  a  key  channel  for  market  entry62.  An  equally  high 
percentage (87%) believe corporate partnerships act as a signal to investors and the market, 
while 79% consider corporates as potential future customers. Additionally, 58% of startups 
look  to  corporates  for  valuable  market  insights,  whereas  only  52%  prioritize  them  for 
financing.  Startups  tend  to  value  revenue  from  customers  over  grants,  demonstrating  a 
preference for sustainable business growth over reliance on external funding. 

Figure 7. Startups are Key for Corporate Innovation 

Source: McKinsey 2021: Startup-corporate collaboration: you can’t buy love 

Corporates,  on  the  other  hand,  stand  to  benefit  significantly  from  startup 
collaborations,  particularly  in  terms  of  innovation.  While  75%  of  corporates  and 
startups  acknowledge 
the  importance  of  cooperation,  72%  of  startups  express 
dissatisfaction with their corporate engagements. This disconnect is further exacerbated by 
the fact that fewer than 1% of startup projects submitted to corporates make it to market. 
One  major  hindrance  is  the  corporate  procurement  process,  which  is  often  not  startup-
friendly.63 The  risk  averse  nature  of  large  corporate  procurers  and  the  bureaucratic  and 
complex nature of these procedures makes it difficult for startups to access private-sector 
contracts, further limiting their growth potential. 

62 Henz, T., & Sibanda, T. (2020). You can't buy love: Reimagining corporate–startup partnerships in the DACH region. 
McKinsey & Company. 

63  Mind  the  Bridge.  (2024).  The  Open  Innovation  Imperative: Adapting  to Stay  Competitive  – Evolve  or Be  Extinct 
Season 2024 

18 

 
 
 
 
 
 
 
Collaboration between startups and established companies is crucial for enhancing 
the  competitiveness  of  existing  European  businesses  in  a  rapidly  evolving  global 
market. Startups bring fresh ideas, innovative technologies, and agile business models that 
help corporates stay ahead of industry trends and adapt to changing consumer demands. 
Given that European companies are growing more slowly than their counterparts in North 
America and Asia Pacific, fostering closer ties with startups is essential to drive economic 
growth,  create  jobs,  and  ensure  long-term  sustainability  in  a  highly  competitive  global 
economy.64 

Despite the growing startup ecosystem in Europe, the engagement between startups 
and corporates is limited, hindering the potential for mutual growth and innovation. 
Despite some improvements in the number of corporate-startup engagements, the quality 
and effectiveness of these partnerships remain suboptimal. Various reports highlight the 
underlying  issues  contributing  to  this  gap.  Only  20%  of  European  corporates  actively 
engage with startups, in stark contrast to 50% in the US.65 Moreover, European corporate 
venture capital (CVC) investment accounts for only 15% of total venture capital funding, 
compared  to  30%  in  the  US.66  Many  European  startups,  recognizing  the  limited 
engagement  from  their  local  corporate  landscape,  seek  partnerships  outside  the  EU, 
particularly with US and Asian companies.67 68 

Further compounding this issue is the investment imbalance, where EU corporates 
allocate more funds to US startups than to European startups.69 Structural barriers also 
play a role, as Europe lacks a robust base of emerging corporates that are naturally inclined 
to collaborate with startups.70 71 

The  development  of  a  European  GovTech72  Single  Market,  where  European  GovTech 
startups and scaleups can engage in a technology-based cooperation with the public sector, 
represents  a  significant  opportunity  to  support  the  digital  transformation  of  the  public 
sector.  Influencing  factors,  common  requirements  and  recommendations  supporting  the 
development  of  cross-border,  interoperable  GovTech  practices  in  Europe  have  been 
identified recently by a JRC study.73 

Public  procurement  represents  another  important  tool  to  drive  innovation  and 
market  growth  for  startups  and  scaleups.  It  has  increasingly  been  recognized  as  a 
strategic instrument to stimulate innovation and accelerate market access for startups and 
scaleups across the European Union. As public procurement spending amounts to 17%-
19%  of  GDP74  (€3000  Bn),  public  procurement  of  R&D  and  public  procurement  of 

64 Accenture, 2023 
65 SEP, 2022 
66 Dealroom, 2022 
67 Tech.eu, 2021 
68 Letout, S. and Georgakaki, A., Role of corporate investors in the funding and growth of clean energy tech ventures, 
European Commission, Brussels, 2024, JRC135443. 

69 Fako, (2024). 
70 Draghi, (2024). 
71 Letout, S. and Georgakaki, A., Role of corporate investors in the funding and growth of clean energy tech ventures, 
European Commission, Brussels, 2024, JRC135443. 

72 ”GovTech” refers to technology-based cooperation between public and private sector actors supporting public sector 
digital transformation. This is defined in Article 2 of the Regulation (EU) 2024/903 (Interoperable Europe Act), which 
provides a gender gaplegislative base for embedding new GovTech activities and scaling them across Member States. 

73 https://publications.jrc.ec.europa.eu/repository/handle/JRC139723 
74 This includes all public procurements, both those by public authorities, utilities and defence procurers. 

19 

 
 
 
 
 
innovative solutions (“innovation procurement”) has great potential to stimulate economic 
growth  and  strengthen  EU  competitiveness.  By  modernising  public  services,  it  can 
improve the quality and efficiency of public services while also boosting the growth of EU 
industry. It can also help combat relocation of companies to other parts of the world and 
help stimulate more private investment in research and innovation in Europe by bringing 
the necessary market demand to pull research out of the lab into the market. By acting as 
an  early  and  reliable  buyer,  public  entities  can  de-risk  innovative  ventures,  encourage 
technological breakthroughs, and promote competitive ecosystems. 

Public  procurement  remains  an  underused  tool  for  supporting  startups  and  scaleups  in 
Europe. Innovation procurement accounts for just 10% of total public procurement across 
the EU—well below levels in the United States (20%) and South Korea (25%). Particularly 
limited is  the EU’s investment  in  R&D procurement (0.5% compared to South  Korea’s 
5%),  reducing  opportunities  for  emerging  firms  to  scale  through  public  contracts  and 
pushing  many  to  seek  opportunities  in  third  countries.  The  underperformance  and 
underutilisation of EU innovation procurement could also push EU startups and scaleups 
participate in innovation procurement in third countries rather than selling their products 
on the EU market.  

However,  despite  its  transformative  potential,  existing  procurement  frameworks  often 
remain  overly  rigid,  risk-averse,  and  burdensome,  posing  significant  barriers  to  the 
participation  of  emerging  firms—particularly  those  lacking  administrative  capacity  or 
prior public sector experience.75 76 Recent research highlights issues such as a lack of pre-
commercial  procurement  schemes,  insufficient  use  of  innovation-friendly  criteria,  and 
limited procurement literacy among startups as critical bottlenecks.77 78 79 80 81 82 Following 
the  Draghi,  Letta  and  Court  of Auditors  reports,  a  group  of  experts  appointed  by  the 
Commission has analysed the barriers for companies to bring their innovative solutions to 
the  public  procurement  market  and  has  developed  specific  recommendations  for  EU 
action,  based  on  analysis  of  how  EU  Member  States  and  other  parts  of  the  world  are 
stimulating innovation procurement83. 

Access to market for the products and services developed by startups and scaleups 
might  also  be  affected  by  anticompetitive  mergers  or  acquisitions.  The  risk  that  a 
merger or an acquisition reduces competition, and that innovative products and services 
are  discontinued,  thereby  negatively  impacting  innovation  and  consumers  in  general  is 

75 Quas, A., Mason, C., Compañó, R., & Testa, G. (2022). The scale-up finance gap in the EU: Causes, consequences, 
and policy solutions. European Management Journal.  
https://www.sciencedirect.com/science/article/pii/S0263237322000950 
76 Mansi, E., & Manta, O. (2024). The Impact of Globalization on Innovative Public Procurement: Challenges and 
Opportunities. Administrative Sciences, 14(4), 80.  https://www.mdpi.com/2076-3387/14/4/80 
77 Zabala-Iturriagagoitia, J.M. (2022). Fostering regional innovation, entrepreneurship and growth through public 
procurement. Small Business Economics.  https://link.springer.com/article/10.1007/s11187-021-00466-9 
78 Pardo-del-Val, M., & Cerver-Romero, E. (2024). From startup to scaleup: Public policies for emerging 
entrepreneurial ecosystems. Journal of the Knowledge Economy.  https://link.springer.com/article/10.1007/s13132-
024-02175-6 
79 De Coninck, B., Viaene, S., & Leysen, J. (2018). Public procurement of innovation through increased startup 
participation: The case of Digipolis.  https://repository.vlerick.com/handle/20.500.12127/5896 
80 Reypens, C., Delanote, J., & Rückert, D. (2020). From Starting to Scaling: Supporting European Startups and 
Scaleups. Nesta Report.  https://media.nesta.org.uk/documents/From_Starting_to_Scaling.pdf 
81 Van Winden, W., & Carvalho, L. (2019). Intermediation in public procurement of innovation: Amsterdam's startup-
in-residence programme. Research Policy, 48(6), 1331–1344. 
https://www.sciencedirect.com/science/article/pii/S0048733319301040 
82 Merisalo, M., Pihlajamaa, M., & Valovirta, V. (2023). From scattered benefits to societal impacts: scaling solutions 
of public procurement of innovation. SSRN.  https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4508704 
83 Bringing down legal barriers for innovation procurement - European Commission: https://research-and-
innovation.ec.europa.eu/strategy/support-policy-making/shaping-eu-research-and-innovation-policy/new-european-
innovation-agenda/innovation-procurement/eu-policy-initiatives-innovation-procurement/bringing-down-legal-
barriers-innovation-procurement_en 

20 

 
 
 
well-documented.  While  merger  control  was  traditionally  focusing  on  product/price 
competition between rivals, ongoing research, recent case practice has focused on other 
parameter  of  competition  including  quality  and  innovation.  Retrospective  analysis, 
continue to highlight new instances involving loss of innovation competition due to merger 
and acquisitions. As a part of these concerns, a “killer acquisition” is considered to take 
place when an incumbent firm acquires an innovative, often nascent, rival with the specific 
purpose  of  terminating  its  innovation  activity  and  therefore  to  pre-empt  future 
competition.84  

In a broader sense, killer acquisitions might also include acquisitions where the main 
purpose of the acquirer is not to terminate the activity of the acquired firm, but rather 
to control it (for example, by changing the scope, changing the timeline, etc). The ultimate 
goal would be to reduce competition constrains of the acquired firm.85  

While the killer acquisitions phenomenon might be relatively limited – a handful of 
cases  per  year  –  its  impact  on  competition  is  rather  significant.  Indeed,  while  the 
materialisation of a harm to competition will depend on a number of factors, notably the 
presence or not of alternative innovative firms on the market, killer acquisition may lead 
to reinforcing the incumbent company in a way that will be unmatchable by other players 
active  on  the  market,  leading  to  monopoly  or  very  strong  dominance  of  one  or  several 
players.  

Recent  studies  estimate  that  killer  acquisitions  occur  in  relatively  sporadic,  yet  not 
negligible,  number  of  instances.  For  example,  Cunningham  et  al.  estimates  that  in  the 
pharma sector 5.3% to 7.4% of all acquisitions considered in its study may relate to killer 
acquisitions. A study  recently published by the European Commission  considered more 
than  240  transactions  in  the  pharma  sector  occurring  between  2014  and  2018,  and 
concluded that 89 transactions, or around 18 per year on average, would ‘deserve further 
scrutiny’ without being able to demonstrate (due to the lack of evidence publicly available) 
if any of these transactions classifies as a killer acquisition. 

4.2. Key Barriers 

4.2.1. Infrastructure and market demand constraints  

Outdated or unevenly developed infrastructure in Europe limits startups' ability to 
deliver  innovative  solutions  at  scale.  OECD  and  EIB  reports86  highlight  that  certain 
industrial  clusters  in  Europe,  particularly  in  manufacturing-intensive  sectors,  face 
modernization gaps.  Legacy facilities reduce efficiency and hinder the adoption of new 
production technologies. Additionally, the Digital Economy and Society Index (DESI)87 
highlights disparities in high-speed broadband availability, notably in rural areas, affecting 
startups dependent on cloud computing, AI, and digital services. 

Gaps  in  infrastructure  investment  hinder  industrial  competitiveness,  especially  in 
strategic sectors with funding needs exceeding available financing.88 As an example, 
the  AIDRES  project89  underscores  that  decarbonization  efforts  require  substantial 

84 Cunningham, C., Ederer, F., & Ma, S. (2021). Killer acquisitions. Journal of Political Economy, 129(3), 649-702. 
85  OECD  (2020),  Start-ups,  Killer Acquisitions  and  Merger  Control,  www.oecd.org/daf/competition/start-ups-killer-
acquisitions-and-merger-control-2020.pdf  
86 European Investment Bank (EIB) – Scale-up Gap Report 
https://digital-strategy.ec.europa.eu/en/library/scaleup-gap-report  
87 Digital Economy and Society Index (DESI) – European Commission 
https://digital-strategy.ec.europa.eu/en/policies/desi  
88 Reports from the European Investment Bank (EIB) 
89 AIDRES Final Report – Assessment of renewable energy demand in industrial decarbonization 
https://op.europa.eu/en/publication-detail/-/publication/  

21 

 
 
 
investments  in  renewable  energy  and  industrial  adaptation.  For  startups  in  cleantech, 
manufacturing, and energy solutions, infrastructure constraints remain a limiting factor. 

As  the  importance  of AI  continues  to  grow,  startups  delivering AI  models  depend 
greatly on access to massive compute power. In this context, the Commission announced 
in December 2025 the creation of 13 AI Factories, with funding of EUR 10 billion, co-
financed  by  the  EU  and  the  Member  States.  The  AI  Factories  upgrade  EuroHPC 
supercomputers to deliver computing capacity for AI. The AI Factories will be accessible 
to  European  startups  to  support  them  in  the  training  and  large-scale  development  of 
general-purpose and trustworthy AI models. These AI Factories will be reinforced by AI 
Gigafactories, announced by President von der Leyen at the AI Action Summit in Paris in 
February 2025. The ambition and direction of these initiatives were further consolidated 
in the newly adopted AI Continent Communication, which outlines a comprehensive vision 
for Europe’s leadership in AI, including actions to support startups  across the entire AI 
value chain. Moreover, RAISE (the European AI Research Council) will support excellent 
laboratories at the cutting edge of AI science as a basis for connecting with the deep-tech 
ecosystem  to  guide  startups.  Despite  the  scale  of  these  public  investments,  these 
infrastructures do not approach the compute power provided by hyperscalers in the US.  

Furthermore,  many  industries  remain  cautious  in  adopting  new  technologies, 
creating  significant  barriers  to  market  access  for  startups.  The  European 
Commission’s SME Strategy highlights pronounced sector-specific readiness gaps, with 
uneven progress  in digital transformation across  industries. This  affects  particularly  the 
adoption  of  technologies  related  to  AI,  automation,  and  data-driven  processes.  The 
Commission has launched a Europe wide network of over 150 European Digital Innovation 
Hubs to foster adoption of digital technology by SMEs90. 

This  lag  in  technological  readiness,  combined  with  slow  adoption  cycles  where 
customers  demand  extended  validation  periods,  make  sales  timelines  longer  and 
creates delays in revenue generation for startups. Traditional industrial players often 
prefer established suppliers, perceiving startups as riskier partners due to concerns about 
implementation  challenges  and  long-term  continuity.  As  a  result,  startups  frequently 
struggle  to  break  into  entrenched  industrial  networks,  limiting  their  ability  to  scale 
efficiently. 

Moreover,  weak  collaboration  between  startups  and  established  firms  (see  section 
4.2.3)  compounds  these  market  entry  challenges.  Findings  from  the  Beyond 
Fragmentation91 study emphasize the lack of robust engagement mechanisms necessary to 
foster  co-development  and  innovation  between  the  two  groups.  Startups  attempting  to 
integrate into industrial value chains often encounter difficulties meeting complex supply 
chain standards, certifications, and regulatory requirements, which are rarely designed with 
early-stage ventures  in  mind. While models like innovation  labs, co-creation platforms, 
and  technology  partnerships  offer  potential  pathways  for  collaboration,  their  adoption 
remains  fragmented  and  underdeveloped  across  many  sectors.  Strengthening  these 
structured integration models is essential for enabling startups to effectively contribute to 
industrial transformation, while overcoming systemic barriers to growth. 

4.2.2. Limited access to non-EU markets 
Innovative companies often  lack awareness  about  the  existence and benefits  of the 
trade agreements the European Union has in force with over 75 partners. EU trade 

90  European  Commission:  Joint  Research  Centre,  De  Nigris,  S.,  Kalpaka, A.  and  Nepelski,  D.,  Characteristics  and 
regional  coverage  of  the  European  Digital  Innovation  Hubs  network,  Publications  Office  of  the  European  Union, 
Luxembourg, 2023, doi:10.2760/590526, JRC134620. 
91 https://digital-strategy.ec.europa.eu/en/library/beyond-fragmentation-connecting-europes-startup-ecosystems-growth-
and-innovation 

22 

 
 
 
agreements  eliminate  tariff  and  non-tariff  barriers  and  set  a  predictable,  comprehensive 
regulatory framework for our startups. They give preferential access to new markets and 
make our startups and scaleups more competitive thanks to simplified technical, legal and 
customs procedures. In addition, EU trade agreements help startups and scaleups become 
more resilient as they will be able to diversify and secure their sources of supply. EU trade 
agreements also set up institutional mechanisms (such as sectoral groups or committees) 
to  detect  problems  in  the  implementation  of  the  agreements  and  discuss  solutions. 
However, despite continuous and increasing efforts by the Commission, awareness levels 
about  EU  trade  agreements,  remain  relatively  low  among  small  companies,  including 
startups  and  scaleups.  This  results  in  missed  opportunities  twofold:  on  the  one  hand 
startups  and  scaleups  miss  on  the  opportunity  to  grow  their  business  on  international 
markets, become more competitive and diversify their sources of supply; on the other hand, 
data shows that companies trading with such trading partners do not always make use of 
the  preferential  tariffs,  thus  missing  on  duty  savings.  For  example,  thanks  to  tariff 
elimination under trade agreements, in 2023, EU exporters saved around 650 million euro 
(duty savings) when exporting to Canada whereas around 365 million euros represented 
foregone duty savings. For UK, in 2023, the figures were around 7.3 billion euros (duty 
savings) and 563 million (duty foregone) respectively.92 

The  lack  of  adequate  intellectual  property  (IP)  protection  poses  a  significant 
challenge  for  EU  startups  seeking  to  expand  internationally.  Without  adequate 
preparation,  legal  advice,  and  institutional  support,  these  companies  risk  losing  their 
proprietary  knowledge  and  technological  edge  to  non-EU  competitors.  In  some  third 
markets, particularly China, weak enforcement of IP protection remains a concern despite 
formal regulations meeting international standards. This is often attributed to vague legal 
definitions, inconsistent implementation, and practices such as forced technology transfer 
(FTT),  limitations on transferring IP back to EU headquarters, and insufficient protection 
of trade secrets. 

In other regions—such as Africa, the Mediterranean, and Latin America—IP-related risks 
are  generally  lower  but  remain  persistent.  To  improve  conditions  for  innovation  and 
technology  deployment  in  these  regions,  and  particularly  to  support  EU  startups  and 
technology  providers engaging  internationally, further efforts  are needed to: a) promote 
voluntary,  mutually  agreed  technology  transfer;  b)  strengthen  local  IP  governance  and 
enforcement frameworks; c) support universities and research centres in these regions in 
developing  sound  IP  policies;  and  d)  facilitate  market  uptake  of  innovative  solutions 
through  joint  initiatives  in  areas  such  as  logistics,  renewable  energy,  sustainable 
agriculture, circular economy, health technologies, and green hydrogen. 

4.2.3. Lack of collaborations between startups and corporates 
One of the primary barriers to effective collaboration is the lack of engagement from 
top  executives  (CEOs,  Boards)  in  corporates.  Without  strong  leadership  support, 
initiatives to work with startups often lack the necessary resources and strategic focus. This 
is compounded by the fact that many corporates do not have dedicated open innovation 
units, or these units are not directly reporting to the CEO, leading to a disconnect between 
innovation efforts and corporate strategy. 

Additionally,  cultural  differences  between  startups  and  corporates  often  lead  to 
frustration and misalignment. Startups operate in a fast-paced, risk-taking environment, 
while  corporates  typically  seek  short-term,  low-risk  solutions.  This  mismatch  in 

92 Report on EU trade policy's implementation and enforcement (see further resources: preference utilisation and duty 
savings on EU exports)   

23 

 
 
 
  
expectations and working styles results  in  a low  success  rate for collaborative projects. 
According to McKinsey, less than 1% of startup projects submitted to corporates make it 
to the market, further discouraging engagement. 

Lack  of  innovation  incentives  within  corporates  also  hinders  their  willingness  to 
engage  with  startup  companies.  Corporates  often  lack  internal  incentives  to  drive 
innovation,  particularly  within  business  and  procurement  units.  Private  procurement 
processes are notoriously difficult for startups to navigate, with high initial qualification 
efforts and scepticism about the reliability of startups. Additionally, corporate innovation 
departments are frequently disconnected from procurement departments, creating further 
barriers to collaboration. 

In this regard, the time required to progress from initial contact to a proof-of-concept 
(PoC) and ultimately to full-scale implementation poses a critical barrier to startup-
corporate or startup-public sector collaborations. Studies have found that on average, 
it  takes  6  months  to  develop  a  PoC,  and  a  further  6  to  18  months  to  move  into  full 
implementation,  particularly  within  large  organizations  and  public  institutions.  This 
elongated timeline is problematic for startups, which typically operate under tight resource 
constraints and require rapid validation and revenue generation to survive.93 94  

Furthermore, procurement processes present another significant challenge. Startups 
face  excessive  barriers  when  trying  to  qualify  for  corporate  procurement,  as  the  initial 
effort  required  is  often  too  high  for  small  companies  to  sustain.  In  addition,  the 
misalignment in expectations and timelines between corporates and startups exacerbates 
the  issue.  Startups  typically  need  rapid  implementation  to  survive,  whereas  corporate 
decision-making and procurement cycles are notoriously slow.  

4.2.4. Limited access to innovation procurement 
A major reason for the slow uptake of innovation procurement in the public sector in 
Europe is the lack of strategic planning. Other parts of the world have clear strategic 
plans, often with mandatory targets, that mobilise innovation procurement including for 
specific  strategic  technologies.  Anchoring  innovation  procurement  in  R&I  policies, 
including  those  for  strategic  technologies,  is  therefore  key  for  Europe  to  compete  with 
other leading economies in the world. However, the 2015 ERAC advisory committee of 
the European Council’s  opinion95 to create EU and national action plans for innovation 
procurement has not been fully implemented yet. EU wide benchmarking also shows that 
research and innovation program support for innovation procurement is growing but still 
limited  and  only  few  Member  States  have  incorporated  innovation  procurement  as  a 
strategic objective in their R&I policies for strategic technologies. 

93 Onetti, A. (2019). Turning open innovation into practice: Trends in European corporates. Journal of Business Strategy. 
94 Haarmann, L., Machon, F., Rabe, M., & Asmar, L. (2023). Venture Client Model: A Systematic Literature Review. 
Proceedings of the European Conference on Innovation. 
95ERAC  Opinion  on  Innovation  Procurement,  June  2015:  https://data.consilium.europa.eu/doc/document/ST-1209-
2015-INIT/en/pdf 

24 

 
 
 
A lack of financial incentives for public buyers is also a reason that is holding back 
innovation  procurement  in  Europe.  Existing  solutions  are  typically  cheaper  than 
innovative ones, as the latter are not produced at large scale yet. 96 97 98 99 100 101 

Furthermore,  procurement  procedures  frequently  do  not  accommodate  emerging 
technologies, leading to exclusionary tender conditions that reinforce the status quo. 

Overspecification in tender documents remains a significant barrier to innovation. Public 
buyers  often  reuse  specifications  from  previous  procurements,  which  tend  to  favour 
established solutions. By prescribing specific outcomes rather than defining the problem 
to be solved, such practices limit the ability of suppliers with innovative alternatives to 
compete. 

Additionally,  public  procurement  is  often  highly  decentralized,  with  different 
agencies  and  regions  setting  their  own  requirements.  The  EU  public  procurement 
directives  are  also  transposed  in  different  ways  across  the  27  EU  Member  States.  This 
fragmentation  makes  it  difficult  for  startups  to  scale  solutions  across  different  markets, 
sectors and borders.102 103 104 105 

Identifying innovation procurement opportunities remains challenging for innovative 
companies.  Although  public  buyers  can  flag  relevant 
tenders  as  “innovation 
procurements,”  this  option  is  underused  in  practice,  making  it  particularly  difficult  for 
smaller firms  to  navigate the vast  volume of annual  tender notices.  Public buyers often 
design  their  calls  for  tenders  without  fully  exploring  market  capabilities,  particularly 
regarding innovative solutions.  

EU  procurement  rules  enable  preliminary  market  consultation106  to  assess  available 
options before drafting tenders, yet this practice remains underutilized. As a result, tender 
specifications tend to be highly prescriptive, limiting opportunities for novel approaches. 
While  direct  interactions  with  individual  bidders  are  regulated  to  ensure  fairness  and 

96 Edler, J., & Georghiou, L. (2007). Public procurement and innovation—Resurrecting the demand side. 
Research Policy, 36(7), 949–963. 

97 Georghiou, L., Edler, J., Uyarra, E., & Yeow, J. (2014). Policy instruments for public procurement of innovation: 
Choice, design and assessment. Technological Forecasting and Social Change, 86, 1–12. 

98 Manika, S. (2020). Mechanisms for innovative-driven solutions in European smart cities. Smart Cities, 3(2), 183–
199. 

99  Uyarra, E.,  Edler,  J.,  Garcia-Estevez,  J.,  Georghiou,  L.,  & Yeow,  J.  (2014).  Barriers to  innovation  through public 
procurement: A supplier perspective. Technovation, 34(10), 631–645. 

100 Iossa, E., Biagi, F., & Valbonesi, P. (2018). Pre-commercial procurement, procurement of innovative solutions and 
innovation partnerships in the EU: Rationale and strategy. Economics of Innovation and New Technology, 28(5), 463–
484. 

101 Suresh, K. (2022). Analysing Incentive Issues and Failures in Innovation Procurement. SSRN Electronic Journal. 

102  L.  Rubini, M. Andov,  and A.  Biondi,  Regulating  for  a Sustainable  and  Resilient  Single Market:  Challenges  and 
Reforms in the Areas of State Aid, Competition, and Public Procurement Law (Brussels: European Trade Union Institute, 
2023) 

103 M. Andhov, A. Biondi, and L. Rubini, “Regulating for a Sustainable and Resilient Single Market: Challenges and 
Reforms in the Areas of State Aid, Competition, and Public Procurement Law,” ETUI Research Paper (2023) 

104 P. C. Gomes, EU Public Procurement and Innovation: The Innovation Partnership Procedure and Harmonization 
Challenges (Cheltenham: Edward Elgar Publishing, 2021) 

105 G. M. Racca and C. R. Yukins, eds., Joint Public Procurement and Innovation: Lessons Across Borders (Cheltenham: 
Edward Elgar Publishing, 2020) 

106 Article 40 of Directive 2014/24/EU 

25 

 
 
 
transparency,  broader  engagement  with  the  innovation  ecosystem—including  research 
institutions,  industry  stakeholders,  and  networks—is  essential.  Strengthening  the  use  of 
preliminary  market  consultations  that  engage  all  these  actors  would  help  public  buyers 
identify emerging technologies, leverage procurement (i.e. specify the problem that needs 
to be solved and not the solution) and refine procurement strategies to maximize value and 
impact.  

Thus, public buyers often prioritise vendors with proven track records to minimize 
perceived  risks.  Startups  and  scaleups,  and  more  specifically  European  Startups  and 
scaleups,  struggle  to  enter  public  procurement  markets  due  to  a  strong  preference  for 
established  firms  that  can  show  prior  customer  references,  even  when  prior  customer 
references on existing solutions do not provide any guarantees for being  able to deliver 
totally  new  innovative  solutions.  This  results  in  limited  competition  and  a  lack  of 
opportunity for newer, innovative companies. 

Public procurement frameworks tend to focus on short-term cost savings rather than 
long-term value. This disadvantages startups offering innovative solutions that may have 
higher  initial  costs  but  provide  greater  long-term  benefits  in  terms  of  sustainability, 
efficiency, or improved service quality. The emphasis on cost over quality often results in 
suboptimal  procurement  outcomes  and  discourages 
innovation. 
Furthermore, startups  and scaleups often struggle with the financial requirements 
associated  with  public  procurement.  Late  payments,  high  upfront  costs  due  to 
underutilisation 
indemnity 
guarantees/insurances  create  liquidity  challenges.  Many  small  companies  are  unable  to 
participate  in  tenders  simply  because  they  cannot  afford  to  cover  the  costs  of  project 
execution while awaiting payments. Additionally, public authorities often demonstrate a 
preference for companies with a stable turnover for several years without allowing startups 
to prove their financial capacity through other ways (e.g. proof of venture capital or bank 
investments). This favours the selection of well-established suppliers, making it difficult 
for new entrants to secure contracts. 

pre-financing, 

investment 

excessive 

demands 

and 

for 

of 

in 

The widespread use of static contracts in public procurement limits innovation during 
contract  execution.  Suppliers  are  typically  required  to  deliver  the  originally  agreed 
solution for the full contract term, even in multi-year agreements, leaving little room to 
integrate  technological  improvements  or  cost-saving  innovations.  Value  engineering 
clauses—which allow updates to solutions and incentivise continuous improvement—are 
commonly used in other parts of the world but remain underutilised in the EU. 

Intellectual property rights pose a significant challenge for both startups and public buyers. 
Frequently, procurement contracts oblige companies to fully transfer their IP rights. While 
there are specific cases where such a requirement is warranted-for instance, when open 
access  obligations  mandate 
the  publication  of  procurement  results,  or  where 
commercialisation is restricted due to security, confidentiality, or similar considerations-
these instances are relatively rare. 

In most situations, however, there is little justification for requiring suppliers to relinquish 
all IP rights. This practice can deter startups from engaging in public procurement, as it 
limits  their  ability  to  safeguard  and  commercialise  their  innovative  solutions.  Such 
requirements  can  discourage  startups  from  participating  in  public  procurement,  as  they 
limit the ability to protect and commercialise their innovations. At the same time, public 
authorities  must  ensure  that  procured  solutions  remain  adaptable  over  time.  Without 
owning the IP, they may fear becoming dependent on the original supplier for updates or 
maintenance—commonly referred to as vendor lock-in. 

26 

 
 
Limited access to innovation-driven public procurement is closely linked to the lack 
of testing opportunities for new solutions before purchasing. Public buyers often rely 
on traditional providers because they lack opportunities to test innovative solutions from 
new suppliers. Without  proper testing  frameworks, they face uncertainty and risk when 
considering  alternatives,  leading  them  to  stick  with  familiar  vendors.  This  limits 
competition,  innovation,  and  cost-efficiency,  as  promising  new  solutions  are  often 
overlooked.  

27 

 
 
 
 
 
 
 
 
 
 
 
5. SUPPORT FOR THE BEST TALENT IN EUROPE 

5.1. Current landscape and challenges 
European companies are facing significant skills shortages, similar to other advanced 
economies.  Skills  shortages  represent  a  main  problem  for  the  smallest  to  mid-sized 
companies in the EU, being identified as such by 53% of micro companies, 65% of small 
companies and 68% of medium-sized companies.107 

Figure 13. Eurobarometer results  

Three quarters (74%) of SMEs in Europe say they face skills shortages for at least one job 
role  in  their  company. Also,  nearly  4  in  5  companies  say  in  the  survey  it  is  generally 
difficult for them to find workers with the right skills, and more than half of them (53%) 
find it difficult to retain skill.108 

Figure 14. Difficulties in staff recruitment for SMEs – Eurobarometer survey 

The  lack  of  appropriate  workforce  skills  weighs  on  companies’  performance  and 
ability  to  invest. According  to  an  EIB  survey,  the  inability  to  recruit  an  appropriately 

107 Flash Eurobarometer 537, SMEs and skills shortages, November 2023 

108 Flash Eurobarometer 529, European Year of Skills: Skills shortages, recruitment and retention strategies in small 
and medium-sized enterprises, Septe,ber 2023 

28 

 
 
 
 
 
skilled workforce has ranked among the most important obstacles to long-term investment 
(81%),  just  after  high  energy  costs,  and  before  uncertainty  concerning  the  future. 
Improving the supply of skills among the workforce could unlock long-term investment 
and help to promote the EU’s overall competitiveness. 109 

Available  human  capital  with  STEM  skills  applicable  to  development  and 
deployment  of  innovative  technologies  is  of  high  quality  but  limited  quantity 
compared to other blocs. Talent is in fact more limited with the EU, with only 203 ICT 
graduates per million habitants, compared to 335 per million in the US. Similarly, the EU 
has only 845 STEM graduates per million inhabitants per year compared to 1,106 in the 
US110 111 . 

Challenges persist with remote cross-border work in Europe. 59% of startups across 
Europe have distributed teams, a percentage that goes up to 78% for the engineering teams. 
112  While  remote  cross-border  work  has  become  typical  feature  for  tech  startups,  it 
furthered as a mainstream trend during and following the COVID 19 pandemic. This new 
model of working prevents regional brain drain and enables innovative startups to tap into 
the wide pool  of European talents,  while minimizing  costs and offering attractive work 
conditions. At  the  same  time,  remote  cross  border  work  creates  significant  challenges 
ranging from healthcare, social security. 

The EU is experiencing brain drain as talented individuals leave for  other non-EU 
destinations  offering  more  and  better  employment  opportunities.  Attracting  and 
retaining talents is critical for Europe's economic resilience, innovation capacity, strategic 
independence, and societal welfare. In the next decade, Europe may face highly skilled 
workers  shortages,  if  it  does  not  create  a  favourable  environment  for  attracting  and 
retaining talents.  

The EU fails to attract highly skilled migrants from abroad. In 2022, 3.5 million first-
time residence permits were issued in the EU, 1.2 million of which were for employment 
purposes. One of the ways for highly qualified workers from outside the EU to live and 
work in an EU country is to obtain an EU Blue Card. Across the EU, the total number of 
EU Blue Cards granted to non-EU citizens rose from 24,305 in 2017 to 52,127 in 2019. It 
then fell to 50,234 in 2020 and increased again to 67,730 in 2021 (by more than 35%) and 
to 81,851 in 2022 (by more than 21%). The majority of EU Blue Cards were issued in four 
Member States: Germany (63,242, 77.3% of the total), Poland (4,831, 6.0 %), Lithuania 
(3,924 or 4.8 %) and France (3,876, 4.7 %). As part of the November 2023 Skills and Talent 
Mobility  Package,  the  Commission  put  forward  a  set  of  measures  to  attract,  retain  and 
maximize foreign  talent, notably  a proposal  for  a Regulation  establishing  an EU Talent 
Pool as well as a Recommendation on the recognition of qualifications of third-country 
nationals,  which  sets  out  additional  measures  to  reduce  the  barriers  to  international 
recruitment and to ensure that third-country nationals can make full use of their skills and 
qualifications in Europe.113 

Europe  has  become  one  of  the  important  exporters  of  talent  and  is  struggling  to 
attract  and  retain  talent  in  highly  skilled  occupations.  Migration  (both  inward  and 

109 Draghi, (2024). 

110 European Commission. (2022). Digital Economy and Society Index (DESI) 2022 

111 OECD. (2022). Education at a Glance 2022: OECD Indicators 

112 Sequoia’s interactive guide to Europe 'size technical talent (2024) 

113 Draghi, (2024). 

29 

 
 
 
outward) has a significant impact on the size, composition and skills of the EU’s workforce, 
and  as  such  it  has  been  an  important  factor  in  reducing  labour  shortages. And  whereas 
migrant workers are almost 9 percentage points more likely to work in occupations with 
persistent shortages than workers born in the EU, currently these workers are primarily 
employed  in  low-skilled  occupations. The  tech  talents  sector  is  particularly  vulnerable, 
with the latest figures showing negative net migration for this segment114 

The European Migration Network (EMN), in collaboration with the OECD, has compiled 
an  overview  of  innovative  approaches  taken  by  21  EMN  Member  Countries  to  attract 
foreign talent between 2021 and 2024115. The report identifies high value-added economic 
sectors targeted for foreign talent recruitment, including healthcare, ICT, manufacturing, 
research, and financial services. It also highlights the growing importance of third-country 
nationals in filling labour market gaps, particularly in the context of global competition for 
skilled workers.  

Fifteen  EMN  Member  Countries  have  introduced  new  policies  and  initiatives,  ranging 
from  fast-track visa procedures  to  financial incentives, and targeted recruitment  efforts. 
Countries  have  also  leveraged  EU-funded  programmes,  initiatives  such  as  Talent 
Partnerships with partner countries, or legal instruments such as the revised EU Blue Card 
Directive, to enhance mobility pathways. Several national websites and job platforms have 
job  opportunities. 
been  developed 
Additionally, some countries are implementing skills validation programs and pre-arrival 
support to ease migration and integration challenges.  

third-country  professionals  with 

to  connect 

Challenges  persist,  particularly  regarding  bureaucratic  complexities,  qualification 
recognition,  and  stakeholder  coordination.  Ten  EMN  Member  Countries  actively 
monitor  their  initiatives,  with  some  having  completed  formal  evaluations.  The  OECD 
Indicators  of  Talent Attractiveness  (ITA)  provide  a  benchmarking  framework,  ranking 
New Zealand, Sweden, Switzerland, Australia, and Norway as the most attractive OECD 
destinations for highly skilled workers. 

5.2. Key Barriers 

5.2.1. Skills shortages and mismatches 
There is an acute shortage of individuals with specialist skills, especially proficient in 
emerging technologies and with the right technological skills, i.e., nearly four out of 
five SMEs in the EU report difficulties in finding workers with the right skillset. Startups 
and scaleups also face difficulties in finding workers with the right skills, such as advanced 
digital skills.116 Other challenges include skills portability and deficit in managerial and 
soft skills, which are key to leading successful startups and scaleups. 

Skills  gaps  impact  investment  decisions.  The  EIF  and  the WorkInHealth  Foundation, 
established  by  EIT  Health,  released  a  joint  report  on  these  gaps  in  Europe's  health 
industry.117 Using insights from the EIF VC Survey, the report enhances understanding of 
skills  needs  in  the sector. It highlights  that management teams are a crucial investment 
criterion for VCs in health and biotech, noting the significance of both hard and soft skills. 
The  survey  identifies  leadership  and  people  management,  industry  knowledge,  and 
commitment as the top soft skills for management teams in VC portfolio companies. Skills 

114 Atomico (2024), State of the European Tech 2024 
115 EMN – OECD joint Inform – New and Innovative ways to attract foreign talents in the EU, (2025).  
116 European Commission (2025), Communication on The Union of Skills, COM(2025) 90 final. 
117 EIT Health and EIF, Addressing skills needs in the European Health sector, Skills gaps, solutions, and strategies for 
VC-startup cooperation, July 2024 

30 

 
 
 
gaps  also  exist  within  investor  teams,  with  leadership  and  people  management  skills 
ranking as a top priority for health-focused fund managers. 

5.2.2. Issues related to social security 
There is a comprehensive EU legal framework in place to ensure that workers and 
citizens do not lose their social security protection when they move across borders. 
However, the national social security systems are not harmonised and instead of a single 
social security regime, there is a system of coordination to ensure that the social security 
rights of people moving around in the EU are protected. The rules identify which national 
legislation is applicable to the mobile person concerned, and which country is responsible 
for collecting the contributions and for paying the benefits. In principle, persons are subject 
to the social security legislation of the country where they work. 

Under EU rules, workers active in  two or more  countries are generally insured in  their 
country of residence if they carry out a 'substantial part' of their work there - defined as at 
least  25%  of  working  time  and/or  remuneration,  though  other  factors  may  also  be 
considered.  This  rule  applies  to  telework. A  new  multilateral  framework  agreement  on 
cross-border telework, signed by several (but not all) Member States118, allows up to 50% 
of telework from the country of residence without changing the applicable social security. 
However, if a worker performs their duties permanently from one Member State, social 
security contributions are due there. 

Cross-border remote workers are particularly impacted by these various rules and 
guidelines, face administrative burdens (e.g. coordinating between two social security 
administrations of two different Member States), as well as potential costs. In addition, 
nearly  20%  of  employers  with  employees  teleworking  from  other  countries  reported 
experiencing related administrative difficulties, related to taxation (30.15%), followed by 
difficulties related to social security (27.2%) and other (unspecified) contractual issues. 119 

5.2.3. Taxation challenges in Employee stock options (ESO)  
Startups often do not have sufficient cash flow to offer competitive wages, and they 
use Employee Stock Options (ESOs) to attract the best talent. From a tax perspective 
however,  the level of complexity and administrative burden increases with the use of ESOs 
in situations where the startup or scale up either employs people in various Member States 
and/or  expands  its  activities  across  borders  cross  border,  as  their  tax  treatment  is  not 
harmonised  across  EU.  The  most  impactful  differences  are  the  timing  of  taxation 
(sometimes  taxation  occurs  at  various  stages  of  the  stock  option  lifecycle),  and 
classification of income received from ESOs.   

Another  issue  related  to  ESOs  is  the  valuation  of  the  income/gain  realised  by  the 
employee. Apart from the taxation arising due to the sale of ESOs, where the gain can be 
calculated from the sale price, it is often difficult to establish what is the taxable base for 
ESOs and this may vary between Member States. At exercise, normally ESOs are taxed on 
the difference between the fair market value of the share and the exercise price of the share 
granted by the ESOs. However, if the company is not yet publicly traded, the establishment 
of the fair market value may be burdensome. 

5.2.4. Limited career mobility for academics  
Europe has become home of 35 000+ early-stage companies, with additional 3400 tech 
companies being in their growth stage. The growth of the European tech startup scene 

118 Framework Agreement on the application of Article 16 (1) of Regulation (EC) No. 883/2004 in cases of habitual 
cross-border telework 

119 Letta Report 2024 

31 

 
 
 
 
was followed by the European tech workforce, which increased up to 3.5 million in 2024, 
indicating a 24% compounded annual job market growth rate, putting Europe’s growth on 
par with the US120. In parallel, the number of full-time equivalent researchers in the EU 
increased by more than 45% and reached 2.15 million in 2023. 121 

Yet,  the  competition  for  highly  qualified  talents  remains  fierce,  in  part  due  to 
untapped academic potential and lack of sufficient mobility between academia and 
startups. The drivers of this problem can be found in the:  

•  Resistance to change, lack of flexible career options and bridging services between 
research and industry and/or diverse professional career paths for PhD holders122; 
•  Low level  of integration of researchers into innovation “clusters”  – networks of 

universities, startups, large companies and venture capitalists123;   

• 

•  Fragmented  national  legal  and  organizational  frameworks  for  establishing 
academic spin offs, with various diverging IP practices and legal regimes124.   
 The  European  tech-talent  landscape  is  increasingly  complex  to  navigate  for 
founders and recruiters. It’s home to world-leading universities and nearly 3 million 
engineers, but talent is more distributed than ever. With remote work, startups are 
increasingly recruiting from across the region. 

5.2.5. Gender gap in technology in the EU  
As  of  2023,  most  capital  investment  in  tech  startups  is  still  dominated  by  all-men 
founding teams, accounting for 82 % of all investments. Mixed gender founding teams 
receive  15  %  of  the  funding,  while  all-women  teams  receive  only  3  %,  representing  a 
marginal increase of 1 percentage point (pp) since 2019.125 Women are underrepresented 
in Deep Tech startups, with less than 25% of these startups having at least one woman on 
their founding teams.126  

Differences  across  stages  of  startup  maturity  reveal  a  healthier  distribution  at  the 
pre-seed stage, with 8 % of funding going to women-led teams and 21 % to mixed teams. 
These  shares  decrease  significantly  in  subsequent  stages  of  fundraising.  Rankings  of 
universities by the numbers of women founders and startups established, together with the 
amount of capital raised, identifies 49 universities where most women founders of startups 
with advanced degrees are based, 11 of which are in Europe (eight in the UK). Cambridge, 
Oxford, the London School of Economics (LSE), HEC Paris, and Imperial College London 
stand out as institutions where most women founders with advanced degrees originate. 127 

scaleups  demonstrate  high  value  growth  but  are 

Women-founded 
still 
underrepresented  in  terms  of  overall  scale  up  value. Women-founded  scaleups  have 
surpassed the European average in value growth since 2017, increasing their value nearly 
sevenfold and growing 1.2 times as fast as their competitors over the past five years. Most 
of  this  value  (73  %)  is  concentrated  in  the  UK,  France,  and  Germany,  where  women-

120 State of European Tech2024, Atomico Report   
121  The  figures  indicate  increase  between  2013  and  2023,  from  1.48  to  2.15  million.  Data  available  at: 
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=R%26D_personnel#Doctoral_students 
122 Knowledge ecosystems in the new ERA Talent circulation and intersectoral mobility: Analytical report with a mapping 
of talent mobility and causes of brain drain, European Commission 
123 Draghi Report 2024 
124 Research-based spin-off creation: VIADUCT Interregional Analysis Report 2024 
125  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025 

126 EIB, EIF and EIT, Women Founders in European Deep Tech Startups. Main findings report, November 2024.  
127 idem 

32 

 
 
 
founded scaleups represent around 12 % of the overall scaleup value. In contrast, Finland, 
Italy, and Portugal exhibit slightly more diverse distribution in their ecosystems.128  

Women-led  startups  receive  significantly  less  funding.  In  2020-2021,  only  20%  of 
companies funded by the European Innovation Council (EIC) Accelerator had a woman as 
leader. Women represented 24% of leadership in EIC Pathfinder projects and over 30% of 
researchers in EIC-funded projects were women. 

As women remain significantly underrepresented in leadership positions within the 
innovation and startup ecosystem, particularly in deep tech and high-growth sectors, the 
European  Innovation  Council  (EIC)  Women  Leadership  Programme  was  introduced  to 
tackle these challenges, offering mentorship, training, and networking opportunities. Since 
its launch, it has supported over 250 female entrepreneurs and researchers, equipping them 
with the skills and connections needed to scale their ventures. However, its current scope 
is  limited  to  EIC  beneficiaries,  excluding  a  vast  number  of  women  leading  innovative 
projects funded by Horizon Europe.129 

In  2022  the  European  Institute  of  Innovation  and  Technology  (EIT)  adopted  the  EIT 
Gender  Equality  Plan.  Since  then,  gender  mainstreaming  actions,  and  women  projects, 
brought increase in women’s participation in all core areas of operations, across the EIT 
Community. Participation targets indicated in the EIT Gender Equality Plan (GEP) 2022-
2024, were met or exceeded (2023 reporting): 25.20% women CEO/Owners of startups 
created of/for innovation  (GEP target:25%); 26.90% women CEO/Owners of supported 
startups and scaleups (GEP target:25%), 45.05% women among graduates from the EIT-
labelled education programmes(GEP target: 40%), and more than 40% women in decision 
making  positions  across  the  EIT  Community.  The  EIT  Supernovas/Women2Invest 
programme supported +110 female-led startups that attracted €40Mn investments. The EIT 
helps connecting the European Innovation Council’s Women Leadership Programme to the 
EIT network and in 2024 the EIT joined forces for the second time with the EIC to organise 
the European Prize for Women Innovators.130 

Gender  diversity  remains  equally  a  challenge  within  venture  capital  firms, 
particularly among general partners (highest decision-making positions). Studies show 
that women general partners are inclined to invest in women-led teams, suggesting that 
increasing the number of women in general partner roles could boost funding for mixed 
and women-only founding teams. However, the current representation of women among 
general partners is at just 16 %. 131 

Gender gap exists also in perceptions of the EU tech ecosystem. There are stark contrasts 
in experiences, particularly among women, with a majority (55 %) expressing a lack of 
belief in equal treatment compared to only one-third (31 %) of men. 132 

5.2.6. Gender gap in intra-European talent mobility (geographical)   
Overall, the international mobility of women and men during Doctoral-level studies 
exhibits minimal differences, with a gap of approximately 1 percentage point or less in 

128  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025 

129 idem 

130 European Institute of Innovation and Technology (EIT) (2024), EIT Gender Equality Plan 2024 Implementation 
Report 
131  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025 

132  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025, https://data.europa.eu/doi/10.2777/934401 

33 

 
 
 
most  countries.    However,  despite  similar  mobility  rates,  gender  disparities  emerge  in 
relation to the length of stay, with a women-to-men ratio of 0.48 in the EU, indicating that 
women tend to have shorter research stays. This phenomenon can be attributed to women 
researchers' caregiving responsibilities, such as family obligations and single parenthood, 
which often limit their mobility to short-term research visits.133   

Additionally,  traditional  gender  expectations,  including  the  historical  tendency  for 
women  to  follow  their  partners  rather  than  vice  versa,  also  influence  women's 
decisions  regarding  international  mobility.  This  trend  is  consistent  across  all  EU 
Member States, with women-to-men ratios ranging from 0.38 in Luxembourg and Hungary 
to 0.61 in Croatia and Portugal, highlighting the need for targeted support to address these 
gender disparities.134  

133  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025 

134  European  Commission:  Directorate-General  for  Research  and  Innovation,  She  figures  2024  –  Policy  report, 
Publications Office of the EU, 2025, https://data.europa.eu/doi/10.2777/934401 

34 

 
 
 
 
 
6. ACCESS TO INFRASTRUCTURE, NETWORKS AND SERVICES 

6.1. Current landscape and challenges 
Research Infrastructures (RIs) are facilities that provide specialized resources and 
services  primarily  for  research  communities.  They  typically  consist  of  large-scale 
laboratories with significant operating budgets, although some RIs exist entirely in digital 
form, such as archives for the social sciences. 

The  EU  supports  RIs  through  the  Framework  Programme  (FP),  funding  specific 
activities rather than their construction or operational costs. This support includes:  

•  Transnational access funding, primarily for scientists, always based on the criterion 

of scientific excellence. 

•  Assistance in the early implementation phase of new RIs. 
•  Joint development of technologies to enhance infrastructure capabilities. 
•  Promotion  of  FAIR  (Findable,  Accessible,  Interoperable,  and  Reusable)  data 

principles to improve data accessibility. 

Although  EU  funding  represents  only  a  small  fraction  of  the  overall  RI  budget,  it 
plays a critical role in enabling non-core activities that national funding often does 
not support. This flexible, low-restriction funding allows RIs to pursue innovation-driven 
initiatives, including enhancing access for startups and scaleups. By strategically directing 
this  support,  the  EU  can  align  RIs  with  broader  European  priorities,  fostering  greater 
industry collaboration and technological advancement. 

To  enhance  European  competitiveness,  the  EU  has  actively  encouraged  closer 
collaboration between RIs 135 and industry. This initiative has been widely welcomed 
by  RIs,  with  72%  already  offering  services  to  industry,  such  as  test-beds,  pilot  lines, 
demonstrators,  and  testing  facilities.  Moreover,  92%  of  these  RIs  plan  to  expand  their 
industry-facing  activities.  However,  even  among  the  most  industry-integrated  RIs, 
industrial collaboration accounts for only a small share of their revenue—just 4% of RIs 
report that more than 20% of their income comes from industry partnerships, with most 
generating significantly less. 

RIs  serve  as  facilities  where  existing  startups  and  scaleups  access  cutting-edge 
technology to conduct experiments (linear approach to RI access). However, this model 
has inherent limitations. Since RI technologies are at the forefront of research, their users 
are  typically  already  deeply  engaged  with  these  facilities  and  possess  a  high  level  of 
technical expertise. This means that startups coming in from the outside often struggle to 
integrate  unless  they  have  prior  knowledge  of  the  RI’s  capabilities.  Despite  these 
challenges, for highly specialized deep-tech startups, gaining access to the right RI can be 
transformative. Identifying an appropriate RI and securing a simplified access pathway can 
significantly accelerate product development and technological validation. 

Beyond the linear approach—where startups access RIs as external users—the more 
effective model is for startups to embed themselves within RI ecosystems, fostering 
technological 
ongoing  collaboration.  RIs  generate  high-potential  research  and 
breakthroughs not just through the experiments conducted within their facilities but also 
through the advanced R&D that goes into developing their cutting-edge equipment. These 

135 European Strategy Forum on Research Infrastructures. (2024). ESFRI Report on Access to Research Infrastructures 
and Charter on Access to RIs. Zenodo. https://doi.org/10.5281/zenodo.10555986; 
European  Strategy  Forum  on  Research  Infrastructures.  (2023).  Survey  Report  on  Cooperation  of  ESFRI  Research 
Infrastructures (Landmarks) with Industry. Zenodo. https://doi.org/10.5281/zenodo.8383568 

35 

 
 
 
 
 
 
innovations  frequently  have  strong  spin-off  potential,  and  RIs  can  play  a  key  role  in 
supporting startups at the earliest stages, helping them overcome the "valley of death" in 
innovation financing. 

Startups  engaging  with  RIs  benefit  from  more  than  just  access  to  specialized 
equipment—they  also  become  part  of  a  broader  industrial  ecosystem,  gaining 
exposure to: Suppliers, manufacturers, and logistical partners that support RI operations; 
potential  customers  and  commercial  collaborators  within  the  RI’s  network;  a  "seal  of 
excellence"  from  their  association  with  world-class  scientific  institutions,  which 
significantly strengthens their position when seeking venture capital investment. 

Additionally, RIs employ some of the world's top scientific and engineering talent, 
who compete at the global level and train the next generation of researchers. However, 
these experts often lack the entrepreneurial  mindset  required to  commercialize research 
effectively.  RIs  do  not  sufficiently  integrate  commercialization  training,  meaning  that 
many breakthrough discoveries never reach market potential. 

In  general,  startup  ecosystems  foster  a  culture  of  competitive  collaboration, 
interdependencies,  and  value  chain  integration,  providing  essential  resources  that 
enhance a startup’s chances of success. These resources typically include policymakers, 
accelerators, incubators, coworking spaces, educational institutions, funding networks, and 
industry partners. For entrepreneurs, selecting the right location to launch and scale their 
business  is  thus  crucial,  as  different  regions  offer  unique  advantages  and  challenges 
depending on the startup’s specific needs. 

Two  key  sources  of  support  for  startups  and  scaleups  are  the  Enterprise  Europe 
Network (EEN) and European Cluster network. 

The EEN is an SME-support programme launched by the European Commission in 2008. 
It is financed through the EU Single Market Programme and is implemented through grant 
agreements with business support organizations on the ground. 

The EEN helps stimulate demand for innovation, improve market access for new solutions, 
and support SMEs, start-ups, and scale-ups in competing with established players. With 
nearly 600 business support organizations in 57 countries in the EU and beyond, the EEN 
provides free-of-charge tailored support to SMEs by facilitating innovation management, 
access to finance, connecting businesses with international partners, and offering expert 
advisory  services  to  e.g.  navigate  regulations,  secure  intellectual  property  rights,  and 
leverage EU-funded programmes (including Horizon Europe). A key focus of the EEN is 
supporting research and innovation in SMEs, including start-ups and scale-ups. It does so 
by providing services like innovation audits and strategy, advice on intellectual property 
rights,  technology  and  innovation  brokerage  services,  advice  on  technology  marketing, 
support in accessing EIC funding opportunities. 

Since  2017,  the  EEN  has  included  dedicated  Scale-up Advisors,  supporting  SMEs  and 
startups in their rapid growth phase, both on access to finance and on innovation support. 

Clusters are regional ecosystems of related industries and competences featuring a broad 
array of inter-industry interdependencies. There are more than 1500 cluster organisations 
registered at the European Cluster Collaboration Platform of the European Commission, 
covering all industrial ecosystems. 

36 

 
 
One of the main strengths of clusters is their role in supporting innovation and development 
and uptake of new technologies within their ecosystems, by pooling of resources through 
trust-based  collaboration  of  their  members.  The  impact  of  clusters  on  industrial 
competitiveness  has  been  demonstrated  by  a  number  of  indicators,  such  as  the  level  of 
business  R&D  investments,  number  of  patents,  employment  in  knowledge-intensive 
sectors,  birth  of  enterprises,  and  a  variety  of  economic  outcomes,  such  as  GDP  and 
productivity (ECCP Cluster Panorama 2024). 

Clusters deliver a number of bespoke services to their members tailored to  the specific 
needs  of  their  ecosystems  such  as  technology  transfer,  support  of  innovative  start-ups, 
support  for  scale  up,  trainings  for  upskilling  and  reskilling,  access  to  finance, 
internationalisation, etc. 

Technology Centres are public or private organisations carrying out applied research and 
close-to-market innovation (Technology Readiness Levels TRL 3 to 8, not necessarily the 
whole range) in digital, green and other advanced technologies. 

Technology  Centres  typically  provide  the  following  services  to  SMEs:  access  to 
technology expertise and facilities for validation, demonstration / proof of concept / lab 
testing, prototype development and testing, pilot production and demonstration/ pilot lines 
/ pre-series, product validation / certification. 

Founders  recognise  the  critical  role  of  an  environment  that  nurtures  innovation, 
collaboration, and support in scaling their businesses. The StepStartUps Study: Beyond 
Fragmentation – Connecting Europe’s Startup Ecosystems for Growth and Innovation136 
found that 33% of founders who relocated cited the lack of a strong startup ecosystem and 
entrepreneurial culture as their primary motivation.  

Beyond  ecosystem  strength,  cost  considerations  are  another  major  driver  of 
relocation, with 27% of founders citing value for money as the most decisive factor. 
Funding  availability  (24%)  is  also  a  key  reason,  highlighting  the  significant  role  of 
financial  accessibility  in  startup  location  decisions.  In  contrast,  talent  availability  and 
business regulations are mentioned less frequently as relocation drivers137. 

Among  the  critical  enablers  of  startup  growth,  accelerators  play  a  pivotal  role  in 
bridging  ecosystem  fragmentation  and  fostering  regional  connectivity.  These 
structured programs provide early-stage, high-growth companies with access to education, 
mentorship, and financing, typically running for three to six months. 

Over time, an increasing number of startup founders have relocated specifically to 
participate in accelerator programs. While the rise of virtual programs in 2022 led to a 
slight increase in same-city participation, most founders continue to move between cities, 
with one-quarter of startups even enrolling in accelerator programs in different countries. 

This  growing  founder  mobility  underscores  the  role  of  accelerators  as  connectors 
across startup ecosystems. By offering structured mentorship, funding opportunities, and 

https://digital-strategy.ec.europa.eu/en/library/beyond-fragmentation-connecting-europes-startup-ecosystems-

136 
growth-and-
innovation#:~:text=StepUp%20Startups%27%20report%20examines%20fragmentation%20in%20Europe%E2%80%9
9s%20startup,to%20boost%20collaboration%2C%20talent%20mobility%2C%20and%20funding%20access. 
137  Krämer,  J.,  Herrmann, A.,  &  Dowling,  M.  (2022).  Startup  Heatmap  Europe  Report  2022:  The  Latest  Trends  in 
Startup Hubs and Founder Mobility. Startup Heatmap Europe. 

37 

 
 
 
networking  access,  accelerators  play  a  key  role  in  reducing  geographic  barriers  and 
fostering cross-border startup growth in Europe. 

Indeed,  a  significant  number  of  startups  in  accelerator  programs  originate  from 
outside the region where the accelerator is based (Figure 15).138 This emphasizes the 
role of accelerators as cross-border interconnectors, helping startups expand beyond their 
immediate  markets.  Notably,  over  one-third  of  mobile  startups  choose  accelerator 
programs in a different country, further demonstrating the importance of accelerators in 
facilitating international startup mobility and ecosystem integration. 

Figure 15. Mobility of Accelerator Participants  

 Source: European Startup Ecosystem Report, 2023 

Furthermore,  as  data  generation  expands  beyond  human  activity  to  connected 
devices  and  automated  systems,  data  accessibility  and  findability  are  becoming 
increasingly complex. In less than a decade, global data volume has increased fivefold, 
rising  from  33  zettabytes  in  2018  to  an  estimated  175  zettabytes  by  2025.  This 
unprecedented surge in data generation has propelled the value of the EU data economy 
from  EUR  301  billion  (2.4%  of  EU  GDP  in  2018)  to  a  projected  EUR  829  billion  in 
2025.139 

Figure 16. Projected Figures 2025  

 Source: A European Strategy for Data, 2020 

138 Findings from the StepStartUps Study 
139 European Strategy for Data, COM (2020) 66 final 

38 

 
 
 
 
 
A  closer  look  at  EU  data  companies140  reveals  that  the  majority  are  startups  and 
scaleups, with 48.6% employing fewer than 10 people. Most are still in the seed stage 
(Figure  17),  and  their  distribution  across  the  27  EU  Member  States  remains  highly 
uneven.141 Yet, 108 out of 4,327 data companies have reached a valuation of at least EUR 
100  million,  a  14%  increase  compared  to  2021-2023.142  These  figures  underscore  the 
immense, yet largely untapped, potential of Europe’s data-driven businesses. 

Figure 17. Distribution of data companies by development stage, 2023 

Source: European Data Market study 2024–2026. 

Without  fully  leveraging  its  existing  data  resources,  expertise,  and  startup 
ecosystems, the EU risks allowing other global players to capitalize on this economic 
potential, weakening its strategic position in the global digital economy143. To address 
these challenges, the EU adopted its Data Strategy in 2020, aiming to facilitate seamless 
data flows  across sectors, borders, and stakeholders—including  businesses, researchers, 
and public authorities. The strategy’s goal is to create a single European market for data, 
enhancing accessibility and interoperability across industries. Work is already underway 
to develop common European data spaces across 14 sectors144.  

 6.2. Key Barriers 

6.2.1. Limited access to research and technology infrastructures 
For many innovative startups, finding and accessing highly specific RI services is a 
major hurdle.  Developing the necessary connections can take years and often requires 
dedicated staff to navigate complex institutional structures. Most companies have no clear 
entry point when searching for available services, leading to an overreliance on informal, 
ad hoc collaborations built through personal networks. 

European  Data  Market 

140 Data companies are organisations that are directly involved in the production, delivery, and/or usage of data in the 
form of digital products, services, and technologies.   
141 
https://ec.europa.eu/newsroom/repository/document/2024-
47/D41_First_EU_Data_Landscape_Report_FINAL_CzCIBGPmPsorKyihsfJsG5kJo8c_110109.pdf  
142 European Data Market study 2024–2026 
143 Letta, (2024). 
144 https://digital-strategy.ec.europa.eu/en/policies/data-spaces 
39 

CNECT/LUX/2023/OP/0043, 

2024–2026 

available 

study 

at: 

, 

 
 
 
 
Furthermore, despite the willingness to engage with RIs, two primary barriers hinder 
effective  collaboration:  limited  visibility  of  available  services  and  complex  and 
fragmented  access  mechanisms.  On  the  one  hand,  many  startups  and  companies  are 
unaware of the specific resources and facilities offered by RIs. On the other hand, complex 
and heterogeneous legal frameworks, particularly concerning intellectual property rights 
(IPR),  can  also  create  barriers  to  straightforward  partnerships. To  bridge  this  gap,  EU-
funded  projects  like  LEAPS-INNOV145  and  Calypso+146  have  played  a  crucial  role  in 
bringing RIs and industry together to co-develop and commercialize new technologies. 

6.2.2. Limited access to data and fragmented support mechanisms 
Navigating the complexity of data accessibility is particularly challenging for startups 
and scaleups, which often lack the financial, administrative, and technical resources to 
navigate the fragmented data landscape. Many struggle to identify, access, and integrate 
relevant  datasets  due  to  a  lack  of  standardized  frameworks  and  interoperability  across 
sectors. 

Data spaces, platforms, and marketplaces have the potential to unlock the value of 
data for startups, yet fragmentation remains a major barrier. Despite recent efforts to 
establish  European,  national,  and  regional  data  initiatives,  data  remains  siloed  across 
different sectors, domains, and levels of governance. Additionally, variations in culture, 
communication, and operational methods among stakeholders further complicate access, 
creating delays and inefficiencies in leveraging data-driven innovation.147 

The highly diverse nature of data sources (ranging from public and private entities 
to  academic  institutions)  results  in  significant  disparities  in  access  regimes. 
Differences between personal and non-personal data regulations, national legal exceptions, 
and ambiguous interpretations of EU-level data policies contribute to inconsistent access 
frameworks.  Furthermore,  many  national  public  administrations  lack  the  capacity  or 
expertise to designate148 and manage coherent national data bodies, adding another layer 
of complexity for startups seeking cross-border access149. 

Europe’s fragmented data governance and regulatory approaches put EU companies 
at a disadvantage compared to the US and China. In the US, the private sector drives 
large-scale  data  aggregation,  enabling  businesses  to  build  vast,  unified  datasets  for 
innovation. Meanwhile, China’s centralized institutions facilitate a more coordinated data 
strategy150,  further  accelerating AI  and  big  data-driven  advancements.  Without  a  more 
integrated  and  efficient  data  access  model,  European  startups  risk  falling  behind  in  the 
global data economy. 

Market fragmentation can not only pose a challenge to startups' operational scaling, 
but also hinder them in acquiring the resources necessary to develop their business. 
During the early stage of their lifecycle, startups are particularly vulnerable and thus need 
targeted  support.151  Currently,  startups  and  scaleups  in  the  EU  face  fragmented  and 
complex  support  systems,  developed  without  coordination  by  Member  States,  regional 
authorities and public financing institutions. Furthermore, the European level services are 
numerous and often require consulting support to find a way among a variety of rules and 
narrow or counterintuitive eligibility criteria.  In its 2025 Communication 'The road to the 

145 https://cordis.europa.eu/project/id/101004728 
146 https://cordis.europa.eu/project/id/730872 
147 Jøranli I and Breunig K (2024), Unlocking data’s potential: navigating the challenges of data driven innovation for 
startups, Measuring Business Excellence, Vol 28, No 3/4 2024,Emerald Publishing 
148 See: https://digital-strategy.ec.europa.eu/en/news/commission-calls-10-member-states-comply-data-governance-act 
149 See Second report on the application of the GDPR, COM(2024) 357 final and Draghi Report 2024 (part B, p319) 
150 Draghi, (2024). 
151 Draghi, (2024). 

40 

 
 
 
next multiannual financial framework’, the European Commission points out that there are 
today more than 30 tools providing technical assistance and support options, with scope 
for simplification and eliminating overlaps. A true single point of entry for beneficiaries to 
all EU funding and advisory services in the next financial framework could facilitate access 
for beneficiaries.   

6.2.3 Access to knowledge and knowledge valorisation 
Efficient  intellectual  assets  management  and  IP  valorisation  are  key  to  accelerate  the 
uptake of innovative solutions and to develop new technologies, products, and services to 
address the most pressing societal challenges.  

In today’s knowledge economy, intangible assets including IP account for 80 to 90% or 
more of the business assets of an enterprise. At the startup level, IP could reach almost 
100%152.  

The role of IP for startup success, particularly for academic spin-offs, is highlighted by 
recent studies153. 

A joint  study by the EU Intellectual Property  Office  (EUIPO) and the European Patent 
Office (EPO)154 confirms earlier empirical studies and stresses that startups with registered 
IP have more than twice the likelihood than other startups to obtain seed-stage funding and 
up to 6.1 times higher chances to obtain early-stage funding. The odds of successful exit 
are  doubled  in  case  of  IP  registration  and  tripled  by  applying  for  both  patents  and 
trademarks.  

Patents are particularly relevant for technology focused startups for example in the fields 
of  biotechnology,  pharmaceuticals/life  sciences  and  engineering.  Patents  signal  to 
stakeholders that the startup is worth investing and they weight on the negotiating table 
vis-à-vis investors and large corporations155. 

Startups can leverage their IP rights to grow and expand by licensing in and out, establish 
partnerships, and prevent others from imitation, therefore securing high profit margins.  

However,  startups  face  significant  challenges  in  the  management  of  their  intellectual 
assets, including: lack of IP knowledge, lack of strategic approach, no dedicated budget 
and limited capacities156. 

6.2.4. Weak commercialisation of results/academic inventions 
More than 10% of all patents filed at the EPO by European applicants in 2019 originated 
in  universities157.  However,  only  a  third  of  the  inventions  patented  by  universities  and 
research  organisations  are  commercially  exploited158.  Hurdles  in  the  commercialisation 
process  also  relate  to  burdensome  negotiation  processes,  weak  interaction  between 

152 Bader and Süzeroğlu-Melchiors (2023), Intellectual Property Management for Start-ups, p. 111. 
153 EPO (2023), Patents, trade marks and startup finance: Funding and exit performance of European startups; SPRIND 
(2023) “Policy Paper IP-Transfer”, UK government (2023) “Independent Review of University Spin-out Companies”. 
154 EPO (2023), Patents, trade marks and startup finance: Funding and exit performance of European startups. 
155 There is clearly a positive relationship between patenting startups’ innovations and economic performance. As also 
explained  in  a  joint  study  published  by  the  European  Patent  Office  (EPO)  and  the  EU  Intellectual  Property  Office 
(EUIPO), fewer than 9% of European SMEs rely on protected IP rights, but this subset of companies appears to generate 
68% higher revenues per employee than SMEs without IPR portfolios. EPO and EUIPO (2021), Intellectual property 
rights and firm performance in the European Union, Firm-level analysis report; EPO (2023), Patents, trade marks and 
startup finance: Funding and exit performance of European startups. See also Zhangabylov et al. 2022, Häussler et al. 
2012. 

156 Bader and Süzeroğlu-Melchiors (2023), Intellectual Property Management for Start-ups. 
157 EPO (2024), The role of European universities in patenting and innovation, p. 11. 
158 EPO (2020), Valorisation of scientific results; Draghi report. 

41 

 
 
 
 
universities  and  industry  and  the  lack  of  incentives  for  researchers  to  become 
entrepreneurs159. 

Figure 18: Stage of exploitation of patented inventions 

Source: EPO (2020), Valorisation of scientific results 

The  participation  of  university  researchers,  university  spinoffs  or  startups  that 
commercialise  scientific  results  in  standardisation  and  certification  bodies  is 
extremely  low  160.  Only  very  few  universities  in  Europe  have  a  standardisation  / 
certification strategy that clearly spells out when and how in the research and innovation 
process engagement with standardisation and certification will be pursued. There is a lack 
of training, support, financial and career incentives for academic researchers to engage in 
these types of activities, while only 0.004% of EU higher education institutes offer courses 
about standardisation161. Secondments of academic researchers to high tech startups to help 
with standardisation of scientific research results are still rare. 

6.2.5. Lack of resources and skills of knowledge and technology transfer offices (TTOs)  
Knowledge  and  technology  transfer  offices  are  crucial  to  support  researchers  with  the 
management  of  their  IP  and  business  plan.  This  notwithstanding,  TTOs  are  often 
understaffed,  lack  the  necessary  expertise  and  financial  resources  and  struggle  to 
effectively act as intermediaries between researchers and the private businesses sector.162 

The  European  TTOs  landscape  largely  differs  across  regions.  In  southern  and  eastern 
Europe, up to 85% of the exploitation of patented inventions is taken care of by TTOs with 
three or fewer commercialization experts. This proportion drops to 60% in Germany and 
to 43% in the rest of northern and western Europe. A majority of patented inventions from 
northern and western Europe (excluding Germany) are exploited by TTO with more than 
three commercialisation experts163. 

159 EPO (2020), Valorisation of scientific results; Draghi report (2024), p. 240, 241, 244. 
160 https://www.anec.eu/images/Publications/Access-Study---final-report.pdf 

161 EU funded projects like EduStand4EU aim to increase that to 2% (500 times increase) which will result in  100 
additional small companies with 300 professionals and 1,000 researchers trained annually. 

162 EPO (2020), Valorisation of scientific results, p. 42; Draghi report (2024), p. 241. 
163 EPO (2020), Valorisation of scientific results, p. 49. 

42 

 
 
 
 
 
 
Variability across TTOs concerns also performance in entrepreneurial activity. The 2023 
Annual Survey conducted by ASTP on 577 TTOs shows that in the year of reference, the 
majority of European TTOs did not create any academic spinoffs, and half were not being 
involved in startup creation. Out of the 205 TTOs having declared spinoff activity, only 30 
were responsible for more than 40% of the total 677 spinoffs created.164 

Figure 19: Distribution of TTOs per spinoffs created 

Source: ASTP Annual Survey. Financial Year 2021 (2023) 

6.2.6. Fragmented university support for startup creation 
The Draghi Report points out that “High-tech innovation clusters typically form around 
first-class higher education institutions. A lack of these institutions in the EU and weak 
interaction  between  universities  and  businesses  limit  technology  transfer,  innovation 
capacity and ultimately economic growth”. 

The  Redstone  University  Startup  Index,  May  2024  looks  at  how  efficient  European 
Universities are in terms of their budget utilization for startup creation. 

The  study  analysed  457  universities  in  34  countries  with  a  combined  annual  budget  of 
almost €170 billion. The study also looks at the startup creation performance of German 
Research  Institutes  (Fraunhofer,  Max  Planck,  DLR).  Annually,  European  universities 
create  7.500+  startups  through  alumni  founders  and  spinoffs,  with  an  average  of  6.6 
startups  per  €100  Mn  budget. The  top  10  universities  create  38.2  startups  for  the  same 
amount. 

There is a significant disparity in the effectiveness of universities in creating economic and 
societal value, with differences up to 100x. Some universities create the same value with 
€2 million as others do with €200 million. 

The  study  claims  that  if  the  universities  performed  at  full  potential,  150K+  additional 
startups could be created in the European Market over 10 years. 

Business  schools  can  often  be  more  efficient  than  non-business  schools  because  they 
operate with leaner infrastructures and don't require extensive research facilities like those 

164 ASTP (2023), Annual Survey. On the European Knowledge Transfer. Landscape Financial Year 2021. 

43 

 
 
 
 
 
 
 
in medicine or biotech. They foster an entrepreneurial mindset and industry connections, 
focusing on business and startups. In contrast, larger universities with integrated business 
schools  have  broader  aims,  which  may  prevent  them  from  achieving  the  same  startup 
efficiency as standalone schools. A city's concentration of efficient universities and high 
budgets can also boost its startup ecosystem as the cases of Paris and London. 

6.2.7. Limited financial and non-financial commercialisation incentives for researchers 
Rewarding  faculty  members  involved  in  the  commercialisation  of  research  results  and 
spin-off  creation  increases  their  propensity  to  contribute  more  to  spinoff  formation  and 
knowledge  transfer  activity165.  In  addition,  the  likelihood  and  degree  of  commercial 
success  stemming  from  licensing  agreements  increases  with  inventor  engagement166. 
However, the current framework for the management and commercialization of academic 
results  lacks  the  appropriate  incentives.  Universities  have  strong  incentives  to  increase 
their publication impact, but not their commercialisation outcomes167. For instance, often 
researchers  cannot  fully  appropriate  royalties  from  licencing  IPRs.168  Moreover, 
researchers’ assessments do not adequately reward multi-track careers.169  

Finding  the  right  mix  of  financial  rewards  (including  appropriate  equity  and  revenue 
sharing),  careers  advancement  incentives,  and  non-monetary  incentives  such  as 
recognition and contractual flexibility is key to encourage participation of academics in 
entrepreneurial activities.170 

6.2.8. Hurdles for spinoff/startups access to IP and knowledge  
As  mentioned,  IP  is  a  core  asset  for  a  spin-off’s  founding  and  development  process. 
However, founding a spin-off based on scientific discoveries might confront researchers 
with a paradoxical situation: establishing the business without owning a core asset, the IP. 
In fact, although the researcher might have solely or jointly contributed to the development 
of  an  invention,  in  most  EU  countries  universities  have  the  right  to  own  and  manage 
university inventions, following the US model. Thus, spin-offs must find an agreement on 
how to access this critical asset. Spinoffs often lack the financial resources to acquire IP at 
market rates, especially during the critical early stages of company development. Also, the 
negotiations  between  universities  and  spinoffs  can  be  uncertain  and  take  a  long  time, 
creating  additional  risks  dissuading  companies  from  engaging  in  collaborative  research 
with universities. 

Hurdles  for  valorisation  of  results  and  public-private  collaboration  on  research 
projects due to incompatibilities in industry-academia IPR policies and issues in the 
existing copyright framework  

Regarding industrial property rights, industry-academia collaboration is still hampered by 
conflicts over who will own the IPR that results from the collaboration (industry wants to 
own all IPR to commercialise their products171, which makes it difficult for industry to 

165 Odei, M. A., & Novak, P. (2022). Determinants of universities’ spin-off creations. Economic Research-Ekonomska 
Istraživanja, 36(1), 1279–1298. 

166 Ajay Agrawal (2006), Engaging the Inventor: Exploring Licensing Strategies for University Inventions and The Role 
of Latent Knowledge, Strat. Mgmt. J., 27: 63–79. 
167 Challenges in academic commercialisation: a case study of the scientists' experiences 

168 Identifying (the right) partner is a major issue for the exploitation of UNI/PRO patented inventions and engaging 
with industry research partners is essential for the commercialisation of inventions. EPO (2020), Valorisation of scientific 
results, p. 43. 
169 Draghi report (2024), p. 241. 
170 WIPO (2024). Incentives in Technology Transfer. OECD (2019), University-Industry Collaboration. New Evidence 
and Policy Options. 
171 Establishing successful university–industry collaborations: barriers and enablers deconstructed 

44 

 
 
 
collaborate  with  academic  researchers  from  universities  require  all  IPR  ownership  of 
academic research to be allocated to the university). Linked to that are also disagreements 
about  delaying  publication  of  results  to  prioritise  protection  of  IPR  in  favour  of  later 
commercialisation  133  (academics  have  more  incentives  for  publication  than  for 
commercialisation). 

However.  there  are  also  issues  with  copyright.  Current  research  provisions  in  the  EU 
copyright acquis – Article 5(3)(a) Information Society Directive and Articles 6(2)(b) and 
9(b) Database Directive – set forth the requirement of use for a “non-commercial purpose”. 
The same limitation applies to national legislation on secondary publication right in four 
out  of  the  six  member  states,  which  have  introduced  secondary  publication  right. 
According to a recent study commissioned by the European Commission, this focus on a 
non-commercial character of the research use causes legal uncertainty (researchers who 
collaborated with industry refrain to use copyright-protected resources) and hinders public-
private collaboration.172 

7. CROSS-CUTTING ISSUES  

7.1. Current landscape and challenges 
Cultural & Media Perceptions of Entrepreneurship (including attitudes to risk) 

Startups do not emerge in a vacuum—they are shaped, nurtured, and often constrained by 
cultural narratives, public sentiment, and media discourse. A comparative analysis of the 
European Union and the United States reveals persistent and evolving differences in how 
startups  are  viewed  and  talked  about,  reflecting  divergent  societal  values  and  systemic 
structures.  While  the  United  States  fosters  an  environment  where  entrepreneurship  is 
idealized and publicly celebrated, the European landscape remains more cautious, policy-
bound, and institutionally framed. 

The dominant  narrative in the United States  positions entrepreneurs as  cultural  icons—
risk-takers,  disruptors,  and  economic  saviours.  Media  platforms  such  as  TechCrunch, 
Forbes, and Wired are instrumental in shaping these perceptions. Aldrich & Ruef (2018)173 
argue  that  such  glamorization  creates  a  "mythology  of  entrepreneurship,"  with  media 
narratives emphasizing unicorns and venture capital success stories rather than the day-to-
day grind of small business creation. 

By  contrast,  European  media  has  traditionally  been  more  conservative  in  its  framing. 
Raible (2016)174 and Wakkee et al. (2014)175 note that failure is portrayed as a personal 
shortcoming,  not  a  learning  experience.  Media  outlets  are  more  likely  to  report  on 
regulatory challenges or economic constraints than on founder triumphs. 

172 European Commission: Directorate-General for Research and Innovation (2024), Improving access to and reuse of 
research  results,  publications  and  data  for  scientific  purposes  –  Study  to  evaluate  the  effects  of  the  EU  copyright 
framework  on  research  and  the  effects  of  potential  interventions  and  to  identify  and  present  relevant  provisions  for 
research in EU data and digital legislation, with a focus on rights and obligations. 

173  Aldrich,  H.E.,  &  Ruef,  M.  (2018).  Unicorns,  Gazelles,  and  Other  Distractions.  Academy  of  Management 
Perspectives. 

174 Raible, S. E. (2016). Entrepreneurship Ecosystems: A Comparison of the United States and Germany. Bosch Alumni 
Network. 

175 Wakkee, I., Dorrestein, F., & Englis, P. (2014). The Stigmatization of Bankrupt Entrepreneurs in Dutch Newspapers. 
Journal of Small Business. 

45 

 
 
 
 
This divergence intensified during the COVID-19 crisis. Kuckertz et al. (2020)176 found 
that  U.S.  coverage  emphasized  startup  resilience,  pivoting,  and innovation  in  adversity, 
while European outlets spotlighted systemic vulnerability and the need for state support. 

The perception of failure is a core differentiator. In the U.S., business failure is seen as a 
stepping  stone.  Friedman  & Aziz  (2012)177  and  Global  Entrepreneurship  Monitor  data 
confirm  that  American  entrepreneurs  experience  higher  public  tolerance  for  risk  and 
failure.  Entrepreneurs  often  reappear  in  new  ventures,  sometimes  with  stronger 
reputations. 

In Germany, however, failure remains socially stigmatized. Kuckertz, Berger & Prochotta 
(2020)178 argue that failure is still considered morally or personally deficient—an attitude 
reinforced by German media narratives. 

A  major  reason  for  these  differing  perceptions  lies  in  the  structure  and  function  of  the 
media. In the U.S., entrepreneurial media outlets serve as amplifiers, often working hand-
in-hand  with  founders  to  shape  public  image  and  attract  funding  (Bruno  &  Nielsen, 
2012)179. Startups use media not just for visibility, but as a component of their strategy—
crafting narratives that align with investors and audiences. 

In the EU, startups  tend to  rely  more on institutional  legitimacy. Porlezza &  Splendore 
(2018)180 show that European entrepreneurial  journalism  projects  emphasize credibility, 
objectivity, and alignment with public service rather than disruptive potential. 

One  of  the  more  recent  developments  post-2018  is  the  emergence  of  social  media  as  a 
parallel  narrative  engine,  especially  in  Europe.  Pakura  &  Rudeloff  (2023)181  find  that 
German  startups  are  increasingly  bypassing  traditional  gatekeepers  to  build  their 
reputations directly on platforms like LinkedIn and Twitter. However, American founders 
remain significantly more adept at building personal brands that translate into capital and 
public support. 

This trend represents a narrowing of the visibility gap but not yet a cultural convergence. 

A big data analysis by von Bloh et al. (2020)182 revealed stark differences in the frequency 
and breadth of entrepreneurship coverage. U.S. media ecosystems produce exponentially 
more startup-related content across various cities, while EU coverage is heavily centralized 
in a few innovation hubs like Berlin, Paris, and Stockholm. 

In  terms  of  gender  representation,  Global  Women's  Entrepreneurship  Report  (2019)183 
shows  that American  media  are  more  likely  to  feature  and  promote  women  founders. 
Europe  lags  behind,  both  in  public  perception  and  media  representation,  although  state 
policies are beginning to address this imbalance. 

176 Kuckertz, A. et al. (2020). Startups in Times of Crisis. Journal of Business Venturing Insights. 

177 Friedman, B. & Aziz, N. (2012). Entrepreneurial Attitudes: Turkey vs. US. International Journal of Business. 

178 Kuckertz, A., Berger, E.S.C., & Prochotta, A. (2020). Misperceptions of Failure. IJEBR. 

179 Bruno, N., & Nielsen, R. (2012). Survival is Success. Oxford Internet Institute. 

180 Porlezza, C., & Splendore, S. (2018). Crowdfunded Journalism. Entrepreneurial Journalism (Taylor & Francis). 

181 Pakura, S., & Rudeloff, C. (2023). Branding via Social Media PR. Journal of Small Business & Entrepreneurship. 

182 von Bloh, J. et al. (2020). News Data for Entrepreneurship Research. Small Business Economics. 

183 Global Women’s Entrepreneurship Report (2019). Smith College. 

46 

 
 
 
Using  topic  modelling  on  news  databases,  Savin  et  al.  (2023)184  confirmed  a  sharp 
divergence in the framing of startups: 

•  U.S. discourse emphasizes disruption, tech, finance, and exits. 
•  EU narratives revolve around sustainability, social impact, policy alignment, and 

long-term employment. 

This  reinforces  an  ongoing  trend  where  American  entrepreneurship  is  cast  in 
individualistic, opportunistic terms, while European entrepreneurship is viewed through a 
systemic, policy-based lens. 

Education and policy framing also shape media narratives. Wilson (2008)185 noted the gap 
in entrepreneurship education between U.S. and EU universities. While this has narrowed, 
European media still reflect a view of startups as policy tools rather than cultural icons. 
Cicchiello  (2019)186  found  that  even  crowdfunding—widely  used  for  publicity  in  the 
U.S.—is seen more as a financial workaround in the EU. 

While both the EU and U.S. recognize entrepreneurship as a growth engine, their cultural 
storytelling,  media  ecosystems,  and  public  sentiment  take  vastly  different  paths.  In  the 
U.S., entrepreneurs write their own narratives—fast, loud, and public-facing. In Europe, 
they are still often expected to fit into pre-approved institutional moulds. 

As digital platforms evolve and younger generations engage with entrepreneurship through 
new  lenses,  these  distinctions  may  soften.  For  now,  they  remain  deeply  ingrained  and 
highly consequential. 

184 Savin, I. et al. (2023). Topic-Based Classification of Startup Trends. Small Business Economics. 

185 Wilson, K.E. (2008). Entrepreneurship Education in Europe. SSRN. 

186 Cicchiello, A.F. (2019). Crowdfunding & Policy Framing in the EU. JEPP. 

47 

 
 
 
 
 
Annex 1: Synopsis Report of Stakeholder Consultation 

1.  Introduction 

The public consultation on the EU Startup and Scaleup Strategy aimed at gathering diverse 
stakeholder  insights  to  inform  the  development  of  a  robust  and  effective  strategy  for 
enhancing the framework conditions for startups and scaleups across the European Union. 
The Call for Evidence, which was open for 4 weeks (17 February 2025 – 17 March 2025), 
attracted  a  substantial  number  of  responses,  589,  from  a  wide  array  of  stakeholders 
spanning  36  countries,  reflecting  the  broad  interest  and  varying  perspectives  on  the 
challenges and opportunities faced by startups and scaleups in Europe. 

The  responses  came  from  a  diverse  set  of  stakeholders,  including  172  companies  or 
businesses,  111  business  associations,  108  EU  citizens,  and  47  academic  or  research 
institutions.  Non-governmental  organizations  (NGOs)  contributed  37  responses,  while 
public authorities and trade unions provided 36 and 10 responses, respectively. Notably, 
the  consultation  also  received  input  from  non-EU  citizens  and  consumer  organizations, 
illustrating the broad relevance of the EU Startup and Scaleup Strategy. 

Geographically,  the  consultation  saw  the  highest  participation  from  Belgium  with  115 
responses,  followed  by  the  Netherlands  and  Germany,  each  contributing  64  responses. 
Other significant contributions came from Italy, France, Sweden and Spain, among others. 
The  feedback  was  predominantly  in  English,  accounting  for  524  submissions,  with 
additional insights provided in languages such as German, Italian, French and Spanish. 

The consultation also highlighted the varied company sizes involved, ranging from micro-
enterprises (171) to large companies with 250 or more employees (104). This diversity in 
stakeholder  representation  underscores  the  multifaceted  nature  of  the  startup  ecosystem 
and  the  need  for  a  comprehensive  strategy  that  addresses  the  unique  needs  of  different 
entities within it. 

In addition  to  the 589 responses submitted through the Call for Evidence, a total  of 26 
contributions were made outside of this process. These contributions are not reflected in 
the visualisations illustrated below but are included in the identified hurdles and actions of 
this synopsis report. 

Through this extensive consultation, the European Commission aimed to capture a wide 
spectrum of viewpoints to ensure that the EU Startup and Scaleup Strategy is both inclusive 
and reflective of the current landscape, ultimately fostering a more conducive environment 
for innovation and growth in the EU. 

1.1. 

Responses by Type of Respondent (Call for Evidence) 

User Type 

Count 

Percentage 

48 

 
 
 
 
 
 
Company/business 

Business Association 

EU Citizen 

Other 

Academic/Research 
Institution 

(Non-governmental 

NGO 
organisation) 

Public authority 

Non-EU Citizen 

Trade Union 

Consumer Organisation 

172 

111 

108 

53 

47 

37 

36 

14 

10 

1 

29.2% 

18.8% 

18.3% 

9.0% 

8.0% 

6.3% 

6.1% 

2.4% 

1.7% 

0.2% 

1.2. 

Responses by Country (Call for Evidence) 

Responses were received from 36 countries. Top countries: 

Country 

Belgium 

Netherlands 

Germany 

Italy 

France 

Sweden 

Spain 

Poland 

Finland 

Portugal 

Count 

115 

64 

64 

51 

43 

27 

27 

21 

20 

19 

Figures (Call for Evidence) 

49 

 
 
 
 
 
1.1. Distribution of responses by user type 

2.2  Responses by Country 

2.3. Call for Evidence questions 

Stakeholders are invited to reply to the following questions. 

50 

 
 
 
 
 
 
 
1.  Do you agree that startups and/or scaleups face the hurdles identified in this document 
(access to finance, regulatory and bureaucratic burdens and fragmentation, access to 
markets, 
access 
access 
to infrastructure, knowledge and services)? 

talent, 

and 

to 

2.  Are there any additional hurdles faced by startups and/or scaleups? 
3.  What  actions  do you think the EU and/or its  Member States should take  to  address 

these hurdles? 

2.  ANALYSIS OF RESPONSES 
2.1. Access to Finance 

Overview 

The Access to Finance area reveals a complex landscape where stakeholders from various 
sectors, including business associations, NGOs, and academic institutions, converge on the 
critical challenges faced by startups and scaleups in Europe. The primary hurdles identified 
include limited access to venture capital, fragmented capital markets and under-developed 
secondary  markets.  Stakeholders  consistently  emphasise  the  need  for  a  more  integrated 
and supportive financial ecosystem to enable startups to scale effectively. The proposed 
actions to address these hurdles are diverse, ranging from the creation of pan-European 
venture  capital  funds,  harmonisation  of  regulation  to  the  development  of  secondary 
markets. These actions are seen as essential to fostering a more conducive environment for 
investment and growth across the EU.  

3.1.2.  Hurdles Identified 

A recurring theme in the feedback is the limited access to venture capital, particularly in 
the  later  stages  of  funding.  Stakeholders  highlight  the  structural  limitations  of  Europe's 
venture capital landscape, which is less developed compared to the US and China. One 
business association from Italy noted that the EU accounts for just 5% of global venture 
capital funds raised, compared to 52% in the US and 40% in China. Certain stakeholders 
find that this disparity is further exacerbated by the fragmented nature of capital markets 
across the EU, which reduces liquidity and makes it challenging for startups to attract long-
term investments. It is said by some stakeholders that this gap is particularly pronounced 
in capital-intensive sectors such as deep tech and biotech, where long development cycles 
and high-risk profiles deter traditional investors.  

Access to finance is further hindered by the limited participation of institutional investors, 
such as pension funds, in venture capital markets. Several stakeholders have pointed out 
that European pension funds control vast assets but invest only a small fraction in venture 
capital, limiting the availability of growth capital for startups. A business association from 
Germany highlighted this issue pointing to the fact that European pension funds have assets 
of over a trillion euros but are limited in their investments in technology startups.  

Additionally, the bureaucratic and administrative burdens associated with accessing public 
funding are seen as significant obstacles. The lengthy and complex application processes 
deter many startups from seeking EU funding, as noted by a company from Sweden who 
expressed that the complexity and lack of transparency in identifying and accessing EU 
funding opportunities creates further obstacles. This issue is compounded by the lack of 

51 

 
 
 
tailored financial instruments that align with the dynamic nature of startups, which often 
require rapid deployment of funds to seize market opportunities.  

Another  critical  hurdle  is  the  lack  of  a  well-developed  secondary  market,  which  limits 
liquidity  and  exit  opportunities  for  investors.  The  absence  of  a  unified  stock  market 
framework further complicates the situation, as noted by a business association from Italy 
which  put  forward  that  European  markets  which  account  for  over  200  trading  venues 
should aim at establishing a unified stock market framework.  

The regulatory landscape is another significant barrier in the context of access to finance, 
with stakeholders highlighting the complexity and inconsistency of regulations across EU 
member  states.  This  fragmentation  not  only  discourages  cross-border  investments  and 
scaling  efforts.  A  company  from  the  Netherlands  emphasised  that  inconsistency  of 
regulations  and  complexity  across  EU  Member  States  increases  operational  costs  and 
slows down expansion. This sentiment is echoed by many stakeholders who argue that a 
more  harmonised  regulatory  framework  is  essential  to  facilitate  growth  and  attract 
international investors.  

3.1.3.  Actions Identified 

To  address  these  challenges,  stakeholders  have  proposed  a  range  of  actions  aimed  at 
enhancing access to finance for startups and scaleups. A common suggestion is the creation 
of a more integrated and supportive venture capital ecosystem, with several stakeholders 
advocating for the establishment of pan-European venture capital funds.  

Another  proposed  solution  is  to  increase  the  involvement  of  institutional  investors  in 
venture  capital  markets.  Stakeholders  have  recommended  policy  changes  to  incentivise 
pension funds and insurance companies to allocate more capital to high-growth sectors. In 
this context, some stakeholders emphasise the need to unlock EU institutional investments, 
including insurers, banks, and pension funds to boost the availability of growth capital. 

In addition to these structural changes, stakeholders have highlighted the importance of 
streamlining  public  funding  processes  to  make  them  more  accessible  to  startups. 
Simplifying  application  procedures  and  reducing  administrative  burdens  are  seen  as 
essential  steps  to  encourage  more  startups  to  seek  EU  funding. A  company  from  the 
Netherlands  underlined  simplifying  the  EU  funding  process,  reducing  unnecessary 
complexity to facilitate access to financial resources.  

Tax incentives are also seen as a crucial tool to stimulate investment. Certain stakeholders 
advocated  for  support  tax  incentive  schemes  for  angel  investment  and  cross-border 
investment. This  sentiment  is  echoed  by  other  stakeholders  who  highlight  the  need  for 
fiscal measures to attract both domestic and international investors.  

The development of secondary markets is also prioritised as a means to enhance liquidity 
and provide exit opportunities for investors. A business association from Italy suggested 
that the secondary markets in the EU must be developed in a way to provide liquidity for 
early investors. This action is seen as critical to attracting more substantial investments and 
enabling startups to scale effectively.  

Regulatory reforms are also seen as crucial to improving access to finance. Stakeholders 
have  called  for  the  harmonisation  of  regulations  across  member  states  to  reduce 
52 

 
 
compliance costs and facilitate cross-border investments. Several stakeholders suggested 
that harmonising business law at European level to enable a more seamless internal market. 
This would not only simplify the regulatory landscape but also enhance the attractiveness 
of the EU as a destination for global investors.  

The feasibility and potential impact of these proposed actions vary, with some stakeholders 
expressing concerns about the implementation challenges. For instance, while the idea of 
a pan-European venture capital fund is widely supported, there are questions about how 
such a fund would be structured and governed to ensure equitable access across member 
states. Similarly, regulatory harmonisation is seen as a complex undertaking that requires 
careful coordination among national governments.  

Overall, the feedback underscores the need for a comprehensive and coordinated approach 
to  improving  access  to  finance  for  startups  and  scaleups  in  the  EU.  By  addressing  the 
identified  hurdles  and  implementing  the  proposed  actions,  the  EU  can  create  a  more 
conducive  environment  for  innovation  and  growth,  ultimately  enhancing  its  global 
competitiveness.  

3.2. 

Regulatory and Bureaucratic Burdens 

3.2.1 Overview 

The  regulatory  and  bureaucratic  burdens  faced  by  startups  and  scaleups  in  the  EU  are 
multifaceted  and  deeply  entrenched,  as  evidenced  by  the  feedback  from  various 
stakeholders. These burdens are primarily characterised by fragmented regulations across 
member states, complex compliance requirements and a lack of harmonised frameworks 
that  hinder  the  seamless  operation  and  growth  of  startups  across  the  EU.  Stakeholders, 
including  business  associations,  companies,  and  academic  institutions,  consistently 
highlight these issues, emphasising the need for a more unified and streamlined regulatory 
environment.  The  challenges  are  compounded  by  the  diverse  regulatory  landscapes  in 
different member states, which create significant barriers to market entry and expansion 
for startups and scaleups. The proposed actions to address these hurdles focus on regulatory 
harmonisation and simplification of compliance processes. 

3.2.2. Hurdles Identified 

The  regulatory  and  bureaucratic  burdens  faced  by  startups  and  scaleups  in  the  EU  are 
primarily driven by the fragmentation of regulatory frameworks across member states. This 
fragmentation  creates  a  complex  and  often  contradictory  landscape  that  startups  must 
navigate, leading to increased compliance costs and administrative burdens. Stakeholders 
noted  that  the  fragmented  regulatory  landscape  in  the  EU  with  27  national  regimes  of 
company  law,  insolvency  law,  and  taxation  creates  significant  barriers  to  scaling.  This 
sentiment is echoed by a company in France, which highlighted the complex and time-
consuming  regulatory  and  compliance  procedures  that  delay  market  entry  and  place  an 
extra burden on young companies.  

Moreover, the feedback indicates that the regulatory environment is often not conducive 
to  the  needs  of  startups  and  scaleups.  Many  stakeholders  have  expressed  concerns  that 
existing regulations are overly restrictive and not tailored to the unique challenges faced 
by  these  companies.  For  example,  one  stakeholder  noted  that  startups  have  difficulties 
understanding the complexity of the applicable legislation for bringing new products to the 

53 

 
 
market. This sentiment is shared by others who argue that the regulatory framework needs 
to be more flexible and supportive of innovation.  

The  lack  of  a  unified  regulatory  framework  is  particularly  challenging  for  startups 
operating  in  highly  regulated  sectors  such  as  biotechnology,  energy,  and  digital 
technologies.  A  business  association  in  Belgium  pointed  out  that  biotech  companies 
accessing EU markets  face a  fragmented and inconsistent regulatory framework, which 
creates delays and hampers access to the EU Single Market. Similarly, it was emphasised 
the  need  for  streamlined  permitting  and  standardized  licensing  processes  for  frontier 
technologies to remove uncertainty and accelerate deployment.  

The  complexity  of  regulatory  requirements  is  further  exacerbated  by  the  lack  of  full 
harmonisation in areas such as intellectual property (IP) protection, taxation, and labour 
laws. A company in the Netherlands highlighted that divergent tax, legal and banking rules 
complicate  scaling  across  the  EU.  This  lack  of  harmonisation  not  only  increases 
operational costs but also discourages cross-border investment and collaboration. Further, 
a  business  association  in  France  noted  that  the  fragmentation  of  European  tax  regimes 
creates a major barrier to the growth and development of scaleups. 

3.2.3 Actions Identified 

To  address  the  regulatory  and  bureaucratic  burdens  faced  by  startups  and  scaleups, 
stakeholders  have  proposed  a  range  of  actions  aimed  at  harmonising  and  simplifying 
regulatory frameworks across the EU. A common theme among the proposed actions is the 
need for a 28th regime or a unified legal framework that would provide a consistent set of 
rules for startups and scaleups across all member states. A business association in Belgium 
suggested  that  establishing  a  dedicated  28th  regime  to  harmonise  essential  regulatory 
standards  across  the  Union  would  simplify  the  establishment  or  relocation  of  startups 
anywhere within the EU. This sentiment is echoed by many others who emphasise the need 
for a more unified and predictable regulatory environment. 

In  addition  to  harmonisation,  stakeholders  emphasise  the  importance  of  simplifying 
compliance processes to  reduce administrative burdens. A company in  France proposed 
streamlining regulatory processes to reduce financial risks and attracting more investors to 
the region.  Similarly, a business  association in Germany recommended  simplifying and 
harmonising EU rules to foster a more agile regulatory environment.  

The  establishment  of  regulatory  sandboxes  is  another  proposed  action  to  support 
innovation  and  entrepreneurship.  A  company  in  Germany  suggested  expanding  and 
harmonising sector-specific regulatory sandboxes to allow startups to assess innovations 
in  a  controlled  environment.  This  sentiment  is  echoed  by  others  who  believe  that  this 
approach  would  provide  startups  with  the  flexibility  to  experiment  with  new  business 
models  and  technologies  without  being  constrained  by  existing  regulations.  Similarly, 
additional  forms  of  experimentation  might  be  considered  to  enable  regulatory  learning 
more generally.187 

187 This approach has been first proposed in EC (2022) ”Regulatory learning in experimentation spaces”, JRC Science 
for  Policy  Brief (https://publications.jrc.ec.europa.eu/repository/handle/JRC130458),  and  has  been  taken  up  and 
extended  in EC  (2023)  ”Regulatory learning  in  the  EU”,  Commission  Staff  Working  Document, SWD(2023) 277/2 
final.  

54 

 
 
 
Furthermore, stakeholders advocate for the creation of a pan-European digital platform to 
facilitate access to regulatory information and support services. A business association in 
Belgium  proposed  creating  a  single  online  portal  where  startups  can  access  all  the 
information and services they need to operate in the EU. This platform would serve as a 
one-stop  shop  for  startups,  providing  them  with  the  resources  and  guidance  needed  to 
navigate the complex regulatory landscape.  

Overall, the proposed actions reflect a strong consensus among stakeholders on the need 
the 
for  regulatory  harmonisation,  simplification  of  compliance  processes  and 
establishment  of  supportive  mechanisms  to  foster  innovation  and  entrepreneurship.  By 
addressing these regulatory and bureaucratic burdens, the EU can create a more conducive 
environment for startups and scaleups to thrive and compete on a global scale.  

3.3. 

Access to Markets 

3.3.1.  Overview 

The Access to Markets area presents a complex landscape of hurdles and proposed actions, 
reflecting the diverse perspectives of stakeholders across the EU. Stakeholders, including 
companies, business associations, NGOs, and public authorities, consistently highlight the 
challenges posed by access to markets, particularly through procurement. These hurdles 
are intricately linked to the proposed actions, which emphasise streamlined administrative 
processes and enhanced public procurement opportunities. The feedback reveals a shared 
understanding  among  stakeholders  that  addressing  these  issues  is  crucial  for  enabling 
startups and scaleups to thrive in the EU market.  

3.3.2.  Hurdles Identified 

A significant hurdle identified by stakeholders is public procurement where startups face 
significant challenges. Despite the potential opportunities it offers, participation in public 
procurement processes remains low due to complex application procedures and stringent 
financial requirements. This sentiment is echoed by several stakeholders who emphasise 
the need for more startup-friendly procurement policies that reduce administrative barriers 
and encourage innovation.  

The  lack  of  harmonised  standards  and  certifications  across  member  states  further 
complicates  market  access  for  startups. This  issue  is  particularly  pronounced  in  sectors 
such  as  cybersecurity,  where  companies  must  navigate  different  national  standards  and 
certifications,  increasing  costs  and  slowing  down  growth. A  stakeholder  from  Belgium 
pointed out that cybersecurity startups face complex and diverse regulatory frameworks 
across Europe, requiring them to navigate different national standards and certifications. 
This  regulatory  diversity  not  only  hampers  innovation  but  may  also  place  European 
startups at a disadvantage compared to their international counterparts.  

Another major hurdle is the lengthy and cumbersome approval processes that startups must 
navigate to bring new products and services to market. The feedback highlights that these 
processes are often slow and resource-intensive, creating a significant unjustified barrier 
to  innovation.  For  instance,  one  stakeholder  remarked  that  the  timeline  foreseen  from 
submission to final decision - can substantially and unduly delay the implementation of 
projects. This delay is said to not only hampers the ability of startups to compete effectively 

55 

 
 
 
but  also  discourages  them  from  pursuing  innovative  projects  in  the  EU  that  require 
regulatory approval.  

Additionally,  the  slow  pace  of  regulatory  adaptation  and  the  preference  for  incumbent 
solutions  in  procurement  structures  create  significant  barriers  to  market  entry  for 
innovative, software-driven technologies. A stakeholder from Belgium noted that the slow 
pace of regulatory adaptation and procurement structures that favour incumbent solutions 
over innovative, software-driven technologies create a significant barrier to market entry. 
This  highlights  the  need  for  a  more  dynamic  regulatory  environment  that  supports  the 
deployment of cutting-edge technologies.  

3.3.3.  Actions Identified 

To address the hurdles identified, stakeholders propose a range of actions aimed at creating 
a more conducive market environment for startups and scaleups.  

Enhancing public procurement processes to be more inclusive of startups is another widely 
supported action. Stakeholders propose the introduction of innovation procurement quotas 
and the promotion of more startup-friendly procurement policies that prioritise innovative 
solutions. A stakeholder from  Belgium  emphasized the importance of leveraging  public 
procurement to support startup growth through the use of strategic purchasing power to 
promote  European  industry  by  mandating  European  participation  in  procurement 
processes.  This  approach  should  not  only  foster  innovation  but  also  strengthen  the 
competitiveness of European startups.  

Furthermore, stakeholders advocate for the establishment of sector-specific incubators and 
accelerators  to  support  startups  in  navigating  market  entry  challenges. These  initiatives 
would provide mentorship, expert advice and access to essential resources, helping startups 
grow in diverse markets. In this context, a stakeholder from Belgium proposed the creation 
of a European network of sector-specific incubators and accelerators to support startups 
and  scaleups.  Such  a  network  would  facilitate  knowledge  exchange  and  collaboration, 
enhancing the market readiness of startups.  

Streamlining approval processes is also a key area of focus for stakeholders. Many have 
called  for  faster  and  more  efficient  approval  mechanisms  to  reduce  the  time  and  cost 
associated with bringing new products to market. One stakeholder remarked that making 
the  authorisation  process  smoother  and  quicker  is  an  absolute  necessity.  This  call  for 
streamlined processes is supported by others who argue that reducing bureaucratic hurdles 
is essential for fostering a more dynamic and competitive startup ecosystem. 

Overall, the proposed actions reflect a strong consensus among stakeholders on the need 
for streamlined procurement processes and targeted support for startups. These measures 
are seen as essential for creating a more integrated and competitive market environment 
that enables startups and scaleups to thrive in the EU.  

3.4.  Access to Talent 

3.4.1.  Overview 

The issue of access to talent is a multifaceted challenge that affects startups and scaleups 
across  the  EU.  Stakeholders  from  various  sectors,  including  businesses,  academic 
56 

 
 
 
institutions,  and  public  authorities,  have  highlighted  the  critical  need  for  a  more 
streamlined  and  supportive  environment  to  attract  and  retain  skilled  professionals.  The 
hurdles  identified  include  complex  administrative  requirements,  fragmented  regulatory 
landscapes  and  insufficient  support  for  creating  an  entrepreneurial  culture.  Proposed 
actions  to  address  these  challenges  focus  on  simplifying  visa  processes,  harmonising 
regulations and enhancing educational and training programs to better align with industry 
needs.  

3.4.2.  Hurdles Identified 

The  hurdles  related  to  access  to  talent  are  deeply  intertwined  with  regulatory  and 
bureaucratic complexities. A significant  concern  is  the administrative burden associated 
with hiring skilled workers from outside the EU. Lengthy visa procedures and the lack of 
mutual recognition of qualifications across member states create barriers that hinder the 
mobility of talent. One stakeholder noted that the lengthy visa procedures for non-EU talent 
make it difficult for startups to recruit globally, limiting their ability to scale efficiently. 
This  sentiment  is  echoed  by  others  who  emphasise  the  need  for  a  unified  approach  to 
streamline these processes.  

Another  critical  issue  is  the  shortage  of  skilled  professionals  in  key  sectors  such  as 
technology and engineering. The responses reveal a persistent gap in the availability of 
talent, which is exacerbated by the competition from larger companies and other countries. 
A stakeholder from Belgium highlighted the skills shortage as a major barrier, noting that 
the machine tool industry faces a significant shortage of skilled professionals, particularly 
in mechanical and electrical engineering, automation, robotics, and IoT. This shortage is 
not only a challenge for startups but also a threat to the broader innovation ecosystem in 
Europe.  

Cultural and structural barriers also play a role in limiting access to talent. The lack of an 
entrepreneurial culture in some regions, coupled with a risk-averse mindset, discourages 
individuals  from  pursuing  careers  in  startups.  According  to  some  stakeholders,  this  is 
particularly evident in countries like Italy, where stakeholders have pointed out the lack of 
entrepreneurial  culture  and  a  risk-taking  mindset  as  significant  hurdles.  Additionally, 
gender disparities and the underrepresentation of women in  leadership positions further 
compound the challenges of attracting diverse talent pools.  

The  fragmentation  of  regulatory  frameworks  across  the  EU  is  another  hurdle  that 
complicates talent acquisition. Different labour laws, tax systems and stock option policies 
across  member  states  create  inconsistencies  that  make  it  difficult  for  startups  to  offer 
competitive  compensation  packages.  A  stakeholder  from  Estonia  noted  that  European 
startups  struggle  to  hire  employees  from  other  EU  member  states  due  to  differences  in 
labour laws and tax systems. This fragmentation not only affects the ability to attract talent 
but also limits the potential for cross-border collaboration and innovation.  

3.4.3.  Actions Identified 

To address the challenges related to access to talent, stakeholders have proposed a range 
of actions aimed  at  creating  a more conducive  environment  for attracting and  retaining 
skilled professionals.  

57 

 
 
One of the most widely supported actions is the simplification of visa and work permit 
processes.  Stakeholders  advocate  for  the  introduction  of  an  EU-wide  startup  visa  that 
would streamline the process and make it easier for startups to recruit international talent. 
One stakeholder put forward that a fast-track EU-wide tech visa would allow companies 
to recruit top talent globally.  

Harmonising  regulations  across  member  states  is  another  key  action  that  has  garnered 
broad support. By creating a unified legal framework, the EU can reduce the complexity 
and administrative burden associated with hiring talent across borders. This would involve 
aligning  employment  and  stock  option  rules  to  make  it  easier  for  startups  to  offer 
competitive  compensation  packages.  Some  stakeholders  emphasised  that  the  need  for  a 
harmonised stock options regime across the EU to facilitate talent mobility and retention.  

Enhancing educational and training programs to better align with industry needs is also 
seen as a crucial step in addressing the talent gap. Stakeholders have called for increased 
investment in vocational education and training (VET) programs, particularly in fields like 
technology and engineering. This would help develop a pipeline of skilled professionals 
who are equipped to meet the demands of the startup ecosystem. One stakeholder from 
Belgium noted that vocational education should be modernised to align with Industry 4.0 
requirements.  

In addition to these actions, stakeholders have highlighted the importance of fostering an 
entrepreneurial culture and promoting diversity within the startup ecosystem. This includes 
initiatives to support underrepresented groups, such as women and migrants, and to create 
a more inclusive environment that encourages diverse talent to thrive. A stakeholder from 
Austria suggested the launch of entrepreneurial education programs specifically targeting 
women and young entrepreneurs as a way to address these disparities.  

Overall, simplifying visa processes and harmonising regulations would not only make it 
easier  for  startups  to  attract  talent  but  also  enhance  the  overall  competitiveness  of  the 
European innovation ecosystem. By investing in education and promoting diversity, the 
EU can build a more resilient and dynamic workforce that is capable of driving innovation 
and growth. As stakeholders have emphasised, these actions are essential for ensuring that 
Europe remains an attractive destination for top talent and a leader in the global startup 
landscape.  

3.5.  Access to Infrastructure, Knowledge and Services 
3.5.1.  Overview 

The feedback from stakeholders regarding access to infrastructure, knowledge and services 
reveals  a  complex  landscape  of  challenges  and  proposed  solutions.  Stakeholders  from 
various  sectors,  including  business  associations,  academic  institutions,  and  NGOs, 
consistently highlight the critical role of infrastructure and knowledge access in fostering 
innovation  and  growth  for  startups  and  scaleups. The  hurdles  identified  include  limited 
access  to  research  facilities,  fragmented  support  services  and  insufficient  knowledge 
transfer mechanisms. Proposed actions to address these challenges emphasise the need for 
harmonised  regulatory  frameworks,  enhanced  collaboration  between  academia  and 
industry  and  improved  funding  mechanisms  to  support  infrastructure  development  and 
knowledge dissemination.  

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3.5.2.  Hurdles Identified 

A  recurring  theme  in  the  feedback  is  the  limited  access  to  research  and  technology 
infrastructure, which is a significant barrier for startups and scaleups. Stakeholders from 
various sectors, including business  associations and academic institutions, highlight the 
challenges in accessing specialised facilities and services necessary for innovation. This 
challenge is particularly pronounced in sectors requiring specialised facilities, such as deep 
tech  and  biotechnology.  For  instance,  one  stakeholder  from  a  business  association  in 
Belgium noted that access to specialized industrial facilities such as CNC labs, robotics 
testing centres and 3D printing hubs is essential for startups. This sentiment is echoed by 
other stakeholders who emphasise the need for better access to infrastructure to support 
the commercialisation of innovations.  

The  issue  of  limited  access  to  research  and  technology  infrastructure  is  particularly 
pronounced  for  deep-tech  and  high-tech  startups.  Companies  in  Sweden  and  Finland 
highlight the scarcity of specialised facilities and the high costs associated with accessing 
existing  infrastructure,  which  impede  innovation  and  growth.  This  challenge  is 
compounded by the lack of awareness and understanding of available resources, as noted 
by stakeholders  from academic institutions in Austria and Belgium,  who emphasise the 
need for better integration and visibility of research and technology infrastructures. 

The  fragmentation  of  support  services  and  the  lack  of  coordination  among  different 
initiatives  are  also  identified  as  major  hurdles.  An  academic  institution  from  the 
Netherlands pointed out that the limited - and often challenging - collaboration pathways 
between the academic and entrepreneurial sectors represent another critical barrier. This 
fragmentation  leads  to  inefficiencies  and  missed  opportunities  for  startups  to  leverage 
existing resources effectively. The feedback suggests that a more integrated approach to 
service  provision,  with  clear  pathways  for  collaboration  and  knowledge  transfer,  is 
essential to overcome these challenges.  

Another significant hurdle is the difficulty in accessing knowledge and support services, 
which  are  crucial  for  the  commercialisation  and  scaling  of  innovations.  Stakeholders 
express  concerns  about 
limited  availability  of  mentorship  and  networking 
opportunities, which are essential for startups to navigate complex business landscapes and 
access  new  markets.  The  lack  of  coordinated  support  for  small  and  micro-enterprises 
further exacerbates this issue, as these businesses often struggle to access the necessary 
resources and guidance to succeed. 

the 

The  feedback  also  highlights  the  challenges  associated  with  intellectual  property  (IP) 
management  and  protection.  Stakeholders  from  various  sectors,  including  business 
associations and companies, point out that the complexity and cost of securing IP rights 
deter  many  startups  from  pursuing  innovation.  This  issue  is  particularly  acute  for 
technology-driven  sectors,  where  the  protection  of  innovations  is  critical  for  attracting 
investment and ensuring competitiveness.  

The lack of a unified framework for accessing infrastructure and services across the EU is 
also a critical issue. Stakeholders note that the existence of 27 distinct national regulatory 
frameworks  hinders  the  ability  of  startups  to  access  the  necessary  infrastructure  and 
services to scale effectively across borders.  

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3.5.3.  Actions Identified 

To  address  the  identified  hurdles,  stakeholders  propose  a  range  of  actions  aimed  at 
enhancing access to infrastructure, knowledge, and services.  

A  common  theme  in  the  feedback  is  the  need  for  a  more  coordinated  and  integrated 
approach  to  infrastructure  and  service  provision.  Some  stakeholders  advocated  for  the 
establishment  of  a  unified  framework  that  facilitates  access  to  research  facilities  and 
support services across the EU. This includes the development of centralised platforms that 
provide  information  on  available  resources  and  streamline  access  to  essential  services. 
Additionally,  the  creation  of  regional  innovation  hubs  and  incubators  is  proposed  to 
provide  startups  with  access  to  essential  resources  and  support  services.  Stakeholders 
propose  the  development  of  shared  facilities  and  testbeds  that  startups  can  access  to 
validate and scale their technologies.  

Stakeholders  emphasise  the  importance  of  enhancing  collaboration  between  academia, 
industry  and  startups  to  improve  knowledge  transfer  and  commercialization. Academic 
institutions  in Austria  and  Belgium  suggest  the  creation  of  dedicated  programmes  that 
foster  partnerships  between  universities  and  businesses,  enabling  startups  to  leverage 
academic research and expertise. Stakeholders highlight the need for targeted funding for 
university-startup collaboration and support for technology transfer initiatives to develop 
deep-tech startups and create knowledge-sharing and mentorship networks. 

To  address  the  challenges  associated  with  IP  management,  stakeholders  propose  the 
implementation of streamlined and cost-effective IP protection mechanisms. Overall, the 
proposed actions reflect a comprehensive approach to addressing the challenges faced by 
startups and scaleups in  accessing infrastructure, knowledge, and services. By fostering 
collaboration, improving regulatory frameworks, and enhancing access to resources, the 
EU can create a more supportive environment for innovation and growth. 

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