EU aims to cut red tape, boost funding to lure tech startups

Mint

5 days ago

The European Union set out plans to slash regulation and set up a special fund to attract tech startups as the bloc plays catchup with the U.S. on financing and innovation.
The European Commission, the EU's executive arm, said regulatory fragmentation across the EU's 27 countries and inadequate financing were holding back growth for startups. Officials now hope to lower the administrative burden and launch a new fund to make it easier for startups to set up shop in the EU.
Under the plans, the commission will seek to simplify rules, including on labor and tax law, so that startups can launch rapidly in Europe, ideally within 48 hours. Officials also plan to work with private investors to launch a new fund. The so-called Scaleup Europe Fund, privately managed and co-financed, will be part of the existing European Innovation Council Fund.
'We cut red tape, we facilitate their access to financing, we improve their ability to do business across our Single Market," Stephane Sejourne, EU executive vice-president for prosperity and industrial strategy, said in a statement. 'In other words, we want to put Europe right in the middle of the global innovation map, for companies and investors."
The plan underscores efforts from EU officials to make the bloc more welcoming for startups and narrow the financing and innovation gap with the U.S. The EU is home to startups like France's Mistral AI and Germany's Aleph Alpha, but companies in the bloc struggle to raise the billions of dollars in funding and venture capital that are available to U.S. rivals like Microsoft-backed OpenAI or Amazon.com-backed Anthropic.
A commission official acknowledged that access to finance is an area of weakness, saying that startups in the bloc have roughly seven times less capital available to grow than in the U.S. Speed is another factor holding back growth, the official said, noting the EU can be 'very slow" in granting approvals.
Europe's fragmented regulatory landscape is a recurring frustration for startups, but fundraising remains the top concern for founders, according to a May report from Slush, part of the Finnish not-for-profit Startup Foundation.
Out of 607 responses from early-stage European startups collected in the first quarter, just 18% of founders said it would be easy to raise financing right now, according to the report, while 57% actively disagree.
Ekaterina Zaharieva, EU commissioner for startups, research and innovation, said the plans would remove those barriers that hold back entrepreneurs. 'Europe is ready to scale up."
Write to Mauro Orru at [e-mail]