The following article is an abstract of the publication ‘Europe is back: Accelerating Breakthrough innovation - Full set of recommendations from the Independent High-Level Group of Innovators on establishing a European Innovation Council
Few of the global tech companies that emerged over the past 20 years come from Europe. Why is that? There are well-known reasons why breakthrough innovators find it hard to start up and then scale up their businesses in Europe: universities lack expertise; adverse attitudes to entrepreneurship; thin and fragmented venture capital markets; the incomplete single market; hard to access talent; regulatory barriers. And many more. Subsequently many promising European start-ups relocated their business to the US where the level of venture capital funding is five times greater than in Europe.
The members of the High-Level Group of Innovators identified 4 factors that hold back breakthrough and deep tech innovation in Europe and described how to overcome these difficulties.Funding
Breakthrough innovation, in particular deep tech, requires large investments, over a significant time period. This is the kind of finance that is missing in Europe and presents a systemic failure: venture capital is too small, fragmented, short-term, concentrated on the digital sector, not enough oriented towards deep-tech. It lacks a critical mass for patient capital. Bank lending, Europe’s predominant investment channel and inherently risk averse, is not adept at supporting breakthrough and deep-tech innovation. Public support for innovation – including EU support – is perceived as complex, slow, designed for R&D, and fails to bridge the gap to private investment.What can the EIC do?
1. Rationalise the existing multitude of schemes with a small set of ‘EIC Awards’ that target breakthrough & deep-tech innovation differentiated by:
- Early stage technology and technology commercialisation (feasibility & commercial pathways, development of full-scale commercial models).
- Acceleration and scale-up (market introduction, expansion and growth).
2. Enable EIC Awards to blend forms of funding — grants, loans and equity investments – to incentivise, align and amplify private investment.
3. Create an EIC strategic advisory board to ensure a continuous focus on the innovators and adaptation to new trends. This should involve leading innovative entrepreneurs, universities, research organisations, venture capitalists, other investors (business angels, banks, etc.), and corporates.
4. Change evaluation and selection processes to enable risk-taking and align with incentives and capabilities of private investors. Use face to face interviews to identify the people who have what it takes to build and grow successful companies. Introduce flexibility to stop an Award or change its focus.
Europe needs a flagship initiative on breakthrough innovation that can attract the best innovators and connect local and sectorial ecosystems.
What can the EIC do?
5. Design EIC websites, application forms, etc. focusing on the needs of innovators, and minimise administrative and financial reporting.
6. Set up a comprehensive EIC monitoring and evaluation system to communicate data, findings and recommendations to a wide audience and demonstrate what EU support can accomplish.
7. Collect, analyse and make available data on new technologies, breakthrough innovations and value-chains generated in particular from EU and national programmes, combining feedback from EIC awardees with other existing data sources.
8. Communicate success-stories to a wide audience.
Europe needs continental scale to compete at global level. It cannot compete with the US or China on the basis of national and local initiatives. European start-ups should not be forced to relocate to the US to access larger financing rounds.
What can the EIC do?
9. Help EIC awardees access partners across value-chains (corporates, investors, public procurers, technology providers) and support (public, private, philanthropic) throughout the EU and internationally.
10. Continue improving access to finance and attract private funds into VC and risk finance.
11. Partner up with regional, national and international innovation-related agencies and programmes to map evolving innovation systems and services, share information and best practice.
12. Help EIC awardees overcome regulatory barriers and improve the early identification of regulatory barriers for emerging technologies.
Europe needs role models and champions. Its funding needs to empower people, create a culture of risk-taking and stimulate entrepreneurship rather than encouraging risk avoidance and paper shuffling.
What can the EIC do?
13. Introduce a prestigious “EIC Fellowship” scheme to honour and recognise Europe’s leading innovators. They would be recognised as ambassadors for innovation in Europe and play an important role in the ongoing development of an EIC. Potential EIC Fellows — no more than 30 a year — should be evaluated by a high-level selection committee against criteria covering leadership, innovativeness and impact on the innovator community.
14. Pair up EIC awardees with experienced peers who will provide trusted advice and exchange of views.
The goals of these activities are to increase the number of EU start-ups that scale up to become larger than SMEs or rather larger than small mid-caps and to gain leadership in emerging technologies. Europe should lead the way.
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