European Startup Nations Alliance – building Europe’s startup future
Last week saw an important milestone in Europe’s coordinated efforts to optimize operating conditions for startups in the continent.
Back in March, a vision of the EU Startup Nations of Excellence (EU SNS) was announced, in conjunction with an eight-point list of policy targets and priorities (the Startup Nations Standard). Now, the first steps are being taken to implement it.
3rd November at WebSummit was Day 0 for the European Startup Nations Alliance, a new body tasked with executing this vision, and measuring its success.
This isn’t just a piece of paper, but a permanent legal entity based in Lisbon, backed by an initial five-year funding runway, and a fair amount of political capital
The alliance is a country-led enterprise including 26 EU member states plus Iceland, with the backing of the European Commission, and an open invite to the broader startup ecosystem for feedback, prioritization and collaboration.
As they set off on their mission to make Europe the best place to start and scale a company, we’ve taken a look at their first eight targets (full details here).
1. Fast startup creation, smooth market entry
One-day legal entity registration for under €100, startup admin support, and cross-border document recognition.
Starting a business remains a relatively cost and energy-intensive endeavour in most of Europe. The World Bank’s latest (and last) issue of the Doing Business Report doesn’t feature any EU member state in its global top ten of the Starting a Business metric. It takes eight times longer to start a business in Greece, which is the EU’s highest ranking country on this metric (11th worldwide), than in New Zealand.
2. Attracting and retaining talent
Founders and senior tech talent to have visas processed within 1 month. Incentivising repatriating talent.
A number of European countries already offer dedicated startup/tech visas for high-skilled talent, founders and investors. SME international hiring consultancy Nanoglobals have an overview of them here. But further continental expansion, fast-streaming, process simplification and awareness required.
There’s also an intriguing plan to incentivize tech talent to return to the EU, which the UK might take interest in.
3. Stock options
Improving and simplifying employee stock options treatment.
Time and time again this is mentioned by industry participants as a key issue. Employee ownership of startups is essential to fostering self-sustaining startup ecosystems. Many successful founders and investors come directly from the teams of previous success stories. Exit talent and capital being recycled into the ecosystem creates a snowball or flywheel effect, to accelerate an ecosystem.
Index Ventures have done extensive work on this topic, and currently track countries on the key differences in stock options schemes in different countries.
4. Innovation in Regulation
Regulatory sandboxes and early-stage red tape exemptions.
Europe has led in key areas on digital legislation (e.g. GDPR, Digital Single Market and upcoming Digital Services Act). As new sectors continue to evolve and emerge, regulatory certainty is crucial for startups to be able to start operating without having to wait years for regulators. Regulatory sandboxes around the world have produced leading regulation in fintech, lawtech, crypto and other areas, in parallel to startups scaling up.
5. Innovation procurement
Easing public procurement from startups, tech transfer conditions and spinouts.
Every year, governments spend over $9.5 trillion through contracts, and governments can be important early partners for startups with public applications.
Improving competition in public procurement, and reducing administrative tender burden which is most painful for SMEs, will unlock the most innovative solutions for governments, no matter the size of the company providing them.
We also know that many innovative businesses emerge from leading research in European universities (see German Covid vaccine developer BioNTech), and optimizing the conditions for breakthroughs to be successfully commercialized is crucial. Air Street Capital have begun crowdsourcing IP transfer terms on spinouts.fyi, and European spinouts are now tracked on Dealroom.
6. Access to Finance
Recovery fund access for startups and VC, fund of fund provisions, pension fund access to venture, and Angel tax relief.
There are a myriad of levers that countries take advantage of to increase startups’ access to capital. Here are a few as compared across a number of mature startup ecosystems.
Europe remains neutral ground in terms of international investment, attracting investors from the US and China as well as domestic funds. European startups have raised over €30B from US investors just this year, and raise a higher proportion of capital from Asia than the US does. This can be an area of political debate, but undoubtedly a strategic difference that Europe holds over the US or China.
7. Social inclusion, diversity, and protecting democratic values
Underrepresented founder support, diversity hiring incentives, championing success.
Tech has a diversity problem. Our research found that in the Nordics, 85% of all startup funding goes to startups with all-male founding teams. In Central and Eastern Europe the figure is 94%, and little improvement can be seen over the last five years.
Diversity also means more than just gender, and a big diversity data gap exists in the industry. We recently launched an initiative to help improve transparency on the scale of the problem – more on that here.
Digitization of government services.
The UK was the first country to develop a Government Digital Service, a large scale project to transfer all citizen-government interactions to “digital by default”. This means allowing people to do everything from pay taxes, process visas, renew driving licences, access housing, and set up businesses via a portal with consistent user journeys, and no need for paper forms.
Many countries have subsequently followed suit, with the result of improving efficiency, compliance and civil literacy.
Our European Startups project, in partnership with Sifted, and supported by the European Commission, aims to facilitate an informed conversation about what it takes to bring Europe’s startup economy to the next level through online data, research and events. And these tangible goals, with a dedicated entity backing, are a huge step for startup support in Europe.
These goals will take more than one body to achieve. It takes an ecosystem to raise a startup culture, and the ESNA will need feedback and data on their progress from all of us. We’re interested in multiplying rather than duplicating efforts, so count us in for the journey.