Introduction
The European Commission has announced plans to establish a public-private fund worth at least €10 billion (approximately $11.3 billion) to support the growth of European technology companies, aiming to reduce the innovation gap with the United States and China.
Background on the European Commission’s Strategy
Titled “Choose Europe to Start and Grow,” this strategy aims to address the European Union’s deficit in unicorn companies—emerging businesses valued at over $1 billion.
The EU’s executive body highlighted key challenges hindering the growth of these startups, including regulatory fragmentation across the 27 member countries and access to funding, markets, talent, and infrastructure.
Currently, venture capital in Europe is scarce for early-stage initiatives, while funding for later stages—when companies expand markets and prepare for potential IPOs—is seven times more available in the US.
Details of the Proposed Fund
The European Commission plans to create a “Scaling Up Europe Fund” next year, combining public and private components with at least four times more private money.
The fund will invest in promising companies and be managed by a private investment firm.
Although the exact amount is yet to be determined, a EU official mentioned it would be in the millions of euros.
“We don’t want it to be a drop in the ocean. We want it to make a clear difference,” said the EU official.
EU consumers hold most of their savings in banks, representing 300% of the GDP, compared to 85% for Americans.
The EU already has plans to direct private savings towards investments in companies through its “Union of Savings and Investments,” aiming to develop a more extensive private pension sector across the region.
The Commission’s strategy includes proposals to simplify regulations and reduce administrative burdens for high-tech startups, encourage public procurement participation, and accelerate the entry of founders from outside the EU.
Key Questions and Answers
- What is the purpose of the proposed fund? The European Commission aims to create a €10 billion public-private fund to support the growth of European technology companies and reduce the innovation gap with the US and China.
- What challenges does Europe face in fostering tech startups? Key challenges include regulatory fragmentation, limited venture capital for early-stage initiatives, and a significant funding gap in later stages compared to the US.
- How will the Scaling Up Europe Fund be structured? The fund will combine public and private components, with at least four times more private money. It will invest in promising companies and be managed by a private investment firm.
- Why is the EU focusing on private savings for company investments? The EU aims to develop a more extensive private pension sector and direct private savings towards investments in companies through its “Union of Savings and Investments” initiative.
- What other measures does the Commission’s strategy include? The strategy includes proposals to simplify regulations for high-tech startups, encourage public procurement participation, and accelerate the entry of founders from outside the EU.
