As Europe charts its economic future amid global uncertainties, the European Commission’s new Startup and Scaleup Strategy signals a pivotal shift in how innovation is conceived—not only as a commercial activity, but as a core strategic asset underpinning EU sovereignty, resilience, and growth
Released as an EU-level communication, the Strategy outlines concrete instruments to support startups and scaleups across sectors—particularly those in deep tech, climate, AI, and digital infrastructure. Its emphasis on regulatory adaptation, market integration, and access to capital offers far-reaching implications for public sector decision-makers, research institutions, and innovation policy advocates.
This is not merely another innovation roadmap—it is Europe’s most deliberate attempt to close the “execution gap” between research excellence and commercial scale.
Bridging the innovation execution gap
The EU has long demonstrated strong capabilities in fundamental research. It produces more scientific publications than any other global bloc and leads in sectors like aerospace, green technologies, and urban sustainability.
Yet, this success in research has not translated into economic leadership in startup or scaleup performance. Europe accounts for just 7% of global unicorns, despite producing 25% of the world’s scientific output.
The EU Startup and Scaleup Strategy identifies this as the “double valley of death” problem:
- First, at the product-market fit stage (startup phase)
- Second, at the growth and international expansion stage (scaleup phase)
This misalignment between public research outputs and private innovation outcomes stems from structural issues:
- Fragmented regulations across Member States
- Risk-averse public procurement systems
- Underdeveloped capital markets for late-stage investment
- Restrictive talent and mobility frameworks
The Strategy proposes a policy overhaul to address these challenges—making innovation readiness a central concern of EU governance.
Infrastructure as an innovation catalyst
Perhaps the most transformative element of the strategy lies in how it views infrastructure not merely as a physical backbone, but as a living platform for innovation.
The Commission introduces a Charter of Access to Public R&D Infrastructure, ensuring that startups and scaleups can access:
For example, a startup developing generative design tools for sustainable construction—or AI systems for predictive maintenance in transport—could be granted access to relevant EU-funded research labs, pilot sites, or digital twin simulations under the Charter.
The Charter echoes earlier calls from Horizon Europe and the European Research Area (ERA) for infrastructure openness. It positions R&D infrastructure as an enabler of market validation, not just scientific excellence.
Regulatory sandboxes and innovation stress tests
A recurring theme in the Strategy is regulatory elasticity: the ability of policy frameworks to evolve in tandem with rapid technological progress.
The Strategy proposes:
- Pan-European regulatory sandboxes, where startups can test innovations in real-world contexts while receiving supervisory guidance
- Voluntary innovation stress tests for Member States, to evaluate how national laws may unintentionally stifle innovation
For sectors like smart mobility, energy retrofitting, and public-sector digital services, these instruments will be invaluable. They also mirror global best practices in countries such as the UK, where sandbox models have proven effective in fintech, medtech, and construction technology.
Importantly, the EU model intends to standardise sandbox availability across Member States, promoting a predictable regulatory environment and supporting cross-border scalability.
Innovation-friendly procurement: Europe as a first buyer
European public procurement—representing nearly 14% of GDP—is a sleeping giant in the innovation ecosystem. Yet, legacy frameworks have made it difficult for startups to break into procurement cycles dominated by incumbents.
The Strategy tackles this head-on by:
- Expanding pre-commercial procurement (PCP) frameworks
- Encouraging contracting authorities to act as launch customers
- Revising directives to limit overspecification and open space for innovation-driven criteria
This approach also complements the EU’s Green Deal, where the deployment of innovative, sustainable solutions in energy, transport, and construction is essential to meet climate targets.
Public authorities—especially local governments and infrastructure agencies—are encouraged to integrate these innovation-enabling procurement tools into their pipelines, making “Europe a home market for innovation.”
Capital market integration and the scaleup Europe fund
Access to finance remains one of the most cited challenges by EU scaleups. Venture capital markets in Europe are smaller, less liquid, and more risk-averse than their US counterparts.
To address this, the Strategy introduces:
- A Scaleup Europe Fund, backed by the European Investment Bank (EIB), focused on deep tech, climate, and infrastructure-linked ventures
- Expansion of the TechEU platform, linking startups to investors, corporates, and public buyers
- Encouragement of syndicated late-stage investment to prevent strategic exits to non-EU buyers
This builds on the EIC (European Innovation Council)’s existing role as a venture investor, but aims to fill the late-stage gap where most scaleups exit or stagnate.
Talent mobility, stock options, and R&D commercialisation
Europe’s digital economy depends not only on startups, but on the scientists, engineers, and technologists who make innovation possible. Yet talent retention and incentivisation remain barriers to ecosystem maturity.
The Strategy calls for:
- A Blue Carpet Initiative to attract third-country digital talent
- Harmonised treatment of employee stock options across Member States, allowing scaleups to compete with US equity packages
- Academic incentives for R&D commercialisation, including new funding tracks for university-industry spinouts
This holistic approach recognises that talent, capital, and policy must align—particularly for sectors like AI, clean energy, and the digital built environment, where cross-disciplinary innovation is essential.
Implications for public administration and policymakers
For governments and EU institutions, the Startup and Scaleup Strategy offers a strategic policy toolkit with the following implications:
- Shift from passive enablers to active innovation facilitators
- Public authorities are called on to become co-creators of innovation ecosystems—through procurement, regulatory alignment, and R&D infrastructure governance.
2. Align public missions with market-building tools
- Instruments like sandboxes and first-buyer models must be synchronised with climate missions, resilience plans, and digital transition goals.
3. Embed innovation governance into strategic foresight
- The strategy encourages the use of innovation foresight tools to stress-test legal frameworks, labour policy, and public funding priorities.
A governance framework for sovereign innovation
The EU’s Startup and Scaleup Strategy is more than a communication—it is a governance framework that operationalises innovation policy across regulation, finance, and infrastructure. It embeds the EU’s ambition to be not just a research superpower, but an innovation leader.
For policymakers, the message is clear: this is not the time for fragmented or reactive approaches. Strategic alignment, policy agility, and investment coordination are essential to ensure that the next generation of European innovation is born, scaled, and retained within its borders.
This is a Europe that doesn’t just fund research—but builds futures.
