The fear to fail is a common trait across Europe and it poses a stumbling block for young entrepreneurs toying with the idea of creating something new.
The European mindset is generally averse to risk and Ekaterina Zaharieva, European Commissioner responsible for startups and R&I, wants to change this.
She acknowledges the problem but insists young entrepreneurs must be encouraged and supported.
“We need to teach our children and our youth that it is not that bad to fail; it’s much worse not to try,” she tells me on the fringes of the Startup Summit at the Mediterranean Conference Centre in Valletta.
She says investment in startups and R&I is a key plank in the bloc’s quest for economic and security autonomy.
Zaharieva will shortly be presenting the European Commission’s scale-up strategy for startup companies to benefit from a more uniform regulatory regime across the 27 member states. It’s not just about money, she says, but also about the speed with which technology and innovative products can reach the market.
The Bulgarian commissioner believes Europe is the best place to live. Her ambition at the end of her five-year term, she tells me, is for the bloc to become “the best place for investment, innovation, research and for the talented people to come here and develop their ideas”.
It’s a tall order indeed but in her own words it is better to act now rather than wait for the right time to come. “The right time is now,” she says.
The following is an excerpt from the interview.
Full interview can be viewed on maltatoday.com.mt and our socials.
I’ve been looking at the European Commission’s website and under the heading research and innovation there are some facts and figures – over €280 billion invested through successive framework programmes, over 120,000 grants with 75,000 beneficiaries, more than 30 Nobel prizes won by EU-funded researchers… the figures would seem impressive but the Draghi Report, published last year says EU companies spent €270 billion less than their US counterparts in 2021 on research and innovation. Draghi noted that Europe’s top three investors in R&I were automotive companies for the past 20 years. It was the same in the US in the early 2000s, but now the top three are all in tech. The picture in Europe is not as rosy as the numbers make it out to be. Do you agree?
…The picture is not that rosy but it’s not that dark. We Europeans sometimes look at things with a dark lens; we have to be more positive… we have to take more risks and embrace failure. Part of the startup picture is that so many startups will fail and this is not a problem; it is part of the development [process] and part of the learning process. We have all the important things that we need. We have the talent; we have the best educated continent in the world. The figures you mention show that Europe is investing a lot of public resources in R&I, startups but you also mention private investments. This is where Europe lags behind the United States and China. The gap comes from [a lack of] private investment and so we are working with private investors and the member states to channel the money that we have towards startups, our innovators, our researchers, our young people, our talented people.
Draghi notes that the problem is not that Europe lacks ideas or ambition. The start-ups summit here in Malta is testament to the different ideas and ambition of young entrepreneurs and researchers. However, Draghi pointed out that innovation in the EU is not being translated into commercialisation. I quote from his report: “Innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations” and as a consequence “many European entrepreneurs prefer to seek financing from US venture capitalists and scale up in the US market”. It’s your job to address this. The question is how?
It is one of the most important jobs of all commissioners – we have a task to focus on our regulation and simplification. This is a top priority for all the commissioners. The biggest asset of the European Union is the single market. But we are not a single market yet… we are 450 million consumers and 27 member states; our market is actually bigger than the US market. We have a bigger population and our population is made up of good consumers… [But] when innovative companies want to expand and are ready to go to market, they face 27 different regimes; 27 different corporate laws, labour laws, taxation, insolvency and liquidation laws… I am going to present the startups scale-up strategy in a couple of weeks that will focus on access to markets, access to finance, access to talent, infrastructure and regulatory barriers that our companies face to scale-up in Europe. This is crucial because it is not always about the money. It is also about how fast you can go to the market when compared to other markets…
How easy or difficult is it for 27 different markets to collaborate between themselves; to collaborate with the EU; or even for companies from different countries to come together?
What surprised me is how active the startup community is. They are organised with associations in almost every member state. They coordinate their actions and proposals but in this geopolitical situation, in a post-COVID era when we realised how too dependent, we were on others for our everyday goods; with the war in Ukraine and an unpredictable geopolitical situation, we have to focus on ourselves. We have to realise that we have to support our innovators and think together because only in this way can we be competitive. This is the message that I want to deliver – only together can we be competitive. I am going to quote Letta (former Italian prime minister who was tasked by the European Commission to draw up a report on the single market): ‘In Europe there are two types of member states – those small and those who don’t realise they are small.’ I also add the word ‘yet’ to his quote – ‘those who don’t realise they are small, yet’. This is a really important moment and I really see this as a big chance to complete the single market and better coordinate our actions, be it in R&I, out economic strategies, our security, our economic autonomy. At the same time, we want to cooperate with the rest of the world. We are an open economy and we want to remain an open economy.
Earlier you spoke of the ‘fear of failure’, yet failure is an integral part of the startup community. Is this a mental blockage in the European mindset?
We are very diverse – 27 member states and this is our strength but in how we invest it is very similar, I would say. Yes… the fear of failure is more or less our mindset but people are different and we should embrace the fact that they are ready to risk. We create the same number of startups as the US, which means young people are ready to risk and act but we have to show more positive examples in our news. We need to motivate young people to try and not be afraid to fail. Yes, some of these will fail but others can flourish and can become unicorns and expand to other continents. We have to start this at kindergarten level. We need to teach our children and our youth that it is not that bad to fail; it’s much worse not to try. This is the message that I conveyed in one of the forums I participated in recently when asked to give some advice to young entrepreneurs – ‘try, don’t wait for the best moment to come; it’s always the best moment, just don’t wait. Start your product, surround yourself with clever people and do not be afraid of failure.’
Within the current geopolitical context that sees an isolationist US, trying to go it alone by shunning Europe and other allies, is investment in research and innovation a key priority in the EU’s bid to seek strategic autonomy in key areas?
It is central for our autonomy and security. We realised that we are too dependent [on others] for our energy and technology. We have to heavily increase our investments in R&I… but this is good for our economy because it helps increase our productivity and our competitiveness and this is good for our citizens. My message to the finance ministers is this type of investment is the best you can do in the future of economic growth…
You are a politician. Could politicians be short sighted sometimes? It is good to see a budget item that says the country is investing so much in R&I but it does not give immediate return. It is an investment that delivers in the long term. In the short term a politician facing an election in two- or three-years’ time would prefer investing in road infrastructure that is visible.
I understand this. But more and more governments are investing in R&I. It has increased from 1.8% of GDP to 2.3% of GDP in 10 years. We are still not at the 3% target that we agreed on 22 years ago but we are close. Politicians and governments realise that this is the best investment they can do in the future of their countries.
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We would like to support governments and we are preparing a campaign to show our citizens that science is about our daily lives and not just labs or something that people don’t see or touch; it is present in our kitchens, in our homes, in our hospitals. Again, I am going to refer to the COVID period. We were able to develop vaccines so fast because we had been investing for decades in healthcare research through the EU’s Horizon programme… these vaccines saved millions of lives…
At the end of your five-year term, what would you like to have achieved?
Europe is the best place to live. Everyone wants to come and live in Europe. Our way of life is unique and I want Europe in five years to become the best place for investment, innovation, research and for the talented people to come here and develop their ideas.
