Single Market Forum 2016/ 2017 EU SMEs in Global Value Chains CIP and AIDA Aveiro, Portugal, 24/01/2017 Victoria PETROVA, Advisor European Commission DG Internal Market, Industry, Entrepreneurship and SMEs Directorate for Industrial Transformation and Advanced Value Chain
SMEs integrating Global Value Chain: main obstacles to scale up a company Average ranking Scaling up companies: results of public consultation > Public policy responses 2
Scale-up: main obstacles to expand a company 1 2 3 4 5 Least important Average ranking Most important Securing financing for expansion Outside EU: 4.2 Understanding and complying with employment law Outside EU: 4.0 Compliance costs: tax regulations (not VAT) Outside EU: 3.9 Compliance costs with VAT regulations Outside EU: 3.9 Uncertainty about regulatory requirements Outside EU: 4.2 65% 4.0 58% 3.8 54% 3.8 53% 3.8 53% 3.7 3
Scale-up: main policies/measures to scale-up 1 2 3 4 5 Least important Average ranking Most important Facilitating links between large corporations and start-ups Providing support for the acquisition of capacity boosting services Developing tailor-made support measures for scale-ups, e.g. how to manage the change Creating network of regional support centres for scale-ups Supporting the uptake of resource efficient solutions to reduce production costs 62% 4.0 62% 3.9 62% 3.9 54% 3.7 46% 3.64
Boosting innovation: desired measures Support to universities via e.g. business internship, access to incubators 71% Promoting partnership between start-ups and medium sized companies 70% Support to incubators, university R&D and technology transfer programmes 70%
Ecosystem-level measures 1 2 3 4 5 Least important Average ranking Most important Supporting local/regional/national entrepreneurial ecosystems Creating EU networks to increase synergies and facilitate access to venture capital, new markets, talent and skills Connecting start-up ecosystems across the EU Integrating entrepreneurial ecosystems with the Smart Specialisation Strategy 85% 4.5 81% 4.3 71% 4.1 59% 3.9
What are we going do about it? Policy response
1. Removing the barriers Commission will support a major, comprehensive and detailed peer review of all Member State rules and practices towards start-ups and scale-ups.
Single Market Service Centre
Addressing tax burdens Comprehensive package to reduce the complexity and fragmentation of VAT system: 1. simplify and extend MOSS; 2. targeted VAT simplification package for SMEs, 3. definitive VAT regime for cross-border trade Common Consolidated Corporate Tax Base (CCCTB) incentives for businesses to grow cross-border. Broaden forthcoming guidance on best practice in Member State tax regimes for Venture Capital.
Second chance The Commission will work with the European Parliament and the Council [ ] to secure timely adoption and implementation of the proposal on preventive restructuring frameworks, second chance for honest entrepreneurs and increased efficiency of restructuring, insolvency and discharge procedures.
Navigating Information European Observatory for Clusters and Industrial Change Single Digital Gateway Startup Europe Digital Innovation Hubs Enterprise Europe Network (EEN) Dedicated Scale-up Advisors
Enterprise Europe Network The world's largest support network for SMEs, created in 2008 and renewed under the EU's Competitiveness of Enterprises & SMEs Program (COSME) Helps European businesses: to innovate to increase their competitiveness to expand their business internationally inside Europe and in growth markets beyond the EU
Boosting growth and creating jobs in the EU (2008 2014) 11,000 companies have signed business, technology or research partnerships 90,000 companies attended international brokerage events and company missions 1.7 million people participated in events 70,000 targeted business meetings every year 600,000 questions on EU issues answered
EEN global presence EU Member States Albania Iceland Armenia FYROM Montenegro Turkey Moldova Serbia Buss. Cooperation Centres* Russia Indonesia New Zealand Canada Japan Argentina China S-Korea Switzerland United States Brazil Peru Norway India Egypt Mexico Israel Tunisia Singapore Belarus Taiwan Chile Bosnia-Herz. Georgia Paraguay Jordan Ukraine Cameroon 625 partner organisations 4.500 professional advisers full list on: http://een.ec.europa.eu *not funded by EU
EEN- 17 key sectors Network experts in 17 key sectors have teamed up to provide SME with customised support Aeronautics and space Agrofood Automotive, Transport and Logistics BioChemTech Creative Industries Environment Healthcare ICT Industry & Services Intelligent Energy Maritime Industry and Services Materials Nano and micro technologies Services and Retail Sustainable Construction Textile & Fashion Tourism and Cultural Heritage Women Entrepreneurship
Contact the Enterprise Europe Network EEN National web site:.. EEN Website: http://een.ec.europa.eu/ Social Media Twitter: @EEN_EU 18K followers Facebook: 8K https://www.facebook.com/enterpriseeuropenetw orkeu/ LinkedIn (group): 5K members https://www.linkedin.com/groups/1287967 EEN policy development: European Commission, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs GROW-Enterprise-Europe-Network@ec.europa.eu
2. Creating new opportunities Support for ecosystems Skills Innovation Social economy Access to public procurement
Matchmaking and Connecting Reinforce Startup Europe Extend Erasmus for Young Entrepreneurs Promote new business ideas Coordinate EU work bring stronger coherence and link up national, regional ecosystems & stakeholders Connect start-ups - pilot matchmaking
From R to I: Design Action Plan (2013) Measuring impact for innovation (Innobarometer) Protecting IPR (Review of Community Design Directive) Sharing cases, stories, facts & figures (Design for Europe) Building capacities of SMEs (Design for Enterprises) Integrating user-centric approach in RDI (Horizon 2020)
Dedicated support to SMEs Your Europe Business for info on doing business in EU SME instrument in H2020 ( 50,000 grant for phase 1) INNOSUP actions in H2020 (e.g. Design for Enterprises) COSME programme (Europe Enterprise Network, financial instruments topped up by Investment Package) Creative Europe (focus on creative & cultural industries) And opportunities under the EU cohesion funds
Ecosystems Size = connectivity Inspiration Mentorship Investment Europe to become the first choice place for breakthrough ideas and next leaders.
Procurement Opportunities Establish innovation brokers to build networks of buyers interested in public innovation procurement, linking with innovative businesses and helping access risk funding Encourage all Member States to set ambitious innovation buying targets Provide guidance on innovative procurement, Create Innovation Partnerships
Innovation Opportunities Changes to Horizon 2020 - support to breakthrough innovation projects with the scaling up potential European Innovation Council EIT - investment Innovation Radar Innovation Deals & regulatory sandboxes
Social economy and enterprises Build on the Social Business Initiative, encouraging social start-ups to scale up through: better access to finance, access to markets, regulatory frameworks by advising Member States on policy design. Explore how to facilitate uptake of new technologies & business models, support impact financing of the social economy and enterprises (e.g. G20 Inclusive Business platform).
Skills 'Access to Talent' is the No 1 Challenge for scale-ups. Build on the New Skills Agenda: Digital Skills and Jobs Coalition Blueprint for Sectoral Cooperation on Skills Big data tool European Entrepreneurship Framework Digital Competence Framework Scale up the EIT for entrepreneurship, management and innovation skills Encourage Member States to use better Erasmus+ Knowledge Alliances, HEInnovate self-assessment tool, EU Blue Card
3. Access to finance More funding EFSI and COSME More risk capital Pan-European VC Fund of Funds More alternative sources Crowdfunding
EU: Issues for SMEs Access to finance is the least pressing one but the situation differs between countries access to finance as most important problem Austria 7% Belgium 9% Bulgaria 8% Croatia 16% Cyprus 25% Czech Republic 7% Denmark 13% Estonia 5% Finland 7% France 11% Germany 7% Greece 30% Hungary 11% Ireland 13% Italy 12% Latvia 9% Lithuania 14% Luxembourg 6% Malta 12% Netherlands 13% Poland 8% Portugal 11% Romania 11% Slovakia 8% Slovenia 15% Spain 11% Sweden 12% United Kingdom 9% percentage of respondents that considered those problems as most important for their enterprise in the past six months Data from "Survey on the Access to Finance of Enterprises (SAFE)" December 2015, http://ec.europa.eu/growth/safe
REVENUE Helping businesses at every stage Pre-seed, technology transfer Seed and start-up Early expansion Expansion Late expansion Likely investors R&D funding, public grants Entrepreneur, family, friends, business angels, public sources Venture capital funds, business angels Strategic investors (IPO), public markets, banks Policy problems Serious lack of outside investors in the early stages VC market fragmented along national lines Too many small illiquid growth stock markets Setting up a company Breakeven point Valley of death TIME Graph adapted from Cardullo: Technological entrepreneurism. Note that there are no agreed and fast definitions for most of the concepts used in SME finance.
EU financial instruments in practice
EU Financial Instruments 2014-2020 Centrally managed by EC (Financial Regulation) EFSI Shared Management with MS ESIF (Common Provisions Regulation) Research, Development Innovation Growth, Jobs and Social Cohesion Infrastructure Horizon 2020 Equity and Risk Sharing Instruments ( 2.7 billion, including at least 1.5 billion for SMEs) Competitiveness & SME (COSME) Equity & guarantees ( 1.4 billion) Employment and social innovation (EaSI)( 192 million) Creative Europe Guarantee Facility ( 121 million) Erasmus+ Guarantee Facility ( 517 million) Connecting Europe Facility (CEF) Risk sharing (e.g. project bonds) and equity instruments SME Window (SMEs and small midcaps) Infrastructure and Innovation Window European Structural and Investment Funds EU level (central management) National/regional instruments (shared management) Off-the shelf FIs Tailor made FIs
EU Financial Instruments 2014-2020
COSME LGF enhancement through EFSI Without support of the European Fund for Strategic Investments (EFSI) the signature of agreements under COSME Loan Guarantee Facility (LGF) would have stopped in June 2015: EFSI supports both COSME and InnovFin Front-loading of COSME LGF 2016-2020 budget: Up to 500 million, agreed in July 2015 and under implementation As of 30 June 2016, more than 3 billion of financing provided to more than 94 000 SMEs, thanks also to the support provided from the risk bearing capacity of EFSI
European Fund for Strategic Investment (EFSI) EFSI risk-bearing capacity 21 billion EU Budget Guarantee EIB Own resources x3 Other financiers (private sector, NPBs,...) EIB/EIF financing 61 billion x5 Investments value over 3 years (mid 2015-mid 2018) 315 billion Infrastructure & Innovation Window SME Window
www.access2finance.eu
Start-up Scale-up There is sufficient financing for start-ups in the EU but funding options are not fully developed when start-ups wish to scale-up in the single market, especially if compared to US
Venture capital for later stage rounds in the EU is still insufficient ALSO because funds are much smaller and fragmented
How to attract investment in European VCs? The Pan European Venture Capital Fund of Funds Tax incentives for investments into startups/scale-ups. Additional incentives to venture capital
Crowdfunding and alternative sources of finance A pan-european platform where Member States can share best practice on crowdfunding together with an assessment of financing gaps in alternative sources of finance.
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