The Start-up and Scale-up Initiative

The Start-up and Scale-up Initiative

Content 1. - Results of the public consultation & how to interpret them 2. - Barriers & how to overcome them 3. Ecosystems & how to connect them 4. IP Rights & how to use them 5. Access to Finance & how to improve it 6. Startup Europe, regulatory sandboxes, innovation radar & how to use them 7. European Innovation Council (EIC), innovation related aspects & how to scale them

Introduction 1. What is the economic and political issue at stake? 2. Why is this Initiative the right answer? 3. Who are we doing this with?

Results of the public consultation under the Start-up Initiative & and how to interpret them

Public consultation: key facts Structured around the company life cycle 571 replies 16 written contributions 53% from entrepreneurs Reaching beyond the EU

Stand-up: most desired support measures Support to entrepreneurial activities 82% Encourage higher education institutions to establish programmes on entrepreneurship 78% Introduce entrepreneurship education in all levels of formal education 56%

Start-up: main obstacles to start a company 1 2 3 4 5 Least important Average ranking Most important Access to finance Rules and costs of hiring workers Resources required to navigate overall regulatory complexity Tax compliance costs (filing and paying taxes) Procedures and costs to access industrial and/or IPRs 72% 4.2 66% 4.0 61% 3.7 55% 3.7 46% 3.5 7

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 8

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 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% 3.69

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 for start-ups & scale-ups 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 Creating European centres outside the EU to promote EU start-ups 85% 4.5 81% 4.3 71% 4.1 59% 3.9 58% 3.7 11

Public consultation - the key findings

Barriers & how to overcome them

A. 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.

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 Single Digital Gateway Startup Europe Digital Innovation Hubs Enterprise Europe Network (EEN) Dedicated Scale-up Advisors

Ecosystems & how to connect them

Ecosystems Size = connectivity Mentorship Inspiration Investment Former Employee Founder Europe to become the first choice place for breakthrough ideas and next leaders.

Matchmaking and Connecting Reinforce Startup Europe Coordinate EU work bring stronger coherence link up national, regional stakeholders & ecosystems Connect start-ups: pilot matchmaking, extend Erasmus for Young Entrepreneurs

Procurement Opportunities (i) (ii) establish innovation brokers (COSME) 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 (iii) provide guidance on innovative procurement - Innovation Partnership 2 Trillion EUR

No. 1 challenge for scale-ups: Finding Talent Skills 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 make more use of Erasmus+ Knowledge Alliances, and the HEInnovate self-assessment tool - EU Blue Card

Innovation Opportunities - Changes to Horizon 2020 - support 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).

IP rights & how to use them

Policy on IPRs and SMEs Focussed on innovative and creative SMEs COSME funds: 4,5 million Commission's commitment to support IP by SMEs : 1. Facilitating IP Access 2. Facilitating IP Use and Enforcement 3. Coordination of IP support and Monitoring impact Collaboration with EUIPO, Member states and other stakeholders 33

(1) Facilitating IP Access for SMEs information and awareness Streamline and share best practices Coordination (mapping, linking, etc.) IP pre-diagnostic services training experts pilot project (2017-19) Funding for European patents for SMEs with the Seal of Excellence 50% of pre-grant and attorney fees 34

(2) Facilitating IP Use and Enforcement patent licensing database knowledge sharing and business matchmaking Mediation and Arbitration Mapping services network fit for SMEs IP litigation insurance and IP valuation Mapping existing products Platform to diffuse best practice and possible co-funding IP valuation identify insurance market methodologies 35

(3) Coordination of IP support and Monitoring of Impact Coordination Streamline support and exchange of best practices Recommendation to and work with Member States Monitoring use of EU IPRs by SMEs impact of IP support 36

Access to finance & how to improve it

While financing for start-ups is sufficiently available in EU, funding options are not fully developed when start-ups wish to scale-up in the single market, especially if compared to US. Start-up Scale-up

Contrary to US, venture capital for later stage rounds is still poor in EU, also because funds are small and fragmented. Venture capital for start-ups and scale-ups as % of GDP (2015) Venture capital investment in Europe (2015) 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% Early stage Late stage

How to attract investment in European VCs? -The Pan European Venture Capital Fund of Funds. - Tax incentives for investments into start-ups/scale-ups. - Additional incentives to venture capital.

Crowdfunding and alternative sources of finance The different forms of investmentbased crowdfunding

Crowdfunding: a small market showing impressive growth External sources of SME funding for US and EU, in 2013 Amounts raised through investment and lending crowdfunding in the EU Source: Association for Financial Markets in Europe (AFME) A pan-european platform where Member States best practice on crowdfunding can be shared, together with an assessment of financing gaps in alternative sources of finance. Source: Crowdsurfer

Startup Europe, regulatory sandboxes, innovation radar & how to use them

Startup and Scaleup Initiative Removing barriers Creating opportunities Access to finance Scaleups are the new corporates Adopted on 22 November 2016 Recommendations of the Scaleup Manifesto Unique insights from Startups and Scaleups stakeholders around Europe 6 headings, 49-point roadmap to complete the single market, mobilise capital, activate talent, power innovation, broaden education, monitor, measure and evaluate. 48

Startup Europe In 2017, the Commission will reinfoce Startup Europe which will take a wider scope beyond the ICT and web startup sector. The Commission will coordinate EU work to connect clusters and ecosystems across Europe, as well as bring stronger coherence between the different EU initiatives in particular by linking up national and regional Ministries, innovation agencies and other stakeholders and ecosystems. 49

Innovation procurement In the first FP7 innovation procurement actions, SMEs won 2.5 more times contracts than in standard exercises (73% versus 29%) and 15 times more contracts were awarded cross-border than the average in public procurement in Europe (29% versus 2%). Encourage MS to set ambitious innovation buying targets 50

Innovation radar Makes it easier to spot early on Horizon 2020-funded innovations with market potential and the teams behind them (e.g. SMEs, startups, spin-offs, universities). The Commission will use the Innovation Radar to connect potential business partners and investors with Horizon 2020-funded innovators to support them in scaling up. 51

Regulatory sandboxes The Commission will explore an enabling framework for regulatory sandboxes, in order to capture the benefits of "the regulator just down the street" in the whole Digital Single Market. 52

European Innovation Council (EIC), innovation related aspects & how to scale them

European Innovation Council Innovation and Regulation Innovation Principle R&I Tool Innovation Deals Fund of Funds 56

European Innovation Council Overview Horizon 2020 has made a good start with new focus on innovation But more could be done to boost impact of EU support for breakthrough innovations that create and capture new markets Means reaching out to new class of entrepreneurs/innovators Step-by-step process: short term actions in 2018-20 potentially leading to a fully-fledged EIC in FP9 57

58 EIC pilot 10 points 1. Establish a Group of Innovation Advisors to provide a user perspective on EU innovation support and advise Commission on reforms 2. Revise Horizon 2020 work programme (2018-20) with simple presentation of instruments targeting market creating innovations 3. Make SME instrument fully bottom up with continuously open call 4. Strengthen evaluation criteria to focus on market creating innovations, with potential to scale, and higher risk profiles 5. Revise and accelerate evaluation process with face to face interviews with teams and faster results (5 weeks rather than 5 months) 6. Provide access to mentors for project teams, targeted to their specific needs 7. Test out new scale-up instruments, e.g. reimbursable grants, blending grants and financial instruments, etc. 8. Gather real time data and intelligence, tracking performance of projects and feeding into policy 9. Work in partnership with existing initiatives - EIT, EIB Group, Eureka, VC and business angel communities for sharing data & intelligence 10. Improve Horizon 2020 website/ participant portal with dedicated space for innovators with advice on funding opportunities

High Level Group of Innovation Advisors Up to 15 personalities with a good track-record in starting and scaling up innovative businesses and/or investing in innovative ventures. Mandated to give advice on: a) The design and implementation of an EIC pilot for the years 2018-20 b) Future design and delivery of EU funding and other support for market-creating innovation under FP9 The Group will start work early 2017 59

Next Steps DG RTD will develop pilot measures for 2018-20 Work Programme Ongoing stakeholder discussions, including with Member States Link up with H2020 Interim Evaluation and preparations for next Framework Programme (Impact Assessment etc.) More Info: https://ec.europa.eu/research/eic/index.cfm 60

Innovation and Regulation Innovation Principle COUNCIL CONCLUSIONS ON BETTER REGULATION TO STRENGTHEN COMPETITIVENESS 26 May 2016 STRESSES that, when considering, developing or updating EU policy or regulatory measures, the 'Innovation Principle' should be applied, which entails taking into account the impact on research and innovation in the process of developing and reviewing regulation in all policy domains. CALLS on the Commission together with Member States, to further determine its use and to evaluate its potential impact. 1 1. The Council recalls the Precautionary Principle. 61

Innovation and Regulation Innovation Principle " innovators, and particularly start-ups, often face regulatory barriers or uncertainties in introducing their innovations to market. As part of its Better Regulation agenda, the Commission is taking into account the potential impact on innovation of current and new regulation, in line with the innovation principle as requested by the Council." - Europe's next leaders: the Start-up and Scale-up Initiative (Nov 2016) "Creating the right market conditions for innovation includes putting in place a stable, longterm, transparent and predictable regulatory environment. In May 2015, the Commission presented the revised Better Regulation package, recognising that innovation needs to be thoroughly considered in any new legislative proposals. This has been stressed in recent Council conclusions referring to the innovation principle. " "Upcoming legislative proposals relevant to clean energy and climate action, amongst others the revision of the post-2020 strategies on cars/vans and on lorries, buses and coaches, will be subject to an in-depth analysis of their impact on research and innovation." - Accelerating Clean Energy Innovation (Nov 2016) 62

Innovation and Regulation Innovation Principle Produce report with MT Pres on existing concepts and best practice at MS and EU level (including on use of R&I Tool and ICT Tool) Revise and utilise R&I Tool Innovation Deals Better Regulation for Innovation Driven Investment at EU Level (Jan 2016) EPSC report on Innovation Principle (June 2016) EESC Opinion on Future-Proof Regulation (Sept 2016) 63

Innovation and Regulation Revision of the R&I Tool Tool to assess R&I impacts in the Better Regulation Toolbox since May 2015 Toolbox will soon be revised including R&I Tool Make more 'user-friendly' Add guidance on regulatory instruments that can be used to innovation and future-proof legislation? Add something on impacts on startups/scaleups? Apply and use (Energy and Climate) 64

Innovation and Regulation Innovation Deals Currently only in the Circular Economy Area Pilot: 32 Expressions of Interest -14 countries 2 'deals' selected E-mobility and Wastewater Joint Declaration with Commisison, National Authorities, Innovators and Other Stakeholders Q1 2017 Standardisation and secondary raw materials/end of waste Startup/Scaleup Initiative includes possibility to expand scheme to other areas following evaluation of the pilot More Info: https://ec.europa.eu/research/innovationdeals/index.cfm 67

EU VC Fund-of-Funds Programme 1/4 Challenge EU VC funds relatively small ( 60 mn vs. double that in US). ca. 90% VC investment concentrated in just eight MS. Private and especially large institutional investors are shy of VC.

EU VC Fund-of-Funds Programme 2/4 Objectives Increase availability of VC funding for start-ups and SMEs in EU. Attract greater volumes of funding from independent private investors, including large institutional investors Enable VC funds supported to reach a greater size than the average size of VC funds in EU, and so help firms get followon funding.

EU VC Fund-of-Funds Programme 3/4 Approach Call for independent fund managers with strong track-record (till 31/1/17) EU invests a 'cornerstone' of up to 300 mn in one or more independently managed FoF (max. budget 400 mn for all FoF invested in) Fund manager must raise at least three times as much as EU investment

EU VC Fund-of-Funds Programme 4/4 Approach EU budget combines resources from H2020 (up to 200 mn), EFSI (up to 100 mn) and COSME (up to 100 mn foreseen) Timing Appoint one or more fund managers by mid-2017 First fund-raising round takes 12 to 18 months