We’ve already covered the set of initiatives the European Commission plans to roll out in order to address the pressing need to support tech startups in Europe. Today in Davos, at the World Economic Form, Vice President Neelie Kroes has announced the launch of two initiatives inspired by that work. (Note: See Update below)
The first is the Startup Europe Partnership – effectively a project to help startups in Europe scale globally. This will be led by the Mind the Bridge Foundation, a non-profit corporation which runs an accelerator programme and Nesta, a UK charity which funds innovation.
The other founding partners of this project are: Telefonica, Orange, BBVA, European Investment Bank, Cambridge University, IE Business School, Humboldt University and the Lisbon Council.
The idea is that the Startup Europe Partnership (SEP) will “build bridges” between Europe’s startup, corporate and investment communities to help EU startups raise funds and beat language barriers to reach maturity as global players. It hopes to do this in three main ways: by creating events which match startups and corporations to encourage corporates to procure and invest in startups; mapping the hottest startups, hubs and success stories; sharing startup related best practices to reduce the cultural divide and favour cross-fertilization. The vision is that European corporations – large and middle size – as well as European universities have to be active key players in this process.
The second is The European Digital Forum – basically a think-tank around policy debates regarding policies network on digital entrepreneurship. This will produce an annual Digital Economy Index to measure how friendly Europe is to the mind-set required to succeed in the digital era. Its ‘secretariat’ will be led by the Lisbon Council in collaboration with Nesta.
Speaking from Davos, VP Kroes said: “Politicians don’t create jobs, entrepreneurs do. We’re going to support that mindset and push European start-ups beyond their comfort zone. And then we’re going to get out of the way. Sometimes the best thing a political leader can do is get out of the way.”
This is interesting language from a non-elected official, but essentially reflects a big push around entrepreneurship coming out of the Commission at the moment.
The Startup Partnership and the Digital Forum are the Commission’s first moves to try and improve business conditions in Europe. To some extent it was inspired by the Startup Manifesto produced by the Startup Europe Leaders Club – a group of entrepreneurs who set out an action plan for the Commission.
The Commission estimates that 800,000 jobs have been created in tech startup is in Europe in the last five years.
Startup Europe is the umbrella term for six initiatives under the Commission’s Digital Agenda: The Accelerator Assembly, the European Crowdfunding Network, The Web Investors Forum, the Leaders Club, the Startup Europe Partnership. We delved into these recently in some detail.
So, what we have here is – one one hand – a group of a large corporates, some entrepreneur organisations who will put together some events, some data maps and some ideas on ‘best practice’ around startup ing. And on the other hand we have a think tank.
Putting together bigger players with small is something the EC is almost bound to do. What remains a frustration is whether the EC can get to the point that it can somehow generate an exit environment for startup entrepreneurs and investors. After-all these are the people who take the risk on to create a new, high-growth, disruptive, company.
You’ll note that of the partners in the Startup Europe Partnership, there are telecoms players, banks, universities, and two non-profits. No VCs. As yet. What these initiatives badly need are the input of real investors.
Limited Partners, (“LPs” the investors in VC funds) are only incentivised by VC funds paying back their investment when a startup has a liquidity events – is sold or floats on a public market or similar. The whole goal of this needs to be more holistically integrated into Startup Europe’s strategy. If LPs do not get a return they will not invest in VCs or accelerators, and they in turn will not have the funds to invest in startups – the whole thing is a chain of activity, and all of the initiatives should be aligned around this.
Only then will Europe create a virtuous cycle of activity that has happened in Silicon Valley, whereby now-wealthy former entrepreneurs are able to go back into the ecosystem and invest in new entrepreneurs.
We’ve now had some clarification from Mind The Bridge about how this Startup Europe Partnership (SEP) is going to work, and to some extent it addresses some of the concerns outlined above.
Alberto Onetti of Mind The Bridge says: “Creating an exit-friendly environment is in fact the very goal of the SEP. The involvement and the commitment (investments, acqui-hiring, procurement) of a wide range of large EU (and not only European) corporates is the first steps needed to create that virtuous circle you talk about. We started right from the exit. And the exit in Europe passes through large corporates.”
He says that the SEP is going to directly address this problem around how only a few startups have been able to scale up in Europe and reach a pan-European size. Europe is still perceived as a fragmented market both from startups and investors.
“Small acquisitions (though suboptimal) are more realistic in Europe where we have a few large corps and a myriad of SMEs,” he added.
The SEP vision is that corporations – large and middle size – as well as universities and investment funds (seed and venture capital) have to be active key players in this process. They can both help the growth process of startups (business partnerships and strategic/venture corporate investments) as well as have access to the best technologies and talents (procurement, acquisition and acqui-hiring). The SEP says it aims to create a strong integrated pan European platform to pave the ground for the development of global champions (and not just local EU companies).
They plan to to this by:
• Increasing the investments/acquisitions from corporates into startups (leveraging programs, such as the European Investment Fund Corporate Innovation Platform (CoriP) which is run by the European Innovation Fund.
• Identify a Fast Track for Startups into “Large Corporate Procurement Systems”.
• Increase the reach and interconnection among the existing corporate incubation/acceleration programs
So, in other words what you have here is a lot of programmes to smash corporates and startups together in the hope that they either get bought, or that the corporate starts to buy services from them, so the startup can scale up and turn into a proper business.
Are we all clear now? I hope so….