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The author is former Vice President of Breakthrough Energy Europe and former Director of the European Commission
For more than 50 years, EU entrepreneurs have been unable to create European listed startups with market capitalizations of over 100 million euros.
Founded in 1972, SAP was the last company to reach such a commercial high. Recent success stories such as Spotify, which has a market capitalization of around 124 billion euros, are listed across the Atlantic on the New York Stock Exchange. For established companies, the story could not be any better. At the beginning of the 21st century, 41 of the 100 most valuable companies in the world were based in Europe (including the UK and Switzerland). Today there are only 18 people.
Therefore, the starting point for the recently announced “Startup and Scale-Up Strategy” by the European Commission is weak. Younger companies can’t scale, while larger companies are shrinking. This double wamy poses a threat to Europe in a world where sovereignty is often projected through the size and growth of our own companies.
Measures announced in the strategy (better regulations, talent support, more funding) are welcome, but they are not sufficient. The last thing Europe needs is stronger, top-down political interventionism, either in the startup or in the industry. The fact that both have traditionally been treated as different by the public sector indicates that most bureaucrats simply do not understand innovation and commercialization.
What Europe needs is a public sector-ready, private sector-driven approach with a focus on promoting mutual fertilization between startups and industries.
This is the most promising way to regain technology and innovation talent in a world where the US and today China call shots. China led three of its 64 technologies in the year 2003-2007, according to the Australian Institute for Strategic Policy. He led by 57 between 2019 and 2023.
It’s time for Europe to realize that true technology leadership doesn’t exist in labs and patents alone, but it has to translate into corporate success. This has been demonstrated by world-renowned companies such as BYD (1995), Alibaba (1999), Longi Green Energy Technology (2000), CATL (2011), and Temu (2022) that Chinese entrepreneurs can discover and grow in the past decades.
In China, current industry players receive taxes and other incentives to work with startups. Compare it with Europe. Politicians often can’t address issues when trying to scale up, from fragmented EU single markets to excessive compliance costs and aging infrastructure.
The answer is that many of these challenges must be systematic. EU countries cannot overcome the problems of scaling on their own, and a single policy domain (energy, industrial policy, digital, fiscal) is not sufficient. Overcoming decades of slow movement requires the unprecedented release of entrepreneurs, innovation and technological insights across the corporate sector. Both counts have poor European records.
Take clean technology as an example: Despite the best intentions and bold strategies like the “Green Deal”, the continent is lacking compared to China. Additionally, the country is currently building 10 new nuclear power plants, steadily cutting down the European wind industry.
It is wise for Europe to not follow in the footsteps of Chinese authoritarian capitalism, but it still requires a strong response to regaining corporate foothold, technology leadership and innovation talent. The rules may have changed, but Europe still has to be a player. It is even more important to the backdrop of acute security challenges and Russian attacks.
Europe cannot afford to remain trapped in endless policy activities, trying to spend itself from economic lies. If digital and green technological performance provides lessons, putting hundreds of billions into strategies that seek to micromanage private sector dynamism will not drive commercial success of scale and power.
While the shortage of European digital and green technology has been unfortunate and expensive, a similar trajectory of defence technology, the next technology frontier, will have a much more intense impact. Not only is it expensive, it can be incredibly fatal. The stakes are higher than ever.
