The Guest Blog

Guest blog post by Florian Noell, Chairman of the Board, German Startups Association.

How the European political framework should look like to foster a fair competition between the Silicon Valley and European startups. The European Startup Monitor (ESM), initiated by the German Startup Association, gives transparency to the European startup-ecosystem and underlines the growing influence of this young enterprises on the European economy.

For the first time, the ESM supplies valid data from all EU-countries, supporting the European Commission in their task to prepare and propose policies, which help the European startups to grow. In particular, the plans for the Digital Single Market, the Capital Market Union and the frequently requested harmonisation of the European markets will have massive effects on European startups. Therefore, the ESM is a reliable tool and source of information to estimate the impact of European legislation regarding startups in Europe more precisely and, following that, to emphasise the role of the startups within the policies in a more significant way. Various questions were in the focus of the ESM, such as: How is the financial and the general business situation of the startups? How old are the founders on average and how many of them are female? Are the European startups satisfied with the political framework? What are the fundamental challenges for startups in Europe?

More than 2,300 startups were surveyed, representing over 31,000 employees from all EU Member States and Israel. Most European founders are between 25 – 34 years old. 14.7 % of the startup founders in the ESM are female. 11.9 % of startup founders and 31.6 % of their employees are from countries other than the location of the startup, the ESM showed. More than 90 % of startup founders are satisfied with their present business situation. 72 % assume positive business development over the next 6 months. Sales/customer acquisition, raising capital and product development are the most important current challenges.

The ESM shows that 50 % of the European startups act internationally and 8 out of 10 have planned to internationalise further within the next 12 months. That proves, that the European startups and the environment in which they act are not a national but European. The startups und their political framework must be thought of in European terms. The long-term objective must be a direct competition as equals between the European startups and the Silicon Valley. This can only succeed, when the adjustment of the European markets, in particular the digital business markets, comes to a quick and extensive conversion within the process of the realisation of the Digital Single Market, proposed by the commission. If and only if the European startups gain an easy, quick and barrier-free access to the European market as a whole, they are able to grow without any further friction losses. Language barriers cannot be prohibited by law, but bureaucratic barriers could.

Therefore, access to capital and extern investments are of particular relevance. At the moment, the Silicon Valley is ahead of Europe. In particular, venture capital investments, especially just before and within the growth phase, are of higher volume and US- investors are willing to take more risks, compared to Europe. The consequence is, that startups from the Bay Area have more capital to work with. Very often, this leads to quicker and larger growth-rates for the US-startups and therefore to a disadvantage for startups in Europe.

The ESM tries to detect and identify the needs of the startups and the areas of activity, which could help the European startups to develop to serious competitors for the Silicon Valley. There is enough creativity and potential within European startups, but they are not as supported as in the US, both by legislation and society. The ESM is an appropriate and effective analytical tool to identify the needed support and adjustments of the startup environment, which could lead to more and quicker growth, as well as to more competiveness with the Silicon Valley. Further the European Startup Network (europeanstartups.org) will unify national startup associations to create a common voice for European startups so that more can start, scale and succeed in the EU.

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