Ursula von der Leyen: "We need to close the startup-scaleup gap"

Helping startup companies grow and thrive is the key to making Europe a global hub for "the next wave of frontier technologies."

But that will also require much higher levels of private investment.

That was one of the key messages from European Commission president Ursula von der Leyen as she prepares to start her second term in charge of the 27-member block.

In a speech to the European parliament, Ursula von der Leyen stressed the need to close "the innovation gap" to China and the United States by cutting some of the red tape and making it easier for startups to scale up and bring products to the market.

"We will put research and innovation, science and technology at the heart of our economy", von der Leyen said.

More private investment needed

To close the innovation gap, Europe first has to close the spending gap.

Von der Leyen pointed out that the business expenditure in Europe on research and development only accounts for 1.3 percent of GDP, compared to 1.9 percent in China and 2.4 percent in the U.S.

"We urgently need more private investment", she said. “This private capital gap is the main reason we lag behind on overall R&D spending, and thus on innovation."

Von der Leyen used her speech to outline the three pillars of her plan to make the EU more competitive, where the first pillar is focused on innovation and startups.

That includes the appointment of a first-ever Commissioner for Startups, Research and Innovation, Ekaterina Zaharieva, who will be tasked with helping companies bring more solutions to the market.

Von der Leyen said the EU is on par with the U.S. and China when it comes to patent applications, but that only a minority of those lead to commercial solutions.

"We are roughly as good as the US at creating startups. But when it comes to scale-ups, we are doing much worse than our competitors. We have to close that gap", Von der Leyen said.

Cutting the red tape

Part of the problem is red tape and a complicated set of rules and regulations that prevents many companies from taking full advantage of the EU’s single market.

“We know what needs to be done. A startup from California can expand and raise money all across the United States. But a startup in Europe has to deal with 27 different national barriers. We need to make it easier to grow in Europe.”

That’s true for bigger companies as well, and von der Leyen has given EU Commissioner Valdis Dombrovskis the task of simplifying and streamlining the EU’s rules to make it easier on all businesses.

They are telling us that the regulatory burden weighs heavily on them. Too much reporting. Too many overlaps. And too complex and costly to comply with. We need to streamline our rules to reduce the burden on businesses”, von der Leyen said.