EU Commission to Ease Investment in European Start-ups through Legislative Reforms
The European Commission is currently reviewing the legislation to see if it has inadvertently created obstacles for institutional investors, such as pension funds and insurance companies, to invest in risk capital, said EU Commissioner Ekaterina Zaharieva in an interview with the “Redaktionsnetzwerk Deutschland” (Monday editions).
The background is that large investors like pension funds and insurance companies tend to invest risk capital primarily in the US, rather than in Europe. “We must, however, build a risk capital market in Europe, which is still underdeveloped” said the EU Commissioner. “We must create incentives for institutional investors like pension funds and insurance companies to increase private investments” Zaharieva added.
Specifically, she announced that she will push forward the idea of a European fund that covers the initial risk of private investors and makes investments more attractive. Gains from a successful start-up could be used for this fund, which would partially compensate for the losses of investors in unsuccessful start-ups.
Zaharieva lamented that the European business culture is geared towards minimizing risk. “The mindset in Europe must change, and that takes time. That begins with education in Europe and the great fear of failure” said Zaharieva. “Europe’s fear of failure is a poison for innovations.”
In some member states, for example, one would not get a bank loan again for years after a bankruptcy. “This conservative way of doing business is a real obstacle. It will take years to change that” she said.
The EU Commission will present its own law to promote European start-ups in the summer. “Starting a business must become easier. That is why we will bring a new EU law for start-ups onto the table” said the EU Commissioner, who will present the law as part of the EU strategy for start-ups and growth in late June.
At the same time, the EU Commissioner announced the reduction of regulations. “Bureaucracy reduction has top priority for me” she said. “As Commissioner for Innovation, money is important, but I will never discuss new projects primarily over money, but rather over simplification. We want to make the procedures simpler, so that researchers can research and developers can develop.”
The EU Commissioner praised the German research location as “highly qualified and competitive.” “Germany has a long research tradition, a strong research scene, and excellent universities that are responsible for these good results. Now it is a matter of turning this top research into marketable products and, in the next step, bringing them to the market on a large scale” said Zaharieva.
“We must, however, also support the traditional industries in their further development, innovation, and the increase of their innovative power. These branches create many jobs, and the greatest innovation motor in Europe has always been the automotive sector.