European strategy for start-ups and scale-ups, all you need to know

In this article written by Lucia Occhiuto, lawyer in charge of Legal Functions and Policy at Italian Tech Alliance and founding partner of Occhiuto Legal Boutique Legale, we analyse all aspects of the new legislation that the European Commission has launched in order to increase the EU’s competitiveness in terms of creating, financing and supporting the growth of innovative companies. It is a decisive stance resulting from the awareness that the fragmented nature of the systems represents a limitation that reduces competitiveness on the global chessboard and a framework that also translates into a great opportunity for the Member States, including Italy.

On 28 May 2025, the European Commission published the ‘EU Startup and Scaleup Strategy’, an ambitious programme to transform the European Union into a global hub for innovation. The message is clear: “Europe is at a crucial juncture, and putting startups and scaleups at the heart of its competitiveness agenda is essential to stimulate future growth and prosperity”.

The paper starts with a factual analysis: despite considerable progress since 2007, launching and growing innovative start-ups in Europe remains complex. Companies face two critical moments, the so-called two valleys of death: the first, in the phase of transforming innovation into a marketable product; the second, when start-ups struggle to scale. Regulatory fragmentation, investors’ low appetite for risk and a still incomplete single market, especially with regard to capital, contribute to hindering the path. The result? Between 2008 and 2021, almost 30 per cent of European unicorns moved outside the EU, and only 8 per cent of global scaleups are based in Europe.

The new European Strategy defines a series of legislative, policy and financial support measures in favour of European start-ups and scale-ups, both at EU and Member State level, with the clear objective of increasing the number of start-ups, the number of ‘centaurs’ (start-ups that have exceeded the EUR 100 million valuation) and the number of unicorns (start-ups that have exceeded the EUR 1 billion valuation) in Europe.

The European Strategy is based on six new pillars

1.Innovation-friendly regulation

Among the most ambitious measures is the so-called 28th regime, a harmonised set of company rules at European level, designed to make it easier to set up, grow and operate businesses in the single market. The aim is to reduce the costs of starting and failing a business by intervening on key aspects such as bankruptcy law, labour law and taxation, with the possibility of setting up a company in less than 48 hours (implementation target: first quarter 2026).

To support digitisation, the European Commission is also proposing the European Business Wallet, a digital identity for all economic operators, which will enable the secure and verified exchange of data and credentials between businesses and public administrations (implementation target: Q4 2025).

Furthermore, with the European Innovation Act, so-called regulatory sandboxes will be promoted, regulatory test environments that will allow developers to test new solutions under controlled conditions, also on a cross-border scale (implementation target: Q1 2026).

A voluntary Innovation Stress Test for Member States will also be introduced to assess the impact of new regulations on innovation (implementation target: Q1 2026).

Finally, the Commission intends to lighten the regulatory burden in strategic sectors (biotech, bio-economy, life sciences, advanced materials, defence), to revise the so-called Standardisation Regulation to make it more accessible to SMEs and to launch a study on the impact of national and EU regulations on corporate restructuring, with the aim of removing obstacles to the growth of innovative companies.

2.Better Access to Finance

The European financial system is still not very innovation-friendly and remains strongly bank-centred: banking assets represent 300% of EU GDP, compared to 85% in the US.

This structure limits the development of the venture capital market, which is still too small due to a lack of equity culture, risk aversion and regulatory fragmentation between Member States. Differences in tax regimes, bankruptcy and company laws hinder investment and make exits difficult. In addition, low levels of cross-border investment hamper the growth of innovative companies, which often seek easier markets outside Europe.

Disparities are also reflected in terms of inclusion: start-ups founded by mixed teams receive only 15% of capital, while those founded by women alone just 3%. Strengthening access to funding for female entrepreneurs and promoting women-led investment networks is essential to close this gap.

Another critical issue is the still marginal role of European institutional investors, such as pension funds, provident funds and insurance companies, which accounted for only 7% of venture capital between 2013 and 2023. Some states, such as France (with the so-called Tibi Initiative) and Germany (with the so-called WIN Initiative), are already taking steps to mobilise these market players.

Finally, many start-ups struggle to value their intangible assets, such as intellectual property, in order to obtain funding. The causes are many: restrictive banking practices, lack of trust in IP valuation methods, lack of awareness of international standards and lack of incentives to promote IP-backed financing.

The European Commission intends to strengthen the role of the European Innovation Council (EIC), simplifying its rules and gearing it towards a step-by-step funding for high-risk innovations, inspired by the US – ARPA models (Advanced research projects agency is a US government agency that funds high-risk, high-potential research projects with the aim of promoting revolutionary innovations in science and technology). The network of investors and the involvement of European centaurs and unicorns to gather feedback on policies will also be expanded.

Among the most relevant initiatives is the creation of the Scaleup Europe Fund, a privately managed and co-financed fund designed to bridge the financing gap for deeptech scaleups, which will operate in synergy with InvestEU and the European Tech Champions Initiative.

The Commission will also work with large institutional investors to launch a ‘voluntary European Innovation Investment Pact’, on the French and German model, aimed at mobilising capital towards funds of funds, venture capital funds and unlisted scale-ups.

Another strategic front is the valorisation of intellectual property: a European framework for the valuation of IP will be developed as well as concrete tools to foster IP-backed financing.

The Commission also intends to strengthen the role of European business angels, revise the definition of ‘firm in difficulty’ to facilitate start-ups’ access to state aid, and revise the so-called Horizontal and Non-Horizontal merger Guidelines to include dynamic criteria related to innovative competition.

Finally, the European Corporate Network will be set up to foster dialogue between large companies, corporate investors and start-ups, promoting innovative procurement and the integration of European solutions into strategic supply chains.

3.Rapid market access and expansion possibilities

In order to build a more cohesive innovation ecosystem, the European Commission aims to strengthen the connections between universities, research centres and start-ups. With this in mind, the Lab to Unicorn initiative was created to accelerate the commercialisation of research results.

Among the planned actions:

• support European start-up and scale-up hubs with strong academic roots, fostering cross-border collaboration and shared access to services, infrastructure and industry partners (implementation target: by 2026);
• define a European model for intellectual property management in universities, with guidelines on licences, royalties, shareholdings and the creation of roles such as venture builders within research institutions;
• provide clarification on state aid rules to facilitate the transfer of IP from universities to start-ups in compliance with European regulations.

In parallel, the Commission proposes a package of measures to make public and private procurement more innovation-friendly:

• Revise the public procurement directives to simplify access for start-ups, limit excessive requirements and introduce more flexible clauses on intellectual property and value engineering;
• Encourage the inclusion of start-ups also in defence and security procurement, with a possible preference for European solutions;
• Introduce fast-track procedures for the procurement of research and development services, including at the pre-commercial stage, and encourage innovation-oriented procurement strategies also in the private sector.

4.Support in attracting top talent

The Strategy clearly focuses on attraction, inclusion and entrepreneurship.

Competition to attract qualified talent in Europe remains high. Barriers to cross-border mobility, under-exploitation of academic potential, under-representation of women and limited diversity in the start-up sector exacerbate the problem. Start-ups also struggle to compete with large companies in terms of salaries and benefits, and the regulatory complexity of Employee Stock Options (ESOs), with different tax treatments between Member States, makes it difficult to offer competitive alternative compensation.

Another critical issue is entrepreneurial education: less than half of European students have access to training in this area, hindering the emergence of new generations of entrepreneurs. Furthermore, universities tend to privilege academic publication over the commercial exploitation of research.

To bridge this gap, the Commission will launch the Blue Carpet Initiative, with the aim of attracting and retaining highly qualified talent, both from the EU and third countries.

Among the planned measures (with implementation target 2025-2026):

• promotion of entrepreneurship education and skills upgrading, with a focus on gender equality and diversity;
• development of a European model for academic careers that rewards the commercialisation of research and the transition between university and industry;
• Harmonisation of the tax treatment of ESOs to reduce complexity and incentivise their use;
• removal of tax obstacles for cross-border remote workers;
• Introduction of a Fair Labour Mobility Package and an initiative for the ‘portability’ of skills, also for third-country nationals;
• adoption of an EU Visa Strategy, with measures to attract highly qualified students, researchers and entrepreneurs;
• launch of multifunctional legal desks to support ICT professionals interested in working in the EU;
• Information campaigns to promote the EU Blue Card and facilitate access to long-term resident status;
• invitation to Member States to introduce fast-track procedures for issuing residence and work permits to start-up founders;
• enhancement of Euraxess services to offer customised support to non-EU talent.

5.Access to infrastructure, networks and services

In order to grow and compete, start-ups need advanced technological infrastructure, specialised skills and fast access to research resources. Programmes such as Horizon Europe support this by, for example, funding the creation of 13 new AI factories that will offer computing power and customised support to SMEs and start-ups.

However, significant obstacles persist: fragmented access systems, complex procedures and uneven intellectual property management make it difficult for many start-ups to navigate the available opportunities. State aid rules are also often perceived as unclear when it comes to accessing public infrastructure.

To respond to these critical issues, the European Commission plans to:

• simplifying access to research and technology infrastructures through a Charter of Access also aimed at start-ups and scale-ups, harmonising contractual conditions and economically supporting access to AI computing resources (implementation target: by 2025);
• promote access to infrastructure through legislative measures within the European Innovation Act (Implementation target: by 2026).

6.Measuring Progress

One of the main obstacles to building effective innovation policies in Europe is the lack of an unambiguous definition of start-ups, scale-ups and innovative enterprises. Currently, only 11 Member States have adopted a legal definition of start-ups and just five for scaleups. The absence of shared standards makes it difficult to collect reliable data, assess the state of the ecosystem and design targeted measures.

To fill this gap, the European Commission proposes:

• the introduction, by the first quarter of 2026, of a harmonised definition of start-ups, scale-ups and innovative enterprises, taking into account the already existing definitions for SMEs and small mid-caps;
• the establishment of a European Startup and Scaleup Scoreboard, which will measure the performance of national and EU ecosystems through indicators such as the number of startups, scaleups, centaurs and unicorns. This tool will also be used to monitor the impact of the EU Startup and Scaleup Strategy;
• conducting an annual survey of innovative company founders to assess their perception of the changing European regulatory environment (as of 2026).

These measures are essential to ensure transparency, comparability and strategic orientation of European innovation policies.

A reminder to the Member States. An opportunity for Italy

This strategy is not just a European action plan: it is a clear call to Member States to take urgent action. The European Commission explicitly calls on national governments to help implement the measures by harmonising regulations, stimulating investment and removing bureaucratic obstacles. It is an invitation to ‘choose Europe’ as the place where innovative companies are born and grow, but also a warning: without coordinated action, Europe risks losing the global race for innovation.

For Italy, the Strategy represents a concrete opportunity to strengthen and enhance its innovation ecosystem. Some key areas of the European Strategy are already at the centre of attention of Italian institutions, and the European framework can offer a further stimulus to consolidate and accelerate ongoing actions:

• direct involvement of institutional investors, such as funds and pension funds, in strengthening and growing the venture capital sector;

• talent attraction, by incentivising and simplifying the contribution and tax system related to talent retention and attraction tools;

• reorganisation and harmonisation of existing legal provisions on start-ups, innovative SMEs and venture capital funds, in order to establish a coherent, simplified and functional regulatory framework;

• valorisation of intangible assets such as intellectual property in order to foster IP backed-financing;

• development of entrepreneurship and STEM subjects in school and university curricula.

Conclusion

The European strategy represents a historic opportunity to rethink the role of innovation in our economic system. The commitment already undertaken by Italy in this area confirms the strategic importance of the sector for the country’s competitiveness and development. Now is the time to act with determination and vision, to make Italy an environment in which start-ups are not only born, but grow and choose to stay. (photo by Ivan Oštrić on Unsplash)

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