Startup Ecosystem Policy Recommendations

Annex to the Davos Declaration on European AI Research and Innovation, based on the NGI Enrichers Program and the AI Horizon 25 conference in Davos

Executive Summary

Europe faces an existential challenge in startup ecosystem development, having missed the digital revolution that created the productivity gap with the US. Despite SMEs comprising 99% of European businesses, Europe lacks the entrepreneurial mindset and infrastructure for creating trillion-euro companies. The fragmented regulatory landscape, complex market access, and risk-averse culture hinder startup scaling and innovation. Four critical recommendations emerge: create a pro-entrepreneurial mindset through storytelling campaigns, embrace neurodiversity in education and training, accelerate Single Market integration using available policy levers, and transition from Next Generation Internet to Commons-based innovation. 

Authors: Vincent Tresno, Andrea Degen, Robbert van Kranenburg, Bea Knecht, Sara Medina, Svetlana Klessova, Théo Lefèvre, Kseniia Savchenko, Benjamin Talin, Miguel Cabrita, Ihor Makushinsky.

Current Challenges

The Existential Challenge: Europe missed the digital revolution, creating a significant productivity gap with the US. Only four of the world’s top 50 tech companies are European. The EU faces fragmented markets, overly complex regulations, security dependencies, and insufficient venture capital access.

Structural Issues:

  • Digital Dependency: Europe accepted US digital enablers without realizing dependency implications
  • Scale Limitations: Focus on SMEs (99% of businesses) rather than potential trillion-euro companies
  • Incremental Thinking: Post-growth and degrowth concepts prevent radical transformation
  • Psychological Barriers: Inability to envision trillion-euro European companies

Strategic Recommendations

  1. Storytelling: Create a Pro-Entrepreneurial Mindset in Europe

Challenge: European entrepreneurs face trust deficits (business leaders score only 28% in global trustworthiness rankings) and negative perceptions despite their space-creating role.

Solution:

  • Launch broad, sustained European social media campaigns highlighting individual entrepreneur stories
  • Make visible the work behind space creation and innovation
  • Educate on entrepreneurial value beyond committee-based approaches
  • Focus on psychological traits: stubbornness, perseverance, curiosity, borderless thinking, creativity
  1. Embrace Neurodiversity in Education, Training and Work

Challenge: Traditional education fails to value digital-native skills and entrepreneurial traits often seen as disruptive.

Solution:

  • Implement reverse mentoring from Gen Z and younger generations
  • Recognize risk-taking traits as positive capabilities essential for AI age
  • Provide free AI access to all
  • Focus on generalists with integration capabilities
  • Introduce Challenge Coaches to encourage border-pushing and failure acceptance
  • Address gender imbalance in female founders
  • Reward failure as evidence of trying
  1. Use All Available Critical Junctures and Levers to Align to a Single Market

Challenge: Europe lacks unified capital and sales markets, with significant startup survival rate differences compared to the USA.

Solution:

  • Accelerate Unified Capital Market development
  • Create Single Market for selling and financing
  • Use AI-assisted probes to examine 18 current Acts (from Chip to AI) for fast-track integration
  • Build on decades of Horizon Europe project results instead of burning possibilities
  • Focus on connections, early network building, and growth capital access
  • Balance open innovation with open borders for talent mobility
  1. From NGI to the Commons: Re-evaluating Commons as a Social and Sustainable Market

Challenge: Current research approach separates development from market realities.

Solution:

  • Transition Next Generation Internet focus to Commons approach
  • Align with open source dominance and go-to-market attitude
  • Merge research and business units for higher TRL development
  • Make institutional support continuously available
  • Focus on bottom-up research approaches

 

Conclusion

Europe must embrace radical change to address the existential challenge identified in the Draghi report. The transition from risk-averse, committee-based approaches to individual entrepreneurial empowerment, combined with strategic Single Market integration and commons-based innovation, offers a path to creating trillion-euro companies and achieving digital sovereignty.

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