How smart policies can strengthen Europe’s startup ecosystem and boost economic growth

European startups face challenges in the current technological landscape, with a need for policy adjustments to foster growth and compete globally. While the U.S. and China lead the way in AI innovation, Europe risks falling behind. Addressing issues like high taxes, bureaucratic hurdles, and sluggish economic growth is critical to boosting Europe's startup ecosystem. A key area for improvement is streamlining access to grant funding, a vital source of non-dilutive capital for startups. The application processes are often complex, with startups struggling to identify and navigate numerous grant options. Governments across the EU could learn from successful models like Singapore’s Startup SG, which simplifies applications, to offer better support. Another crucial step is enhancing R&D tax credit systems. The current processes in Europe are often lengthy and require expensive third-party advisors, diverting funds from innovation. Compared to the U.S. and South Korea, the EU has lower R&D expenditure as a percentage of GDP, emphasizing the need to increase investment and simplify processes to allow startups to file claims directly. To bolster the startup landscape, promoting national startup tax incentive schemes across Europe is also essential. Schemes like the UK’s SEIS and EIS have proven successful, providing tax relief to mitigate the risk of early-stage investments. Such initiatives exist in Ireland, France, and Germany, though they remain underutilized, highlighting a significant opportunity to expand the pool of angel investors and accelerate growth.