As the European Union prepares for its next five-year term under President Ursula von der Leyen, one of the primary goals is to address the continent's struggle with scaling startups. Despite having a competitive edge in creating startups, Europe is falling behind in helping these companies grow and become successful global players. Von der Leyen recently highlighted the urgent need to close this "innovation gap," signaling a new approach for Europe’s business future.

The European Union has been successful in fostering a robust startup ecosystem, with Europe’s share of global patent applications now on par with the U.S. and China. However, the challenge lies in turning these ideas into commercially viable products. According to von der Leyen, Europe is good at creating startups but far less successful at scaling them compared to its competitors in the U.S. and Asia.

In an effort to address this, von der Leyen’s second-term priorities include creating a new commissioner role dedicated to startups. Ekaterina Zaharieva, appointed for this position, will focus on providing better support for early-stage companies, with an emphasis on improving their ability to scale across the EU’s single market of 27 member states.

To further advance innovation, von der Leyen stressed that Europe must focus on "investing earlier" and "focusing better." The EU's lack of sufficient private investment, particularly in research and development, has been a major obstacle. Von der Leyen pointed out that Europe spends just 1.3% of its GDP on business expenditure for R&D, compared to 1.9% in China and 2.4% in the U.S. This investment gap is why Europe lags behind when it comes to breakthrough innovations and technological advancements.

The EU also plans to address this funding gap by proposing a European Savings and Investments Union. This initiative, led by Commissioner Maria Luís Albuquerque, aims to help European companies secure the capital they need for innovation and growth. As Europe seeks to scale its businesses, the success of startups will depend on increasing access to funding, especially private investments that can fuel future technological developments.

Another critical area for reform is the regulatory environment, which von der Leyen argues has become a burden on European startups. Many entrepreneurs have expressed frustration with the complexity and cost of complying with EU regulations. To ease this, the EU has introduced plans to streamline the rules, making it simpler and cheaper for companies to operate across the EU.

The appointment of Valdis Dombrovskis as commissioner for "Economy and Productivity" is central to this effort. He will oversee the introduction of new omnibus legislation designed to simplify and harmonize regulations. This regulatory overhaul aims to replace a multitude of national standards with a single set of rules that will make it easier for businesses to thrive.

While von der Leyen’s proposals have been welcomed by the startup ecosystem, some experts remain cautious. The EU has long prided itself on its comprehensive regulatory framework, and simplifying these rules may present challenges. However, the EU's commitment to supporting innovation and making Europe a more attractive place for businesses to grow signals a new direction for the bloc.

For decision-makers and investors in major cities like Jakarta and other fast-growing urban hubs in Indonesia, the EU’s strategic shift could offer valuable lessons. As Indonesia continues to grow its own startup ecosystem, there may be parallels in the challenges faced by both regions when it comes to scaling businesses.

With Europe aiming to become a global leader in "frontier technologies," such as AI, biotech, and blockchain, Indonesia may also find opportunities to collaborate on these emerging industries. Local investors and tech founders can look to the EU’s new approach as a potential model for addressing similar barriers to scaling startups in Indonesia while fostering a more competitive and innovative business environment.

TECHCRUNCH