Start-ups, Scale-ups und europäische Wettbewerbsfähigkeit

Frankfurt Book Fair 2023 with partner country Slovenia - view of the courtyard

It never ceases to amaze what scientific and technical achievements the old continent is capable of. The World Wide Web was invented here (1) and the company BioNTech has developed an innovative vaccine against the coronavirus pandemic faster than any other company. Unfortunately, however, the old continent has so far been unable to reap the benefits of these efforts. This is because BioNTech, like many other companies, chose not Europe but the United States for its initial public offering.

The reason for this is not a lack of loyalty to Europe or a lack of confidence in its workforce. This is the message of a joint letter sent by European start-up associations and European stock exchanges to the EU finance ministers and the European Commission in September. (2) ‘The logic is purely economic: the US offers deeper and broader capital pools, potentially higher valuations and a better integrated listing and trading ecosystem that does not exist in Europe.’

A number of promising start-ups that wanted to expand (scale-ups) were currently considering an IPO. The challenge now is to enable these companies to access sufficient investment in the EU ‘so that the jobs, patents, talent, tax payments and economic returns they create are retained.’ In their open letter, the authors list four sets of measures that are widely seen as providing a remedy.

Firstly, scale-ups should be strengthened in their growth phase by promoting venture capital before they go public. Because there is a lack of European venture capitalists, one in four start-ups that raises more than 100 million euros in Europe ends up leaving this continent. Secondly, a changed tax and regulatory environment, as well as a deeper liquidity pool, should create incentives for European savings to flow into their own economy in the future. So far, European savers invest 300 billion euros annually in American companies.

Thirdly, transaction costs for equity investments should be eliminated when crossing EU borders. Because: ‘Today, most European investors have to pay more when buying a European share than when buying a national or even an American share.’ Fourthly, European citizens should become more competent in terms of their financial investments. In doing so, the EU could learn from successful initiatives and practices at the national level ‘to create a pan-European effort for a more integrated capital market union.’

The urgent appeal in September is no coincidence. On 9 September, Mario Draghi presented his report ‘The future of European competitiveness - A competitiveness strategy for Europe’ (3). And a new Commission will take office this autumn. In her acceptance speech (4) to Parliament on 18 July 2024, President von der Leyen promised to propose a European Savings and Investment Union (another name for a capital markets union). ‘European start-ups should not have to look to the US or Asia to finance their expansion. They must find what they need to grow here in Europe.’

If that were the case, Enrico Letta would have something to smile about again. When he presented his report ‘Much more than a market’ (5) at an event in Frankfurt am Main on 7 May this year (6), he became personal for a moment during the subsequent discussion. In order to write his report, he had also spoken to young people in the start-up scene. He was very saddened by the fact that they told him, ‘My dream is to go to the USA...’ because they find better conditions for their business there.

Margit Reiser-Schober

Error in content? – eurolandpost@gmx.eu
Original language German – machine translated by deepl
Error in translation? – eurolandpost@gmx.eu