Funding — Awareness — Scale — Talent (F.A.S.T.) | Europe is back: Accelerating breakthrough innovation. Full set of recommendations from the Independent High-Level Group of Innovators on establishing a European Innovation Council. Jan 2018. European Commission, Directorate-General for Research and Innovation, Directorate B. Open Innovation and Open Science.
At the start of the 20th century, Europe was the world leader in technology. Based on their breakthrough innovations, Europe’s scientists, inventors, engineers and entrepreneurs created great companies that shaped new markets and transformed living standards. Leaps in economic prosperity were unprecedented.
At the beginning of the 21st century Europe is far from this position of global leadership. Few of the global tech companies that emerged over the past 20 years come from Europe. Many promising European start-ups have relocated to the US where the level of venture capital funding is 5 times greater than in Europe. Not only may we have lost the battle in digital technologies, we are now facing a very real risk of being overtaken by Asia, China in particular. This should be a major, if not the major, concern of policy makers in Europe where ageing populations and limited natural resources call for innovative solutions and new sources of growth.
We do believe we are at an historic moment of opportunity for Europe to regain innovation
leadership. Over the coming decade, large parts of the economy will be reinvented. Massive
opportunities for breakthrough innovation will appear. Economic progress and societal value
will increasingly come from innovations that rely heavily on science and engineering (“deep
tech”) where Europe excels. Values that are at the heart of the European project – such as
social equality, environmental protection, open rules-based markets, diversity – will be a critical asset
Europe has the talent, motivation and resources to lead the world in the next generation of transformational technologies. The growth of entrepreneurship among the young over the past
decade is truly unprecedented. Europe has an emerging generation of world-class entrepreneurs. It has vibrant technology hubs, several of which can realistically compete with the likes of New York and Boston, if not yet San Francisco. As the locus of breakthrough innovation moves to deep tech, Europe is ideally positioned to benefit from this trend.
Entrepreneurs, investors and innovators, not governments, build innovative companies. But
smart public policy and funding at the EU level are needed to turbocharge the exciting trends in
European entrepreneurship and help usher in a new era of European technological leadership.
We have identified four factors that hold back breakthrough and deep tech innovation in Europe.
Funding. — Breakthrough innovation, in particular deep tech, requires large investments, over a significant time period. This is the kind of finance that is missing in Europe and presents a systemic failure: venture capital is too small, fragmented, short term, concentrated on digital, not enough oriented towards deep-tech and lacking critical mass for patient capital. Bank lending, Europe’s predominant investment channel and inherently risk adverse, is not adept at supporting breakthrough and deep-tech innovation. Public support for innovation – including EU support - is perceived as complex, slow, designed for R&D and fails to bridge the gap to private investment.
Awareness. — Europe needs a flagship initiative on breakthrough innovation that can
attract the best innovators and connect local and sectorial ecosystems.
Scale. — Europe needs continental scale to compete at global level. It cannot compete
with the US or China on the basis of national and local initiatives. European start-ups should not be forced to relocate to the US to access larger financing rounds.
Talent. — Europe needs role models and champions. Its funding needs to empower
people, create a culture of risk-taking and stimulate entrepreneurship rather than encouraging risk avoidance and paper shuffling.
In this report we present a set of recommendations and related actions for a European flagship initiative – the European Innovation Council (EIC) – as the central pillar of EU support for breakthrough innovation. It should provide a critical mass of funding and expertise for high
risk / high gain breakthrough innovation, which is simple, empowers the innovator and incentivises private investment. The key to success will lie not in replacing private markets, but
in removing market failures and gaps in the European innovation ecosystem. The EIC should
focus on what cannot be done at local level or by national governments: providing critical funding for the rapid scale-up to compete globally and leveraging the value of European networks.