Europe’s innovators are creating the tools that will power the next wave of competitiveness. But many still face avoidable hurdles. In Caribou’s response to the European Commission’s European Innovation Act consultation, we set out practical ways to strengthen Europe’s innovation environment, drawing on insights from working directly with innovators, including through the Mastercard Strive EU program. We focus on three priorities: easier access to finance, proportionate and clearer regulation, and a more connected EU-wide ecosystem for scaling solutions.
Learning from innovators: Evidence that informs better policy
Our insights on EU innovation offer a critical perspective for EU policymakers, which we shared as feedback to the public consultation. Much of our evidence comes from in-depth interviews and research directly with innovators.
We know the single largest challenge that entrepreneurs and innovators face in the EU is a lack of access to finance. Almost 50% of applicants to the Mastercard Strive EU Innovation Fund reported that financing constraints significantly affect their ability to roll out new solutions. This problem is especially pronounced in the transition-to-scale phase, after initial market validation but before profitability. At this point, follow-on funding or other capital is often required to maintain operations, not just to grow them. Innovators also report that EU funding application processes are often overly complex, bureaucratic, and time-consuming, creating barriers especially for early-stage ventures with constrained capacity. Many struggle to comply with intricate eligibility rules, multiple reporting demands, and tight deadlines.
Further, innovators consistently identify regulation as a barrier to growth and scaling. The complexity of the EU regulatory landscape shapes which markets innovators enter and dampens their appetite for building. For example, the EU Artificial Intelligence Act raises significant implementation challenges. Burdensome and costly compliance requirements for high-risk AI systems create uncertainty, and some innovators may avoid deploying AI altogether rather than risk misclassification. The slow pace of regulatory reforms risks leaving EU firms behind global competitors and delaying the adoption of digital tools by small businesses.
Finally, as innovators develop and test their solutions, partnerships become critical—a reality Caribou has observed within the Mastercard Strive EU portfolio. Partnerships are essential for reaching small business customers, enabling technical integration, and learning from established firms. Yet identifying and establishing these partnerships is often a major hurdle. Startups typically lack a clear platform for approaching established companies without endorsement or trust signals, making it extremely difficult for them to reach decision-makers within those companies.
Recommendations to address these challenges
To support the European Commission’s efforts through the proposed European Innovation Act, Caribou proposed recommendations to reduce the barriers and challenges that innovators report.
Simplify access to finance.
- Revamp the EU funding portal: While a central funding portal exists, innovators report that its complexity makes it difficult to navigate. Clearer guidance, simplified application formats, and streamlined reporting requirements that reduce application times by 30% will better align with startups’ capacity.
- Launch an “Innovation Passport”: To reduce the administrative burden for innovators, the EU should create a one-stop-shop passport for those applying for funding: a portable digital profile that stores documentation, grant history, and pitch decks that is reusable across EU calls.
- Mobilize private capital with strategic instruments: Rather than focusing solely on volume, the EU should create conditions for more patient, mission-aligned private investment, prioritizing long-term resilience, responsible scaling, and autonomy over “growth at all costs.” This would reduce reliance on capital sources that tie innovators to infrastructure or models outside Europe, ensuring greater sovereignty in emerging tech.
Enable small businesses to scale
- Reduce the regulatory burden: Compliance requirements should be proportionate to firm size, with tiered requirements and exemptions for smaller firms. EU policymakers should also reduce fragmentation by aligning national standards and procedures wherever possible.
- Open access to data: Make the Common European data spaces more accessible by promoting them within startup communities and by facilitating participation by firms that may lack the knowledge or resources to access user and market data. As part of its Digital Omnibus, the EU should look for opportunities to exempt startups from burdensome data-sharing requirements.
- Ensure regulatory sandboxes are built for businesses: Regulatory sandboxes should focus on helping startups shorten time to market. Beyond their educational function for regulators, sandboxes should create an environment that allows a startup to test products, benefit from specific and targeted exemptions, and communicate regulatory hurdles to policymakers.
Facilitate a competitive ecosystem
- Build a European “Match & Scale” platform: A curated mentor-matching platform or voucher system (drawing on the European Commission’s existing bank of experts and its partnerships with research centers, chambers, and accelerators) would ensure that innovators can draw on high-quality, domain-specific advice and have access to decision-makers in corporate value chains when scaling across markets.
- Launch Member State innovation hubs: “EU innovation hubs” across Member States would centralize information and definitions, communicate pro-innovation initiatives, and provide startups with access to findings and research. This could strengthen national incentives for policy experimentation tailored to sector-specific needs, while also generating EU-wide spillovers and fostering innovation.
- Proactively leverage pro-innovation regulatory instruments: EU accelerators, Digital Innovation Hubs, chambers, living labs, and associations (innovation intermediaries) should be funded to connect startups, policymakers, corporates, and investors. Rather than serving as passive directories, they should operate as proactive matchmakers to broker pilots and cross-border connections, and to share infrastructure and networks.
The path forward
Micro- and small businesses are essential to Europe’s competitiveness and prosperity, and innovators are leading the charge with tailored innovative solutions. The path forward to support innovators requires coordinated action across the entire ecosystem, with collaboration between public and private sectors key to unlocking innovation.
Caribou’s role as a bridge-builder remains paramount, and we continue to engage with EU institutions to support a more inclusive, data-driven innovation agenda by turning evidence into actionable policy ideas.
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