European Union President Ursula von der Leyen has underscored the importance of scaling startups in the EU, citing an "innovation gap" that needs to be bridged to ensure the bloc's competitiveness. In a speech to the European Parliament, von der Leyen highlighted the need to unlock more support for startups to scale and reduce bureaucratic hurdles that may be holding businesses back from fully leveraging the EU single market.

Von der Leyen's remarks come as she prepares to embark on her second five-year term as EU president, with a start date set for December 1. Her focus on innovation and startup support is a key plank of her second term, with the creation of a commissioner portfolio dedicated to startups, led by Ekaterina Zaharieva.

The EU president noted that while Europe's share of global patent applications is on par with the US and China, only one-third of these patents are commercially exploited. She emphasized that the EU is "roughly as good as the US at creating startups," but lags behind in scaling them up. To address this gap, von der Leyen outlined a strategy centered on "investing more and focusing better."

Investing earlier is also a crucial aspect of the plan, with the appointment of Commissioner Henna Virkkunen, who will focus on fostering "frontier technologies." Von der Leyen stressed that Europe must be at the forefront of emerging technologies to remain competitive. On the funding side, she acknowledged the need for more private investment, citing a significant gap in business expenditure for research and development (R&D) compared to the US and China.

To address this funding gap, von der Leyen proposed the creation of a European Savings and Investments Union, which will be led by Commissioner Maria Luís Albuquerque. The aim is to ensure that European companies can access the capital they need within the EU. Additionally, von der Leyen vowed to simplify the regulatory landscape, which is seen as a major obstacle for entrepreneurs. Commissioner Valdis Dombrovskis will be tasked with introducing "new omnibus legislation" to streamline rules and reduce the burden on businesses.

Von der Leyen's emphasis on innovation and startup support is likely to resonate with the European startup ecosystem. However, some may question whether the EU can indeed simplify its complex regulatory framework, given its historical reputation for being a leader in rule-making. Nevertheless, the shift in focus towards innovation and entrepreneurship marks a significant change in direction for the EU.

Ultimately, delivering on von der Leyen's vision will require a cultural shift, with regional investors needing to become more comfortable with risk and big bets, rather than prioritizing stable and predictable returns. As the EU embarks on this new path, it remains to be seen whether the bloc can successfully close the "innovation gap" and emerge as a leader in global innovation.