“I believe we have everything we really need to lead.”
Ekaterina Zaharieva has an optimistic view of European innovation and its potential. As European Commissioner for Startups, Research and Innovation, her brief is to drive the European Union’s innovation ambitions and keep innovation at the heart of the EU’s economy.
Europe has a lot going for it.
“We have excellent research and technology infrastructures, [and] we are the biggest single market in the world with a quite wealthy Continent as well,” she says. “We are very good in advanced manufacturing, we have the best deep tech engineers in the world and we still have more AI engineers per cap[ita] compared with the United States.”
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But there are challenges, not least the perception that Europe is falling behind. Various multinationals have accused the EU of hampering progress through regulation. There have been warnings that Europe risks becoming the “museum of the world” by chilling innovation.
The Draghi report, published in September 2024, was another blow, as it pointed to a competitiveness crisis facing the region, with Europe lagging behind the US and China. What was needed was sweeping change to boost innovation and competitiveness, it said.
There have been some moves to address the challenges raised by that report. Simplifying regulation, with proposals for an EU-wide regime for registering companies, known as EU Inc, that would make it easier for firms to operate in the EU, and harmonising legislation with the European Innovation Act, are part of the response.
Closer to home, Enterprise Ireland this week announced a new start-up accelerator aimed at replacing the National Digital Research Centre (NDRC) programme that was given a stay of execution last year. The new Startup Ireland programme will include accelerators aimed at early stage companies, AI and founders, along with the establishment of a start-up hub for early stage companies.
The Guinness Enterprise Centre, meanwhile, is targeting growth for Irish start-ups and scale-ups in the UK through a series of partnerships with innovation hubs there. The idea is that small enterprises will have easy access to local networks, workspace, universities and market-entry support as they build their businesses.
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Europe has a good track record of supporting innovation with funding in the past, helping to finance deep tech start-ups through the Horizon Europe programme. The successor to Horizon 2020, the flagship research and innovation funding programme from the European Commission, is due to run until 2027. Its €95.5 billion budget to fund grants for research and innovation projects makes it the largest transnational research funding programme in the world.
Aside from funding collaboration between universities, research institutes, companies and public bodies across multiple countries, it also funds individual researchers, start-ups and SMEs.
Ireland has done well from the Horizon Europe programme. Last September, the State officially passed the €1 billion mark in funding receiving by projects here, with the target of €1.5 billion – 1.6 per cent of the programme’s €95.5 billion budget – in its sights. The amount awarded to Irish researchers and innovators by September was more than 2 per cent of the overall funding allocated; not a bad metric for a small state.
“Ireland is a strong innovator and you have really a really good performance in Horizon Europe, which is a very competitive programme,” Zaharieva says.
But one area where innovation is suffering is in access to capital. The commissioner points to a recommendation that Ireland increase investment in research and innovation, and also improve the range of finance sources open to growing companies.
“It’s a big issue,” she says.
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It is not just an Irish problem. While there are plenty of supports for early-stage companies at seed capital level, access to growth capital within Europe continues to be an issue.
“We are still fragmented, especially when you talk about capital, for example. We still don’t have a capital market union,” she says. “There are many, many innovative companies [that] were created in Europe”, but when companies have to grow and become global, they are often turning to investors outside the EU.
Zaharieva wants companies to have a choice when it comes to capital.
“It’s really important to find the needed capital in Europe,” she says. “It doesn’t mean I’m against capital outside the European Union. But they should have a choice.”
Public money will never be sufficient to adequately fund innovation to the level needed long-term, she acknowledges, whether it is in Ireland or the EU as a whole. “We have to engage with private capital as well as private big companies and foundations.”
With that in mind, the European Commission has created the Scaleup Europe Fund, a €5 billion late-stage growth fund to support deep tech companies.
Created under the European Innovation Council Fund, it is a public-private partnership, with a €1 billion commitment from Horizon Europe and €4 billion from the private sector. Among the investors are pension funds, insurance companies, sovereign funds – institutional investors giving their backing to the fund.
“The goal of this fund is to help [European] companies become global from Europe,” she says. “The second goal is to show this is good, that it is profitable, to give signals to the market and hopefully to more and more private investors who may start to invest in venture capital. That is something that we really need.”
Another aspect that has come to the fore in recent months has been the issue of tech sovereignty. With Europe dependent on the US for some essential tech services – cloud services, financial technology – the move could help European companies to catch up.
But it is not the only move we should make in Europe, Zaharieva says. Procuring from European companies and innovators should be on the agenda, for both the public and private sector.
“The public sector should lead by example, and we should start procuring innovation in general much more in Europe,” she says.
The European Innovation Act may help here, harmonising legislation and making it more user friendly for public procurement.
She acknowledges the difficulties, though.
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“The big American companies have a track record. You are taking a chance on a newer company, or it might be that they can have huge economies of scale and can offer things cheaper. That is often a huge thing for the public sector in particular, the perception sometimes that big companies sell cheaper. But it’s not always the case.”
Smaller companies and those that are newly established may also find the procurement process more complex, something the European Innovation Act is hoping to address, making it easier for European businesses to grow in the single market.
Looking ahead, the plan is to increase the budget for Horizon Europe, ideally doubling it, creating a pool of funding for deep tech. The plan is also to continue to develop European AI, with investment in AI factories and gigafactories – public-private supercomputing infrastructures that can handle the life cycle of frontier AI models – a key component.
The EU is investing in an ecosystem of 19 AI factories that will offer subsidised or free computing power for European start-ups and SMEs.
“A lot of commitment coming from national governments, the commission and the private sector for infrastructure is so key,” she says.
“We talk about AI but without compute power and affordable compute power for our innovative companies, they’re not going to develop their models. They’re not going to train their models. So this investment from the European Commission, together with the member states, first in factories and now in gigafactories, is something that is also very positive.”
That will help boost digital sovereignty, an issue that has been increasingly on the agenda in recent times as geopolitical tensions show.
The change in the US administration may have focused attention on the topic, but Zaharieva points out the debate did not start with the most recent change in the White House. It has been ongoing for some time.
“Europe has started to realise more and more that it’s not good to depend on only one source of supply,” she says, pointing to gas and oil, and basic items that were lacking during the Covid-19 pandemic – masks, ventilators and so on.
With the increasing importance of AI, the debate has now shifted to AI sovereignty and the importance of developing it for Europe in Europe. But the drive to make things simpler for European businesses does not mean the push for regulation in this area will be relaxed.
The challenge posed by AI is becoming increasingly evident, both in Ireland and abroad.
The International Monetary Fund this week warned it was one of three risks to the financial markets, with a “reassessment” of efficiency gains and financial benefits expected from the technology potentially triggering a big correction in equity markets.
The incidences of “rogue” AI agents have also caused understandable concern, with calls for stricter rules and regulations overseeing the technology to prevent real harm from being inflicted on society. But, Zaharieva says, regulation should be smart and easy to implement.
“Some of the models are really very powerful. They can be a threat even without the intention to be a threat,” she says.
“It’s not going to disappear. I believe that if AI is developed as we believe in Europe – it’s trustworthy, it’s human-centric, safe – it will help the citizens and the private sector of Europe.”
