There is still not enough seed capital in the form of venture capital in the EU to adequately finance the development of European start-ups and spin-offs. Yet it is precisely these high-tech companies that are the basis for the future competitiveness of European businesses. Universities and public research organizations are therefore increasingly strengthening links with entrepreneurs and large companies.

Most companies have the desire to develop new business models and enter new market segments, especially if they could do so on the basis of the knowledge and personnel available within the company. Unfortunately, there is often a lack of adequate development opportunities for innovation within established companies.

Therefore, universities and public research organizations are increasingly strengthening relationships with entrepreneurs and large companies. The mechanisms of the innovation environment within universities are subject to constant upgrading and complementation, as well as new forms of collaboration. By asserting the so-called third mission of universities, the process of transferring knowledge and technologies from the university sphere to the business sphere has developed, bringing many social and economic benefits.

This process of collaboration between the university and the external environment takes various forms, from patent licensing to academic spinouts or spinoffs, created and developed with the support of university incubators, science and technology parks and specialized university funds of venture capital.

Many Spinoffs Are Developed in Accelerators

Typically, the spinoff shares certain support mechanisms with the parent organization, which allows it to devote itself exclusively to development with lower operating costs, and the parent organization gets to develop and innovate but with less risk to itself. Although many spinoffs are developed in accelerators, it is important in what broader business environment they emerge, which indirectly conditions access to the capital needed for further development. Despite an increasingly supportive business environment that encourages innovation, most spinoffs seek growth and development in foreign markets.

The importance of a supportive environment for start-ups will be discussed by Devika Thapar, co-founder of Wilbe, where Europe’s leading research centres educate, support and invest in some of the world’s best scientists.

As much attention as is required to develop products and services and devise a market entry strategy should be devoted to planning the financial framework. This is not only a matter of matching the financing to the development of the spin-off, but also of having a very good knowledge of the characteristics and, above all, the requirements and sources of private and venture capital. This is the only way to ensure the acquisition of the necessary financial resources at all stages of the spin-off’s development.

Most Startups Fail in the Early Stages of Development

When it comes to funding a startup, whether it’s a spinoff or a startup, two problems are solved at once. Startup founders need capital, and venture capitalists, on the other hand, know that they need to make many more investments on top of that because most startups fail in the early stages of development. The logic of venture capital funding spinoffs, most of which fail to reach their full potential, is therefore well illustrated by the saying “Spray’ n ‘Pray”. The principle of large scale dispersion is the only sustainable principle of funding start-ups.

The European Innovation Environment Has Little in Common with the American Unicorns

While the aforementioned funding logic does not differ significantly across the globe, there are important differences between high-tech startups in the US and the EU. The United States is dominated by B2C digital unicorns such as Uber, Airbnb or Snapchat, which are based exclusively on new business models rather than innovative technology, but mainly on maximizing ownership value and minimizing initial investment. The culture of European high-tech startups and spinoffs is quite different. They are primarily looking for innovative business-to-business (B2B) technological solutions based on the use of their own innovative technologies, the development of which requires a lot of financial resources and a suitable support environment such as incubators.

Unfortunately, there is significantly less seed capital available in the EU in the form of venture capital that could adequately finance the development of Europe’s technological potential. Yet it is precisely these high-tech companies that are the basis for the future competitiveness of European businesses.