Can Europe’s start-ups escape the Valley of Death?

Europe has long been a hub of brilliant ideas. From AI breakthroughs in Paris to green tech innovations in Stockholm, European start-ups regularly make global headlines. Yet too often, these promising ventures hit a wall. Instead of growing into global champions, they stumble into the “valley of death”—that treacherous gap between early innovation and commercial success. Lacking capital, talent, or market access, too many relocate or sell out to foreign competitors. In short, European innovation too frequently blooms only after crossing the Atlantic or Pacific.

A new exploratory opinion by the European Economic and Social Committee (EESC) urges the EU to break this trend by adopting a scaling-up mindset in all business-related policies. Supporting start-ups at birth is not enough—the challenge is ensuring they can thrive and expand without leaving the Single Market.

A Reality check: Regulatory hurdles

The struggle begins with regulation. A recent Flash Eurobarometer survey (559) shows that regulatory complexity is the number one barrier to growth. Sixty-four percent of SMEs point to administrative and regulatory burdens as their main obstacle, rising to 71% among start-ups. Payment delays (39%) and limited access to finance (27%) follow closely. Talent shortages are another critical challenge: 43% of growth-oriented SMEs report difficulties in hiring or retaining skilled staff.

For entrepreneurs, these aren't abstract complaints but daily frustrations: months lost filling forms, delayed invoices stifling cash flow, and a scramble to find qualified workers in a tightening labour market. The result is too much creative energy wasted on survival instead of scaling. This is why the EESC calls for a smarter, lighter regulatory framework that encourages innovation and minimizes administrative barriers.

Funding without borders

Ambition is not what Europe’s start-ups lack—but capital often is. Funding dries up after the seed stage, pushing founders to look abroad for investors who can match their global ambitions. Here the EESC is blunt: Europe must take scaling financing seriously, not after the next budget cycle.

That means dedicated EU investment funds for scaling, a completed Capital Markets Union, and smarter tax policies that make Europe a more attractive place to bet on new ventures. Without this, the brightest founders will keep booking one-way tickets to Silicon Valley.

People and talent, not just patents

Talent shortages are fast becoming a make-or-break factor for Europe’s start-up scene. Three out of four SMEs report difficulties in recruiting skilled workers, with start-ups and scale-ups feeling the pinch most acutely.

Europe can no longer afford to drag its feet—streamlined procedures for highly skilled workers and founders from outside the EU are overdue. At the same time, the EESC urges a long-term push: stronger STEM and entrepreneurial education, and more agile labour markets that can attract and retain top talent from around the world. Europe can no longer afford to lose the race for brains.

From market potential to market power

Equally vital is access to technology and infrastructure. Access to world-class AIlabs, supercomputers, and research facilities and digital infrastructure should be the baseline, not the exception. And yet, despite the EU's vaunted single market, 70% of SMEs still operate only in their home country, with just one in four exporting to another EU state.

The path forward

Breaking the cycle demands more than tinkering. Europe must simplify rules and cut red tape, unlock finance across the entire growth chain, de-risking private investment, attract top talent, and nurture a culture where failure does not end careers but strengthens them. Encouragingly, the European Commission’s new start-up and scale-up strategy marks a step in the right direction, and the EU's start-up and scale-up scoreboard can serve as a reality check, distinguishing political promises from real progress.  But the message from both the EESC opinion and the Eurobarometer is unmistakable: Europe’s entrepreneurs are ready to scale—now it is Europe’s turn to scale with them or watch its best ideas bloom elsewhere.

By Mira-Maria Danisman, Rapporteur of opinion INT/1089 European Start-ups and scale-ups