Danuta Hübner MEP

  • “The review of the European Venture Capital Funds regulation should make investment in startups easier”

Commentary by Danuta Hübner MEP, Chair, Constitutional Affairs Committee, European Parliament, EPP

Small and medium-sized enterprises (SMEs) are the segment where growth potential, and in particular potential for job creation, is the highest. A broad fabric of SMEs is necessary for an economy to be resilient and to combine competitiveness with creating new jobs.

Therefore, there is first a need to eliminate barriers to the creation of SMEs. Innovative projects cannot be held up by lack of access to financing. Then, there is also a need to provide incentives to the creation and development of SMEs.

Those are objectives that are widely shared within the European Parliament, and in Union institutions in general. With them in mind, good initiatives have been taken in order to facilitate the access of SMEs to finance and also to make it easier for them to grow and climb the funding escalator. For instance, the review of the European Venture Capital Funds regulation should make investment in startups easier, the review of the prospectus regulation should lighten the administrative constraints on SME issuances and there is now a new a package of proposals on crowdfunding presented by the Commission.

However, we also have to look at other aspects in order to encourage the growth of SMEs, and regulation cannot address them all. 

Some of the most important elements hindering the development of SMEs are cultural and also financial. Starting a business, or, for savers, investing in capital markets that will support SMEs, is not perceived in the same way and not seen as equally attractive in all countries of the Union. This situation needs to change, and for this change to happen, improving financial education and promoting entrepreneurship will be crucial. However, we need to be mindful that this process will take time. 

In bringing about this change, successful SMEs, those that have grown and become prosperous, have a pivotal role. They could, and should, share their success stories in order to, through their example, provide incentives to the creation of new companies. They could, and should, use their experience in order to provide advice to incumbent SMEs and to would-be entrepreneurs, who very often will stand in great need of such advice. Networks of entrepreneurs, business angels and industry-led initiatives aiming at guiding and advising new entrants are key elements to the development and success of newly established SMEs.

Therefore, both regulators and industry have to play their part in supporting SMEs. Public and private action should complement each other. A long-term perspective will also be crucial in order to consistently and progressively create a true European SME culture.