Europe is at a critical juncture – striving for global competitiveness while upholding its values in an increasingly turbulent geopolitical landscape, with startups and scaleups at the heart of that ambition. Despite persistent challenges, from navigating EU market access to fragmented regulation, Europe's startup and scaleup ecosystem is showing remarkable resilience. Many scaleups report rapid year-on-year growth and express confidence in their future outlook, even in the face of uncertainty.
The recent publication of the Startup and Scaleup Strategy is a crucial step forward in recognising the importance of high-growth companies to Europe’s competitiveness. New research from Sage identifies the enablers of that growth, drawing on insights from over 7,500 startups and next-gen scaleups across 15 EU Member States. It finds that the average European scaleup grew by 38% in the past year, far ahead of the OECD’s 20% benchmark. Scaleups had a clear message for EU policymakers: digitalisation and cross-border trade are the two keys to scaling – with 9 in 10 scaleups identifying digital tech as critical to their success, especially those operating in international markets.
Read the full report here: Scaling for Growth Unlocking the Potential of Europe’s Startups and Scaleups
A digital by default single market
Digitisation is essential not only for innovation, but also for enabling startups and scaleups to scale efficiently across borders, and transform into global champions. The EU plays a pivotal role here: by harmonising standards across e-invoicing, digital ID, and open finance, it can remove the hidden barriers that stifle growth and trade.
Yet nearly half of scaleups and next-gen scaleups say they need stronger EU and Member State support to accelerate their digital transformation. Without adequate investment and support, Europe risks falling behind more aggressive global tech ecosystems.
The Draghi report pinpoints AI-powered software as a key tool for reducing compliance and administrative costs for small businesses. While many scaleups are already embedding AI into their day-to-day, uptake among smaller and potential scaleups remains limited – revealing a widening digital maturity gap that must be addressed. To close this gap, policymakers should focus on expanding access to digital tools that pave the way for AI adoption among next-gen scaleups. Even without the impact of AI, accelerating the digitisation of small businesses has the potential to increase EU labour productivity by 2.6% annually.
Digital tools such as e-invoicing (where invoices are sent and processed digitally) are proven to act as a stepping stone to AI and cloud adoption. E-invoicing reduces late payments by 20%, and getting paid on time is a priority for European businesses: 1 in 5 scaleups and next-gen scaleups call for the EU to make it easier for them to receive payments on time – rising to almost a third among the smallest next-gen scaleups. This demonstrates the importance of working capital for scaleups throughout their growth journey.
With the European Commission set to propose a 28th regime which will provide a single corporate framework based on digital-by-default solutions, it is crucial that digital tools such as e-invoicing are leveraged to simplify cross-border transactions and reduce administrative burdens for growing businesses. Combined with the upcoming proposal to develop a European Business Wallet establishing a digital identity for economic operators, and the important digitalisation and e-invoicing work outlined in the Single Market Strategy, the EU can create a truly digital by default single market.
Growth beyond borders
To become a scaleup, international expansion is essential: the research shows that businesses that successfully grow across borders consistently outperform those that remain domestic, and the most successful scaleups tend to generate a large share of their revenue from abroad.
77% of scaleups have expanded overseas, compared to 29% of next-gen scaleups. While many next-gen scaleups are on the path to expansion, there remains a maturity gap that will require future-proofed policy to close. International trade today should be digital-by-design: startups with stronger digital capabilities are more likely to succeed globally, and tools such as e-invoicing are becoming the backbone of cross-border commerce. E-invoicing plays a crucial role in facilitating international transactions: it helps streamline supply chains and reduce operational costs, and also connects to Europe’s broader sustainability objectives. By integrating e-invoicing with carbon accounting, Europe can support sustainability and competitiveness in tandem.
Going forward, we need to focus and invest even more in digital tools and frictionless trade, both to supercharge our existing scale-ups and to cultivate the next generation of scale-ups.
Skills and financing to power the ecosystem
Technology and trade are catalysts for growth, but they cannot succeed without people or capital. As pinpointed in the Union of Skills, the competitiveness of Europe’s startup ecosystem hinges on having a workforce with future-oriented skills, but Europe must take action to nurture homegrown talent. This message is echoed by roughly half of Europe’s scaleups and next-gen scaleups who say they need improved access to talent.
Public-private partnerships are proven to play a key role in upskilling, particularly in AI and digital skills, by aligning education and training programmes with industry needs. These collaborations are essential not just for hitting Digital Decade goals, but for ensuring the startup ecosystem has the people it needs to thrive. Access to finance remains another critical barrier, with 81% of next-gen scaleups and 72% of scaleups calling for the EU to provide more support for equity funding and taxation support.
The EU must act decisively to deliver on the Startup and Scaleup Strategy – and use the upcoming 28th regime as an opportunity to harness digital tech and cross-border trade to unlock more growth. Europe’s startups and scaleups have shown resilience, optimism, and a clear commitment to growing within the EU. Now they need an environment that matches their ambition. With the right support, these companies will shape the future of Europe’s economy.
For more information, take a look at Sage’s Digital Newsroom
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