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(Draft) Response to the Commission's EU Startup and Scaleup Strategy Call for Evidence

2025-03-12

We have drafted a position paper of the EuroStack Project, to be submitted in response to the European Commission's Call for Evidence on the EU Startup and Scaleup Strategy. As the Commission states:

Start-ups and scale-ups are crucial for the EU’s competitiveness. They often bring to the market breakthrough innovative solutions for societal challenges. However, their growth is still hindered by barriers, including difficulties in accessing private capital in the EU and in selling seamlessly across the single market.
The Strategy contains a set of policy, financial and legislative measures to improve and simplify framework conditions for start-ups and scale-ups.

This document specifically addresses the challenges faced by European startups and scale-ups in the digital sector. The Commission rightly identifies the crucial role of these companies in driving innovation and competitiveness, and acknowledges the barriers hindering their growth. However, we believe that the proposed "set of policy, financial and legislative measures" must go further, fundamentally reshaping the Single Market to achieve true digital sovereignty and create a level playing field for European innovators. We present a critical analysis of the current digital landscape, arguing that the dominance of non-European tech giants, coupled with a lack of enforceable interoperability and an over-reliance on proprietary solutions, poses a systemic threat to the success of European startups and scale-ups.

Drawing upon the principles of Open Source software, strategic autonomy, and SME empowerment, we propose a comprehensive framework that goes beyond simply "improving and simplifying" existing conditions. We advocate for a transformative shift towards a Single Market built upon European values, open standards, and a thriving ecosystem of European digital businesses. Our recommendations offer a concrete roadmap for building a resilient, competitive, and values-driven digital future, where European startups and scale-ups can not only survive but thrive.

This is a draft document, and we actively solicit feedback from the EuroStack community, particularly from startups and scale-ups themselves, and all stakeholders interested in building a sovereign European digital future. We believe that a collaborative approach is essential to refining these proposals and ensuring they reflect the diverse perspectives and expertise within the European digital ecosystem. We encourage you to review this document carefully and provide your comments, suggestions, and critiques by contacting us. Your input is invaluable in shaping the final version of this position paper, which we intend to submit to the European Commission before the deadline. We particularly welcome feedback on the clarity, completeness, and feasibility of our recommendations, as well as suggestions for additional actions or areas of focus that would directly benefit European startups and scale-ups.

Additionally, we encourage anyone who shares our concerns to submit their own answer to the consultation. Note that the deadline is the 17th of March 2025.

(Draft) Position Paper: Response to the EU Startup and Scaleup Strategy Call for Evidence – From the EuroStack Project

To: The European Commission
From: The EuroStack Project (www.euro-stack.com)
Date: 12 March 2025
Subject: Response to the Call for Evidence on the EU Startup and Scaleup Strategy
Status: Draft

The EuroStack Project (ESP) welcomes the European Commission's initiative to develop an EU Startup and Scaleup Strategy. We believe this strategy is crucial, but true competitiveness and resilience require a fundamental shift towards digital sovereignty based on Open Source principles and leveraging existing European solutions. This is not just a matter of economic policy; it is an existential imperative.

Recent events – such as President Trump's return to protectionist trade policies and the imminent collapse of the Transatlantic Data Privacy Framework – underscore the urgent need for Europe to control its digital destiny. This strategy must go beyond addressing surface-level hurdles. It must tackle the core issue of Europe's over-reliance on non-European technology providers, recognizing that, as Euclidia powerfully stated in 2022, "Everything already exists in Europe" to build a sovereign cloud. The EuroStack Project, aligned with other initiatives and alliances such as Euclidia, APELL, the EuroStack Initiative, and others, advocates for a comprehensive approach to build a truly independent and sovereign digital future for Europe, now. We must act now, before it is too late.

1. Do you agree that startups and/or scaleups face the hurdles identified in this document (access to finance, regulatory and bureaucratic burdens and fragmentation, access to markets, access to talent, and access to infrastructure, knowledge and services)?

Partially Agree, but with Critical Caveats:

While the identified hurdles are real, they are symptoms of a deeper problem: the lack of a cohesive, sovereign European digital infrastructure built on European solutions. Addressing these symptoms in isolation is akin to treating the disease without addressing the cause. The root cause is Europe's dependence on non-European tech giants. This dependence, as highlighted by both EuroStack and Euclidia, creates:

  • Uneven Playing Field: European startups and scaleups compete with established hyperscalers who often benefit from dominant market positions, preferential treatment, and extraterritorial legal frameworks.
  • Vendor Lock-in: Proprietary solutions and platforms create dependence, hindering innovation, limiting choices, and increasing costs for European businesses.
  • Data Sovereignty Risks: European data is often stored and processed outside of European jurisdiction, creating legal and security vulnerabilities, as demonstrated by the recent threats to the TADPF.
  • Innovation Stifling: The dominance of a few large players can stifle innovation and limit the growth potential of European startups, preventing the emergence of a vibrant, SME-driven ecosystem.
  • Lack of Interoperability: The current fragmented landscape, dominated by proprietary systems, makes it difficult for European companies to collaborate and share data effectively.

The Gaia-X initiative serves as a cautionary tale. Its inclusive approach, welcoming the very hyperscalers it aimed to counter, has undermined its core principles, allowing these companies to dilute the project’s focus and shape it to their advantage. We are critically aware of this failure, and, as former Gaia-X CEO Francesco Bonfiglio admitted, the project has largely failed to deliver on its promises, resulting in a dramatic decline in the European cloud market share. As Nextcloud's Frank Karlitschek put it, Gaia-X has become a "paper monster," producing bureaucracy rather than tangible results. We must adopt a bolder, more decisive, and SME-focused approach.

2. Are there any additional hurdles faced by startups and/or scaleups?

Yes, several critical hurdles, many of which are emphasized by Euclidia, are not adequately addressed:

  • Lack of a Sovereign Digital Foundation: Europe lacks a comprehensive, interoperable, and open-source-based digital infrastructure built on existing European technologies. This forces startups to build on non-European platforms, perpetuating dependence.
  • Dominance of Hyperscalers: The overwhelming market power of non-European tech giants creates significant barriers to entry and growth, controlling critical infrastructure, data, and market access.
  • Extraterritorial Laws: Laws like the US CLOUD Act and FISA pose significant risks to European data sovereignty and business continuity.
  • Lack of Open Source Prioritization: Public procurement and funding mechanisms often fail to prioritize existing European Open Source solutions, hindering the growth of a vibrant European Open Source ecosystem.
  • Insufficient Support for Open Source Maintenance: Many critical European Open Source projects lack sustainable funding, jeopardizing their long-term viability.
  • Lack of Enforced Interoperability: The absence of enforced interoperability standards prevents European startups from seamlessly integrating their solutions, hindering the creation of a cohesive European digital ecosystem.
  • Gaia-X's Negative Impact: The structure and outcomes of Gaia-X actively hinder the emergence of a truly sovereign European digital infrastructure.
  • Dependence on Non-european Hardware: dependence on foreign-made hardware is a strategic vulnerability.
  • Market Concentration Among Foreign Hyperscalers: creates unfair competition.
  • Regulatory Burdens: Initiatives like the Cyber Resilience Act (CRA), while well-intentioned, will place disproportionate burdens on European SMEs and Open Source projects if not carefully implemented.

3. What actions do you think the EU and/or its Member States should take to address these hurdles?

The EU and its Member States must adopt a bold and decisive strategy and prioritize digital sovereignty, leverage existing European Open Source solutions, and actively promote a thriving European SME ecosystem. This requires a fundamental shift in approach, encompassing:

A. Foundational Principles :

  • Open Source First: Mandate the use of existing European Open Source software as the default choice for all publicly funded digital infrastructure and services. "Public Money, Public Code" must be a core principle, both for R&D&I funding and for public procurement.
  • Enforced Interoperability: Establish and enforce mandatory, open standards for data formats, APIs, and communication protocols to ensure seamless integration, prevent vendor lock-in, and empower European SMEs. This must go beyond mere recommendations; it requires legally binding requirements, robust testing and certification mechanisms, and clear penalties for non-compliance, as highlighted by the recent CJEU ruling against Google, and detailed in our position paper on interoperability.
  • Data Sovereignty: Ensure that European data is stored and processed under European jurisdiction, with strict adherence to GDPR and robust privacy protections.
  • Everything Exists in Europe: Prioritize existing, proven European solutions, recognizing that we do not need to "reinvent the wheel." Leverage technology and solution directories like euro-stack.com and cloudrepo.eu.
  • Vendor Neutrality: Promote competition and avoid monopolies by adopting vendor-neutral platforms and standards, actively favoring European solutions.
  • Security by Design: Embed security and privacy into the core of all digital solutions, adopting a Zero Trust architecture, addressing supply chain security (including hardware), and utilizing strong, open cryptographic standards.

B. Concrete Actions:

  1. Establish and Promote the EuroStack: Create a comprehensive, modular, and interoperable digital infrastructure, building upon and integrating existing European Open Source technologies. The EuroStack Directory Project (ESDP), inspired by and complementary to Euclidia's cloudrepo.eu and other directories, will be a key component, providing a catalog of vetted European solutions.
  2. Prioritize European Open Source in Public Procurement: Mandate the use of existing European Open Source solutions in public procurement, providing clear preferences and incentives for European SMEs. Procurement should be a strategic tool for building European digital sovereignty. Actively disfavor non-European solutions when a viable European alternative exists, even if it initially means a slightly higher cost or fewer features. This should be framed as "strategic procurement" based on objective criteria (security, interoperability, data sovereignty, long-term cost-effectiveness) to avoid violating WTO rules. Arguments based on the "cultural exception" and "national security" exemptions within WTO rules should be explored.
  3. Strategic Investment: Direct significant public and private investment towards existing European-grown Open Source technologies and SMEs that enhance sovereignty and autonomy. Leverage European institutional investors. This investment should be directed towards concrete projects and companies, not just abstract research.
  4. Sustainable Funding for Open Source: Provide long-term, sustainable funding – primarily through direct contracts, not just subsidies – for existing European Open Source projects critical to European sovereignty. This includes funding for maintenance, security audits, and community development.
  5. Support European SMEs: Structure public procurement, funding, and tax incentives to explicitly favor European SMEs and Open Source projects. Provide SMEs with the tools, resources, knowledge, and market access to compete effectively with hyperscalers. Advocate for SME-friendly regulations, including exemptions from overly burdensome requirements in initiatives like EUCS and CRA, and streamlined compliance processes. A dedicated "European Small Business Act" for the digital sector should be considered.
  6. Education and Skills: Develop digital skills training programs focused on Open Source and cloud technologies, fostering a culture of openness, self-reliance, and European expertise. These programs should emphasize not just technical skills but also the strategic and ethical implications of technology choices.
  7. Bottom-Up Governance: Establish clear, bottom-up governance frameworks for public-private collaborations and digital infrastructure, ensuring transparency, accountability, and SME inclusion.
  8. Counter Hyperscaler Dominance: Actively address the market dominance of non-European tech giants through regulatory measures, stronger antitrust actions, competition policy, and strategic investments in existing European alternatives.
  9. Mandate Data Residency: Enforce strict data residency requirements for sensitive data, ensuring it remains under European jurisdiction.
  10. Promote a European Cloud-Edge Continuum: Develop a vendor-neutral, European-led cloud-edge ecosystem based on Open Source, enabling workload portability and user control.
  11. Reject Gaia-X's Approach: Learn from the failures of Gaia-X and explicitly avoid replicating its inclusive, hyperscaler-friendly model. We need a decisive shift towards a truly independent, SME-driven European approach. The Commission must acknowledge Gaia-X's shortcomings and publicly commit to a new direction.
  12. Define and Track Metrics: Establish clear, measurable, achievable, relevant, and time-bound (SMART) metrics to assess the progress and impact of the strategy, including metrics specifically tracking the adoption of existing European solutions and the growth of European SMEs. As an example, after establishing a baseline based on an internal audit of its IT spending practices, the Commission should develop an ambitious plan to spend 90% of its IT budget on European-supported interoperable Open Source solutions by 2035.
  13. Foster European Hardware Independence: Support the development of European-based hardware solutions, or guarantee sourcing from trusted European manufacturers.
  14. Promote European Leadership in Emerging Tech: Dedicate a framework with funding to put Europe at the forefront of Cloud and AI innovation. This includes supporting the development of Open Source AI models and frameworks.

Conclusion:

The EU Startup and Scaleup Strategy must be a transformative initiative that establishes a truly sovereign and competitive European digital ecosystem, built on the principle that "Everything already exists in Europe." Our vision puts the emphasis on existing European Open Source technologies and solutions, [enforceable] interoperability, SME empowerment, and European values, provides a clear roadmap. We urge the Commission to embrace this vision. Adopt a bold, decisive strategy that prioritizes European digital independence by leveraging the innovative power of existing European solutions and SMEs. The time to act is now. The failures of the past must not be repeated. Let us choose to build, not to surrender. The Commission must demonstrate, through concrete actions and policy decisions, that it is serious about achieving digital sovereignty, not just talking about it. The future of Europe's digital economy, and indeed its overall resilience, depends on it.

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