EU's new Innovation Act targets €35bn in startup gains

The European Commission has formally proposed a new European Innovation Act, a flagship piece of legislation designed to help Europe's startups and scaleups develop, finance and grow their innovations without leaving the continent to do so.

The proposal is flagged as a central plank of the EU Startup and Scaleup Strategy and the Competitiveness Compass for the EU, and is pitched as a way to strengthen the bloc's long-term competitiveness, prosperity and technological sovereignty.

Turning ideas into economic success — in Europe

The Commission's diagnosis is blunt: Europe has world-class research, talent and creativity, but innovators face different rules in every member state and frequently struggle to raise money. The result, the Commission says, is that ideas developed in Europe are too often turned into economic success elsewhere, by other countries. The Act is meant to reverse that pattern by making it easier for innovative European companies to scale across borders and compete on the world stage.

The proposal targets two main obstacles: unlocking IP-backed financing and simplifying R&D procurement.

Startups and scaleups often hold valuable intellectual property — patents, know-how, other intangible assets — that is hard to value, which in turn makes it harder to attract investors. To address this, the Act will promote a common EU framework for valuing intellectual property, alongside a new digital marketplace connecting IP buyers and sellers, plus expert support to help companies bring their ideas to market. The Commission estimates these measures could generate around €35 million in administrative cost savings and unlock €10.2 billion a year in additional financing through IP-backed venture capital and debt.

The Act will also create a common EU procedure for research and development procurement, giving companies more legal certainty and helping new technologies — in areas like health, education and clean mobility — reach the market faster. It will make it easier for public buyers in different member states to run joint R&D procurements. The Commission projects these measures could save public buyers €1 billion a year and generate €25.92 billion in additional annual profits for companies.

A companion proposal on regulatory sandboxes

Alongside the Innovation Act, the Commission put forward a separate proposal for a Council Recommendation on regulatory sandboxes — controlled settings in which companies, researchers and public authorities can test new products, services or technologies for a limited period under regulatory supervision. Sandboxes already exist in some corners of EU law, but the lack of a common approach has created fragmentation and uncertainty across the bloc. The new recommendation would establish a shared EU reference framework for sandboxes in areas not yet covered by EU legislation, building on lessons learned in member states and existing EU initiatives, while keeping public interests protected.

What's next

Commissioner for Startups, Research and Innovation Ekaterina Zaharieva framed the package as a first step rather than a finished product. "With the European Innovation Act, we are tackling fragmentation head-on: one framework for IP valuation, one digital marketplace connecting buyers and sellers, and one simpler route for public procurement of cutting-edge research and development," she said, adding that further steps are planned to build a genuine single market for innovation by 2028.

The proposal for the European Innovation Act and the accompanying Council Recommendation on regulatory sandboxes now head to the European Parliament and the Council of the EU for negotiation.