How can the EU help on re-starting from failure? Problems & Solutions #IPS2016

The 3rd panel session of the #IPS2016 hosted a productive and very informative discussion regarding the existing policies, initiatives and supporting mechanisms at European level mainly for SMEs and startups.

The panel was consisted of Ms. Lidija Globokar, President & Co-founder Project 668, Mr. Kevin Tammearu, Digital Officer at LYMEC and Mr. Dionysios Tsagkris Policy Officer, DG GROW, COSME Directorate (Competitiveness for SMEs). Mr. Dionysios Tsagkris in his introductory speech, he outlined the current strategy of EU Commission with focus on the important issue of ‘second chance’, starting with describing why failure in the entrepreneurial world is one of the major concerns for EU today.

Official data from the EU Commission and other sources show that:

  • Every year, 1.7 million jobs are lost in the EU due to companies that go bankrupt.
  • 000 of these companies operate within EU territory and 50.000 owe money to EU member states.
  • 50% of the new companies do not survive more than 5 years.
  • More than 40% of young entrepreneurs are afraid to move on with the creation of their company, because of the not favorable conditions in EU. In contrast with the US where the level of tolerance in failure is much higher.
  • There is big divergence among the EU member states regarding the ‘death settlements’ after the failure of a company. Many parties are involved and there is lack of central policies.
  • 96% of the bankruptcy in companies is ‘honest’, however this is not the perception among the society. Bankruptcy is usually considered a deliberate act.
  • Second time’ starters do much better in their second entrepreneurial attempt.

The numbers show clearly that there is a need for appropriate actions at EU level in order to face the different aspects of failure in entrepreneurship and establish an efficient framework to facilitate second chance. However, EU seems to acknowledge that failure, likewise creation, is part of the dynamics of a business environment. The big ‘death rate’ in new companies as well as the cultural and institutional stigma that follows them brings back more urgent the question: how these people will come back to business?

A series of past, current and future interventions, all parts of EU’s strategy to change the status among the member states regarding failure and second chance, were discussed.

  • On October 2015 EU launched a new strategy for the new companies and startups. The member states will be pushed to change their legislations on bankruptcy in order to achieve better compliance in terms of legal framework among the countries, especially for new technology companies.
  • Since 2011, the Council of competiveness has asked for more second chance opportunities to honest fails, by setting a maximum period of 3 years in the consequent ‘death
  • An initiative from the EU Commission, the Capital Market Union will be soon published and aims at facilitating awareness in terms of legal procedures for the investors when they invest to member states.
  • Early Warning Network was published on March 2016 providing knowledge for the development of advisory mechanisms and services in the countries which do not provide already.
  • The EU Commission intends to initiate public consultation regarding startup and scale up companies in single markets intending to examine the attitudes and behaviors of the involved parties in entrepreneurial activities.
  • Several programs and initiatives such as Entrepreneurship 2020 and Small Business Act 2014 emphasize ‘second chance’ in an attempt to create the appropriate institutional and cultural context in Europe.

This session of the IPS 2016 showed that there are a lot of functions at EU level regarding second chance in entrepreneurship. The acknowledgement from a policy maker that failure must be seen as a learning and development opportunity and that all relevant actions take this into account is a very encouraging step. SMEs still represent the main source of employment in Europe and Europe knows very well that there is an urgent need to facilitate their growth and sustainability.

Besides the above very useful information regarding the bureaucratic aspects of entrepreneurship, the panel emphasized enough the power of discussing about our entrepreneurial idea. Asking feedback and not being afraid to discuss with those who have learned already from their failure and/or success is important, especially at the very early stages of an idea.

Entrepreneurship can thrive within the appropriate ecosystem which is able support their development. From macro to micro level, starting from EU until every young entrepreneur and his/her idea entrepreneurial activities can thrive when bottom up and top down interactions are taking place and when proactivity is encouraged and rewarded.