Building Europe’s Innovation Operating System: Policy, Capital, and Execution
Kat Borlongan and Paul Fehlinger talk about the impact of the EU Startup and Scaleup Strategy and how to better bridge the VC, policy and innovation worlds on the continent.
“Startups were viewed almost as cute puppies… Now, technology is essentially a new arms race determining sovereignty, defense, and prosperity.”
As the European Commission just unveiled its long-awaited Startup and Scale-up Strategy, Europe faces a pivotal test. The Draghi report has rekindled ambition, and long-debated much-needed enabling tools like the Capital Markets Union or the 28th Regime are finally gaining political traction. But ambition alone won't fix a fragmented landscape where venture capital, policy, and entrepreneurship still operate in silos—undermining the continent’s ability to build and scale globally competitive tech.
In this conversation for VC+POLICY, I have the pleasure of sitting down with Kat Borlongan—former director of La French Tech, a key architect of France’s startup success story, and now a board member of the European Innovation Council (EIC) advising the European Commission, among many other achievements. She was also the rapporteur of the EIC Contribution “Beyond Catch-up” to the Startup and Scaleup Strategy.
Together, we cut through the noise and delve into a shared passion we've discussed on several occasions: addressing the flaws in Europe's innovation ecosystem and aligning the interests of Europe’s fragmented stakeholder landscape to drive collective action.
We explore why past efforts have fallen short, what it would take to create a true innovation operating system, and whether Europe is finally ready to execute and compete on the global stage.
Paul Fehlinger: Europe seems to be at an exciting crossroads: the Draghi report serving as a wake-up call, and initiatives like the Capital Markets Union reform, or the 28th Regime and the EU Inc. campaign generating real momentum, and the Startup and Scaleup Strategy was just released. Yet we've been here before a couple of times —the 2016 Startup Initiative, Scale-up Europe to name just a few—and many promising flagships haven't fully connected the policy, capital, and entrepreneurship worlds. What's your assessment of why previous efforts haven't achieved their full potential?
Kat Borlongan: If you examine any ambitious vision requiring multiple actors to deliver something beyond themselves, you always need three fundamental ingredients: solid leadership, solid strategy, and solid execution. Looking at past initiatives, none fully hit the mark across all three
On leadership, startups have never been as much of a mainstream priority as they are with this Commission under President von der Leyen. On strategy, I've never seen an actual strategy—just lists of measures. A strategy isn't just fixing what's broken; it's deciding where we want to be, how to get there, and what to prioritize or deprioritize along the way. And on execution, there's never been a dedicated, ambitious, experienced team running this at the Commission level.
You know, if you want to go deeper into why these three things were missing, you have to ask yourself: how did that happen? I think it's really interesting to trace the place that startups have had in policy in general. There's been this whole evolution in how we think about startups in the policy context.
Paul Fehlinger: There's also an interesting evolution in how policymakers view startups. Can you trace that journey?
Kat Borlongan: It's fascinating to see how the perception has shifted. Around 2015-2017, startups were viewed almost as cute puppies—"let's help these kids with hoodies eat pizza and play foosball while they raise their first million." Fast-forward to 2020-21 during COVID, and suddenly people realized startups were responsible for delivering food, educating children, enabling remote communication, and booking medical appointments.
Now, post-Ukraine and amid geopolitical shifts with the US, we've realized technology is essentially a new arms race determining sovereignty, defense, and prosperity. I still find it strange that we isolate startups completely as a separate thing rather than integrating them into a holistic innovation strategy.
Paul Fehlinger: This reflects Europe's special pathway. Looking at the policy side, Europe has invested enormous energy in regulating technologies, seeing this as its superpower to impose transnational standards. Only now are certain leaders, spurred by geoeconomic changes, recognizing the need for a proactive vision of European innovation, capital allocation and entrepreneurship.
You are the rapporteur of the EIC contribution to the European Commission’s new Startup Scaleup Strategy. Titled “Beyond Catch Up”, it emphasized that "what is needed is a movement, not yet another list of checklists or regulatory measures." Among both entrepreneurs and investors, there's definite white paper fatigue—what people want is unlocking the practical requirements to build and scale.
Kat Borlongan: Absolutely. People are approaching this from very different angles. Some view this as simply helping startups become scale-ups and scale-ups become unicorns. Others see it as securing Europe's position as a future tech superpower, where startups play an important but not exclusive role.
The truth is, you need a mix of both. But I think for a long time, we've just had this very unhealthy obsession with unicorns, as though that was the end game. We need to align on our goals first. "Helping startups" and "making Europe an unassailably strong tech superpower" require completely different approaches. The first focuses mostly on the ecosystem, while the second brings in industrial policy. We need both, but for too long, we've had an unhealthy obsession with unicorns as the end game.
There's also been this expectation that the Commission should somehow be this messianic force bringing everybody together - all Member States, ecosystems, and stakeholders around a single battle plan. That's probably not realistic given the complexity of the EU system. If we can get the 28th regime, capital markets union, and stock options done properly, that would already be a significant win for the ecosystem.
Paul Fehlinger: Could you outline the main pillars of the new startup and scale-up strategy?
Kat Borlongan: The Commission organized their "call for evidence" around five pillars: talent, funding, policy, bureaucratic burden, and they later added infrastructure and data. It primarily outlined obstacles startups face regarding these pillars and crowdsourced ideas to overcome them.
Paul Fehlinger: How many investors and entrepreneurs were actively engaged in this process? I've heard the Forum included just 30 representatives.
Kat Borlongan: That's correct about the Forum, which isn't actually an event but an advisory group in Commission-speak. I'm on the Forum; we've met twice, with some seats rotating. It's not meant to be fully representative.
Paul Fehlinger: In an ideal scenario, we'd have a pan-European platform converting the issues facing governments, entrepreneurs, and investors into matters of common concern, catalyzing a "we feeling" that would unlock roadblocks. Having contributed to building the French ecosystem, why do you think this communication between policymakers, VCs, and startups isn't working better in Europe? Why aren't we seeing more co-creation of the ecosystem rather than stakeholders working in isolation?
Kat Borlongan: I'm admittedly biased by the French experience, which sometimes leads me to think it could be a model for Europe. The French model had a visionary executive in Macron and capable people at the execution level. We had the French Tech Mission—my team at the time—and ministers for digital who were sometimes former founders or VCs themselves. So you had maybe 50% of them that have been founders or VCs at some point.
We had a strategy around innovation in general, not isolated to startups. But most importantly, we built good relationships in the ecosystem. And that wasn't always there. So if you look at the French story, I think the first thing that the government moved to fix, and the ecosystem as well, and we met halfway, was really this broken trust. You had the ecosystem treating, very legitimately, believing that the French government were a bunch of overzealous bureaucrats who hated innovation and hated entrepreneurship. And likewise, the image of the entrepreneur, the tech entrepreneur, was these kind of like self-serving, greedy, anti-nationalistic sort of people. You had like those two stereotypes that were hurting each other, and it hurt to the point that you had so much of French talent leave in the nineties and early 2000s.
The EU situation is different. I wonder if the trust was ever there, to be honest. Let's not forget that the European Union is still relatively young, as are many of the startup ecosystems. So the notion of a European startup ecosystem - it's not like we fell out of love with it and now we need to fall back in love with it. The notion of a European startup ecosystem has often seemed fictional to many, not something they truly belong to.
Paul Fehlinger: It seems evident to build this innovation operating system now, when there's unprecedented momentum from policy, innovation, and capital sides. How might we replicate the density of interaction and quality of relationships that characterized, for example, the French or Nordic successes?
Kat Borlongan: The European situation presents unique challenges. At the EU level, supporting startups doesn't always translate to immediate political gains—founders are often vilified and don't win you votes or popularity. Yet in France, Macron took that political risk because there was a vision of what needed to be done.
Currently, the EU approach feels more like a constituency play than a long-term visionary play: "It's hard for startups; let's make it easier." That's very different from "How do we become a tech superpower?" For instance, areas like consolidation or competition law haven't been as central to the startup strategy discussions.
I’ve got an unpopular opinion: I think the Commission misunderstands its role. It’s not about making startups happy. Take the fact that roughly 90% early stage startups fail to get funding. The response often becomes, “Well, that’s most of that constituency — so let’s help them get more funding.” The issue gets framed as “access to finance” as opposed to say when what we actually need is a deep, liquid, full-stack risk capital market. See the difference? Their focus as far as startups go is not the riders, nor is it even the horses. It’s the racetrack. The flywheel, as we like to call it.
Paul Fehlinger: Europe has a choice: follow Silicon Valley's innovation model or pioneer its own way and lean into making regulated technologies scale. What are your thoughts?
Kat Borlongan: The Draghi report used that horrible term about "closing the gap," which presupposes a single development path with Silicon Valley as the model. The question we need to answer is: if not that, then what? What are our two or three big bets for Europe's future? Will we power the world's climate revolution? Become the global R&D center? What's our stance on defense tech?
Paul Fehlinger: Should Europe consider adopting bold innovation investment models like the U.S.’s SBIR (Small Business Innovation Research) and OTA (Other Transaction Authority) mechanisms, or Israel’s Yozma program? Even as Europe advances the Capital Markets Union and explores reallocating pension funds toward venture capital, the question remains: how do we build an ecosystem that doesn’t just invest in innovation, but aligns incentives across public and private stakeholders, creating a shared “innovation operating system”? One where governments, investors, entrepreneurs, and researchers work toward long-term strategic goals like digital self-determination, sustainability, and responsible tech?
Kat Borlongan: I prefer a collaborative approach, but I believe in clearly defined roles with everyone performing their function exceptionally well. Policy is like a product. It’s a craft.
The opportunity for improvement in European policies isn't necessarily in the collaboration process; it's in the product management approach. Some policies simply haven't been designed for specific outcomes or with key users in mind. Some aim to protect European consumers from American tech rather than empowering our own emerging tech companies as alternative champions.
There are instances where policymakers sometimes venture into areas that aren't their core job, like creating networks or directly funding things that VCs are perfectly capable of handling. Meanwhile, the ecosystem has sometimes viewed policy as "not our business"—too technical or peripheral. We've been both naive and somewhat disdainful of policy, as though it's beneath founders and VCs.
Paul Fehlinger: Absolutely. As technology becomes regulated, founders and investors should be concerned with the conditions creating their markets.
Kat Borlongan: Exactly. And much of the battle for Europe as a tech superpower will happen through sector-based regulation. It's less about co-creation and more about ensuring startups are brought into the earliest phases of regulatory development—even preemptively.
Then there's the issue of Member State regulations, where releasing something like a medical device requires 27 different approvals at ridiculous cost and time. Public procurement is also crucial for emerging technologies—Europe needs to become an active market maker, not just an environment.
Paul Fehlinger: If you had a magic wand, what two or three things would you prioritize to create a better innovation “operating system” among investors, builders, and policy?
Kat Borlongan: "Policy" encompasses many dimensions—regulatory, legal, administrative, executive, local, regional, national, and European frameworks. A more focused approach may be more effective than attempting to coordinate across all these spheres simultaneously.
Ultimately, it comes down to vision and leadership: where do we want to be in 20 years, what three or four things need to happen to get there, and then committed backing to move in that direction. In France, the approach wasn't about centralized control but rather aligned purpose.
The French Tech model offers interesting lessons because the term encompasses both the government mission and the community with shared identity. The European landscape has a more complex architecture with various initiatives: ERC, EIC, EIF, EIB, the multiple DGs with their own history of collaboration…history of beef too—diverse structures with different purposes. It can sometimes feel more like a network of frenemies than a unified team — well-intentioned, but not always pulling in the same direction.
In France, the approach was a mix of movement building and tactical alignment I can’t say it was not messy, but it was inspiring to see everyone come together wearing the same Red Rooster insignia (the symbol of La French Tech) whether they were government administrations, regional government, VCs, founders, etc. The foundation needed is shared identity and purpose. Technical measures are important, but insufficient without what I would call a movement—a collective belief in the European tech ecosystem's potential and shared commitment to a specific narrative of a future we want.
Paul Fehlinger: I love your framing of transforming "a network of frenemies to Team Europe”. Time to roll up the sleeves to build the ecosystem to make this happen. So what's the bottom line?
Kat Borlongan: I'd rather see us get three fundamental things right than twenty things half-done. The 28th regime with real teeth, complete with a true European stock options framework. Aggressive pro-startup procurement to unlock revenue. And, of course, a successful Savings and Investment Union to get us to the deep liquid risk capital market we need. If those three things actually happened - implemented, not just discussed - everything else would follow.
This interview has been edited and condensed for clarity.
