Report: Digital Markets Act, Venture Capital and Startups

Report: Digital Markets Act, Venture Capital and Startups

In this report produced by Beta-i both for the tech community and their policy-makers in Europe, we share analysis and recommendations on a crucial, yet unexplored, topic: the Digital Markets Act (DMA) systemic impact on European startups and scale-ups, with special emphasis on the direct or unintended consequences on venture capital investment. 

Available for download here, the document summarizes what the DMA is about and how it can impact European digital companies growth. But above all, shares contributions to the legislative discussion being held on the topic, such as:

 

# The DMA’s message that growing too much will come at the cost of being regulated ex-ante is still not enough for Europe’s ambitious digital and green transformation goals over the next decade;

#  The proposal skips some necessary guiding principles for the single market’s future competitiveness. The DMA could better anticipate ways to support and prepare European startups’ journey towards a “gatekeeper” position within Europe’s digital single market;

# European companies may choose to fragment themselves to avoid reaching the “gatekeeper stage”, which will inhibit their ability to compete on the global stage;

# By being mainly focused on existing large players rather than unleashing innovation from within, the DMA proposal lacks the connection with other EU initiatives to reinforce Europe’s entrepreneurial vision;

# The DMA debate could explore the topic from a more positive perspective, establishing a competitive and inclusive vision, capable of foreseeing scenarios based on collaboration between different business stakeholders, of different sizes;

# Net VC numbers could plunge in Europe for a period still to be estimated, as the impact of the DMA on the ecosystem and the uncertainty it can generate keeps under assessment. The impact could be greater and deeper in more risk-averse investment models such as corporate ventures and regular M&A;

# The theme of mergers, acquisitions and the so-called killer acquisitions should not be framed under a “one size fits all” logic. Each merger and acquisition is the result of differing sets of circumstances which means that not every acquisition is a to-be-controlled killer one;

# The proposal of centralizing within the DMA gatekeepers’ deliberations in the European Commission is interesting and pragmatic, as long as the Commission set up minimum instruments for the Member States to provide timely context and information;

# In regard to data processing and usage, a proposal with a greater focus on what happens at the very beginning of commercial relations between the current gatekeepers and their business users (and then their final consumers/users), would be a simpler way to nudge compliance and neutralize future conflicts of interest;

# The European Commission could double-down in a systemic economic consultation to further preview and anticipate DMA’s consequences on the investment market, and the impact it will have on up-and-coming European players in the digital marketplace.

Commissioned by Google, the report actually translates Beta-i’s perspective from the inside of innovation, digital and entrepreneurship spaces in Europe. The Digital Markets Act is relevant and necessary but could improve its understanding of the interconnected nature of the tech ecosystem. This would be a way to better design any transition towards Europe’s digital competitiveness ambition. We believe it is possible to promote a free market alongside regulatory tools to ensure fair, equitable access to B2B opportunities – while giving consumers choice.

 

Analysis: the Portuguese Presidency of the European Council and the (new) digital legislation

Analysis: the Portuguese Presidency of the European Council and the (new) digital legislation

Alisson Avila *


Portugal takes over the rotating presidency of the Council of the European Union next January with several challenges and opportunities, capable of making this six-month term a memorable season. Especially when it comes to common market’s digital legislation, the bustle is already guaranteed: it’s the temporary Portuguese leadership that will deal with the first developments towards the implementation of new rules replacing others created 20 years ago – that is, a near-eternity for the tech cluster. Formally presented this Tuesday (15), the Digital Services Act (DSA) intends to introduce new rules in areas ranging from content moderation, online advertising and algorithms configuration transparency, while the Digital Markets Act (DMA) intends to anticipate potential illegal practices and provide an audit tool for companies that have more than 10% of the market within the common economic space. Both propositions can be checked on the
European Council’s website official announcement. 

DSA announcement landing page

DSA announcement landing page


It has been known since before her inauguration, that the current President of the European Commission, Ursula von der Leyen, wishes to modernize the digital legislation of the common market. Something that was crystal clear, for example, in her recent opening speech at Web Summit 2020 – a definitely global event, but whose opening narrative was decisively European. Ambitiously, the German politician opened the world’s largest technological meeting by recognizing there are still many obstacles to digital entrepreneurship in the European Union and many startups end up leaving the European space to ensure their growth. For this reason, she reiterated three fundamentals of change that, in her understanding, will make the EU the global leader in digital excellence in the “20s” that are coming. Such pillars affirm that the (European) practices and values ​​of the offline world must also be respected online; that companies must have a unique set of fundamental digital rules across the European Union; and that they must have equal conditions and opportunities.

All of these principles are reflected in the brand-new proposed legislation. DSA aims to strengthen the EU’s single market, facilitate the expansion of startups and scale-ups through unifying rules in the economic space and clarify the responsibilities and obligations of digital services, while DMA will directly address the economic power of major online platforms with the intention of restraining (and demanding) certain behaviours, even before regulators have evidence of real damage to the market.

 

 

The proposals point to unquestionable benefits for society and democracy in Europe (reduction of fake news, illegal products and services and hate speech), but it is too early to know what their systemic implications will be on people’s daily lives and, above all, on businesses’. These are epic challenges in political, legal and geocorporate terms, capable of generating an impact both in large technological companies and in early-stage startups.

Although the European Commissioner for Competition, Margrethe Vestager, stated (also) at the Web Summit 2020 that this debate “is not about where you come from, but about what you do and the role you have in the market”, the potentially geopolitical discussion it’s already set. The Center for Strategic & International Studies (CSIS), positioned at the top of the North American ranking of the Global Go To Think Tank Index, published last November the studyDigital Services Act, Digital Markets Act and the new competition tool – European initiatives to face US technology companies“, whose approach highlights how the different international perspectives and interests on the subject will be heard with a huge echo while Portugal leads the temporary presidency of the European Council.

 

CSIS (left) and Oxera / Allied for Startups (right) studies

CSIS (left) and Oxera / Allied for Startups (right) studies

 

On the other hand, the study “The Impact of the Digital Services Act on business users”, released last October by the British consultant company Oxera in partnership with the international association Allied for Startups, suggests another angle: that the emerging digital entrepreneurs in Europe have a vision on defending their autonomy and free initiative similar to that of North American big techs. After collecting the perspective of 1,000 startup & SME founders from the travel and tourism, gig economy and creative industry segments in Germany, Bulgaria, Ireland and Spain, the study concludes that DSA can achieve positive results if 1) it continues to limit the platforms’ direct responsibility for content and products made available by third parties; 2) it allows platforms to take their own voluntary actions to detect harmful or illegal content; 3) it elaborates obligations with known penalties, in order to increase customer confidence and provide legal certainty; 4) it expands the consistency of rules applied across the EU; 5) it avoids overloading discouraging information to users, such as detailed verification of product lists, qualifications or content copyrights; 6) it doesn’t prescribe governance solutions that prevent platforms from implementing scalable technical solutions, such as artificial intelligence tools; and 7) it avoids rules based on the size of each platform, such as numbers of users or the value of facilitated transactions.

These are perspectives both legitimate and potentially fracturing when facing the Council of the EU intentions, ready to feed a lively debate right at the moment of Portugal’s protagonism in its rotating presidency. So the question emerges: how will the well-known Portuguese pro-innovation and digital transformation position, expressed so favourably over the past few years, be used as a parameter in the legislative developments of the Digital Services Act and the Digital Markets Act? A theme that we’ll closely follow-up throughout 2021.


* Beta-i’s Co-Founder, Communication & Knowledge Principal

Get ready for Lisbon Tourism Summit

Get ready for Lisbon Tourism Summit

The Lisbon Tourism Summit (LTS), organized by Beta-i and sponsored by Turismo de Portugal, will take place on Sep 30th and goes fully online. The 2020 edition focuses on a more sustainable approach on the tourism sector, “a segment that more than ever requires deepening in strategic themes such as circular economy, mobility, artificial intelligence and energy efficiency so that it is possible to actually talk about sustainability“, emphasizes Gonçalo Faria, one of Beta-i’s Innovation Programs director.

LTS counts on the participation of several national and international speakers, with the emphasis on the sustainability designer, sociologist and businesswoman, Leyla Acaroglu. Awarded as Champion of the Earth by the United Nations, Leyla is also author of several books and TED Talks. Check what she has to say as, in her own words, a sustainability provocateur:

The Lisbon Tourism Summit is an integral part of Turismo de Portugal’s innovation strategy to manage the growth of this industry in the country over the past few years. Beta-i is a strategic partner in this because, in addition to LTS, it also organizes The Journeyan open innovation program that facilitates collaboration between leading companies in the tourism industry (such as Grupo Barraqueiro, Vila Galé, Parques de Sintra – Monte da Lua and Unicre) with technological solutions from startups around the world. The results of its latest edition will be presented within the LTS: there will be more than a dozen project presentations, involving startups from Europe and Asia.

Download: “Learnings in times of a pandemic” poll

Download: “Learnings in times of a pandemic” poll

  • Digital transformation still has a long way to go before becoming ubiquitous in society and companies. The belief that all the market is fully on digital mode, is actually a myth.

  • B2B relations might consider more environmental, social issues in their procurement and compliance processes;

  • Core business technological reinvention is an unavoidable must. Really. At last.

These are some of the key impressions from “Learnings in times of a pandemic – A quick poll on personal mindset changes” ran by Beta-i during the peak of quarantine and self-isolation stress in Europe (May to June). We’ve asked some of our corporate clients, closest startups and other stakeholders (investors, think tanks) about these new perspectives. And you can access the full results here:

Beta-i 2020: collaborative innovation

Beta-i 2020: collaborative innovation

Well yes, we do have some exciting news to share. We’re launching our new brand and everything that comes along in these key moments. We’re really happy with the final result – something that was already happening when the entire planet turned upside down with the pandemic:The interesting thing is that our value proposition – collaborative innovation – couldn’t be more aligned with the new challenges brought by this new brand world waiting for us out there, or already impacting us right now whenever we can be.

Beta-i has distilled its approach on innovation during the past years and if there’s a one really important thing to highlight at this point, is that what we’re saying is not a goal or a will. It’s a reality from here to the future. Beta-i has a global reach actually, a strong 10-year track record on innovation ecosystems and an expert team able to share this knowledge. 

We have a new branch in Brazil, clients in 20 countries in the 5 continents and an admirable team of 50 people from 15 different nationalities.

We believe collaboration is the key to make things change. To solve things that matter. To help ecosystems and society grow. To, no bullshit, build a collective future. That’s what we have been doing; now, we’re just funnelling these services to the same destination: collaboration to innovate.  We’ll keep connecting the innovation voices to transform ideas into a business, pilots into deals, solutions into impact to solve complex changes.

Beta-i was created during the last Portuguese crisis, in the second half of 2009, with the deep motivation of being part of the solution and help to create an innovation ecosystem able to support the next generation of entrepreneurs. We helped to make that in Portugal and abroad, and now we’re leveraging this in a global scale – helping corporates, startups, universities, investors, social impact organizations and other voices to work together. We’re starting a new phase in the best possible moment.

So you’re invited to explore our new site and follow our social media channels. And stay tuned: we have a lot more to share during the next months. And to tell, after 10 years of ongoing innovation.

 

Beta-i launches online course and ecosystem weekly podcast

Considering the economic context of the coming months, when great difficulties for businesses in several sectors are foreseen, innovation is the keyword to guarantee a sustainable future for businesses and society. As a contribution to the response of leaders and employees of companies and startups to the upcoming scenarios, Beta-i launches a free online course on collaborative innovation, alongside other European institutions, and starts a podcast dedicated to what’s next on the innovation ecosystem facing the current situation.

The “Co-Innovation Journey for Startups and Corporates” free online course starts on April 22 and is the result of a year-long effort carried out by a European consortium that includes Beta-i, representing Portugal, and universities, companies and institutions from six more countries (Hasso Plattner Institute – Germany, FH | JOANNEUM – University of Applied Sciences and AVL – Austria, European Startup Network – Belgium, Haaga-Helia University of Applied Sciences – Finland and University of Economics Krakow – Poland). Over six weeks of training, the course addresses specific topics and teaches companies and startups the fundamentals and modalities of collaborative innovation, as well as exercising the initial design of this collaboration through the “Co-Innovation Builder”, a map that organizes the start of open innovation projects between the two entities.

The course is aimed at managers and employees of companies in any sector, and entrepreneurs interested in better understanding the functioning of collaborative innovation projects with companies, which often do not involve direct investment or venture capital. With a duration of six hours a week, the curriculum consists of lectures, informative articles, questionnaires, discussions and practical activities to bring together different players.

In addition to online training, Beta-i is also betting on the creation of a podcast that appears as a new source of information for the innovation ecosystem. The weekly BetaCast, available on the Beta-i YouTube channel, will explore topics that can be applied to the current challenges of companies and startups, also giving the audience the possibility for live participation in the content of the debate with comments and questions.

The first episode of the Beta-Cast will be broadcast live this Thursday, March 26th, starting at 7:00 PM GMT, discussing the theme “Innovation in Times of Crisis” with David Braga Malta, Domingos Cruz and Filipe R. Portela.