## Austria Grapples with Economic Headwinds: A Call for innovation and Capital Market Reform
Austria is facing important economic challenges for the third consecutive year, mirroring broader European trends. These difficulties stem from new tariffs and global economic uncertainties. To address these issues and revitalize Austria’s economy as a hub for innovation and startups,key figures from the Austrian business and investment community gathered at a press conference organized by the research initiative eXplore! at the WU founding center.
Entrepreneur Michael Tojner, Julia reilinger of B&C Innovation Investments, Hannah Wundsam from austrian Startups, and startup founder Michael kowatschew of Heating, discussed potential solutions.
### Igniting Capital Markets: A Polish Spark?
Tojner emphasized the challenging economic outlook for the next few years but also highlighted the prospective opportunities. He argued that promoting Austrian and German capital markets is crucial. His primary proposal involves tax incentives designed to attract investors to provide capital through the stock exchange, directly investing in companies rather than just buying existing shares.Tojner elaborated, “if a private individual in Austria invests via the Vienna Stock Exchange or Venture Capital, i.e. provides new capital, it should be able to write off up to 20,000 euros of this investment.” He believes a streamlined tax incentive can boost entrepreneurship and strengthen Austria’s capital market.
Drawing parallels with Poland, Tojner noted, “I am a friend of simple solutions. In Poland, incentives for the pension system were set ten years ago – as an initial spark for the capital market. Shortly afterwards, some Austrian companies were on the Polish stock exchange.” This highlights the potential for well-designed incentives to rapidly transform a nation’s investment landscape, a lesson applicable to the U.S. where similar tax-advantaged investment accounts, like 401(k)s and IRAs, fuel the stock market.
### The UK’s SEIS Model: An Austrian Blueprint?
Wundsam pointed out that Austria already possesses ample capital, but it needs to be mobilized effectively. She noted that investment in startups by foundations isn’t the norm and advocated for an investment allowance, similar to the United Kingdom’s model, for both private and institutional investors.
The UK’s Seed Enterprise Investment Scheme (SEIS) offers significant tax advantages to investors in young companies,allowing them to deduct 50% of their investment from their income tax. Furthermore, capital gains from these investments are exempt from capital gains tax. Reilinger concurred, stating this model could be easily adapted for Austria.
Reilinger emphasized the need for transparency and security for investors. “It is significant that investor: know exactly what you invest inside, what happens to your money and how you can get it out – including the tax regulations,” she said, stressing that less bureaucracy and more positive incentives such as tax allowances are needed. this sentiment resonates in the U.S., where regulatory complexities ofen deter small-scale investors from participating in early-stage funding rounds. Streamlined regulations and clear communication are key to unlocking capital.
### Bridging the Growth-Phase Gap
reilinger emphasized the need to understand the transitions between various capital sources and corporate phases, saying, “It is about combining different disciplines, but also to understand capital sources and corporate phases. It is important to recognize how you get from one level to the next. And if you have a gap in the intermediate area – for example when accessing larger financing volume – then you cannot get any further.”
While early-stage startup financing tends to be available, challenges arise during growth, scaling, and exit phases. She highlighted the importance of promoting spin-offs to facilitate the transition from research to marketable products. As an example, she mentioned the sale of the Ttech car to chip manufacturer NXP: “A European company was bought here by a European technology leader to be able to grow even further in the future.” This, she argues, underlines the need to expand the capital market and willingness to invest within Europe itself.
Sharpening the Education and entrepreneurial Mindset
Wundsam believes that more than just capital is required to foster new companies. “Capital is not everything it needs to create more companies,” she stated, advocating for the promotion of an entrepreneurial mindset from an early age, starting in schools. She cited the “Youth Entrepreneurship Week,” an initiative spanning 150 Austrian schools, where students develop ideas, build prototypes, and present concepts. This broad-based promotion of entrepreneurial thinking is designed to enable young people to engage in entrepreneurial activities.
She also noted the significant potential within universities. For this purpose, WU and eXplore! have launched the Business Case Day, a pitching competition for students focusing on practical case studies.
### Encouraging High-Risk Innovation
Kowatschew, the founder of Vienna-based energy tech startup Heizma, stressed the importance of Europe developing the courage to invest in high-risk innovations to drive new technologies and business models. He cited battery storage, energy management technologies, and AI models as examples. he recounted his own experiance of founding his first business at 18: even though it wasn’t instantly successful, each subsequent venture honed his skills, ultimately leading to success with Heizma.
He stressed the urgency of implementing the energy transition, particularly in Austria, within the next five to ten years. this requires long-term funding structures. “Renewable technologies have long been there, now we need clarity in the framework conditions to strengthen the market sustainably.”
Another challenge is the regulation of wind power. Kowatschew pleaded for deregulation and a clear, five-year plan to accelerate wind power expansion.
Holcim and neustark start the first CO storage system for concrete in Vienna
### innovative policies: Startup-Visa, Entrepreneurial PhD, and Bankruptcy Bonus
Wundsam highlighted the chance for Europe to attract top research talent from the United States, saying, “We should be the top entrepreneurs: Interior and future entrepreneurs: Address inside and create framework conditions that make it attractive.” She praised France’s startup visa programme, which allows founders from abroad to quickly establish their startups in France.
she also shared the concept of an “entrepreneurial PhD,” discussed within the European Startup Network (ESN), to incentivize researchers to found companies.Additionally, a “bankruptcy Bonus” would allow founders to claim losses suffered in the event of bankruptcy when starting a new venture.
### Industrial Strategy: The Energy Imperative
Tojner stated that enabling nuclear power to return to Europe,including Austria and Germany,is essential,saying,”This is relatively simple,I think. We have to enable nuclear power to return to Europe – also to Austria and Germany. It is best with innovative solutions from the USA, where the security concerns have now been solved.” He advocates the use of cheaper energy in Europe as a key driver for industry.
He also reiterated the need to reduce non-wage costs. “We have almost the highest wage costs in Europe – the Germans are already just overtaken and the Italians anyway.” Otherwise, he fears, young, promising companies will relocate.
“unique opportunity to bring top -class talents from the USA to Europe”
How can Austria best support high-risk, high-reward innovations, especially in areas like energy transition?
Austria’s Economic Crossroads: An Interview with Dr. Erika Schmidt on Innovation and Capital Market reform
Archyde News Editor, Michael Richter, recently sat down with Dr. Erika Schmidt, a leading economist and investment strategist, to discuss Austria’s current economic challenges and the potential solutions proposed at a recent press conference organized by the eXplore! research initiative. Dr. Schmidt offers insightful perspectives on capital market reform, startup ecosystems, and the vital role of innovation in Austria’s economic future.
michael Richter: Dr. Schmidt, thank you for joining us. Austria is facing important economic headwinds. What’s your overall assessment of the situation, especially considering the recent discussions on capital market reform?
Dr. Erika schmidt: Thank you for having me, Michael. Austria, like many European nations, is navigating a complex economic landscape. The challenges are multifaceted, including global uncertainties and the need to adapt to new global competition. The good news is that ther’s a clear understanding of the need for action, and the proposals discussed at the eXplore! conference, especially regarding capital market reform, are a step in the right direction.
Michael Richter: michael Tojner highlighted the importance of stimulating capital markets through tax incentives. Do you see the Polish model as a viable blueprint and how could it benefit Austria?
Dr. Erika Schmidt: The Polish example is relevant. Poland’s tax incentives for pension funds sparked significant growth in their capital markets. Tojner’s proposal for tax breaks on investments through the Vienna Stock Exchange and in venture capital is crucial. These incentives could draw private investment and provide a crucial influx of capital to support entrepreneurial growth in Austria. Moreover, a focus on streamlining regulations to simplify capital flow would provide further advantages.
Michael Richter: The UK’s SEIS model was held up as a possible model. can you elaborate how a similar approach might work in Austria to fuel startup investment?
Dr. Erika Schmidt: The Seed Enterprise Investment Scheme (SEIS) in the UK is a good example of a model that could be effective. Significant tax advantages for investors and investors in young companies would considerably generate a rise in funding. It’s about incentivizing investment and making it easier for both private and institutional investors to support early-stage companies. Transparency and security are also core elements. Like Julia Reilinger emphasized, potential investors must understand where their money goes and the regulations involved to boost investment.
Michael Richter: Julia Reilinger stressed the need to address the transition between the phases of a Startup.What are the key factors Austrian ecosystems should address in creating a supportive capital pathway?
Dr. Erika Schmidt: A key area to address is ensuring that startups have access to funding across all phases. The transition from early-stage financing to scaling and later exit phases is critical. Promoting partnerships between research institutions and industry is a huge opportunity. Like the Ttech car sale mentioned by Reilinger, we should create an investment willingness within our European ecosystem. This could bolster the transition and create better outcomes for startups.
Michael Richter: Hannah Wundsam mentioned fostering an entrepreneurial mindset from a young age. Do you agree,and how can Austria cultivate that mindset?
Dr. Erika Schmidt: Absolutely. Fostering an entrepreneurial mindset from a young age is key.Initiatives like the “Youth Entrepreneurship Week” are excellent. Also, the Business Case Days within universities are pivotal in putting theory into practice. It’s more than capital; it’s about creating a culture that encourages innovation, risk-taking, and problem-solving at all levels.
Michael Richter: Michael Kowatschew highlighted the importance of investing in high-risk innovation, especially in areas like energy transition. How can Austria best support these types of ventures?
Dr. Erika Schmidt: Kowatschew is correct. Investing in high-risk, high-reward innovations is essential. This includes long-term funding, regulatory clarity, and a willingness to accept failures as part of the learning process. Clear, accessible funding programs through both public and private sources and deregulation of wind power is key. Furthermore, addressing long-term strategic investments for the energy transition will be an important part of the journey.
Michael Richter: The article mentioned innovative policies such as a startup-visa program and an “entrepreneurial PhD”. Do you think these are practical considerations?
Dr. Erika Schmidt: They are. France’s startup visa program is a great example for attracting international talent. An “entrepreneurial PhD,” would incentivize researchers to create companies. An added “bankruptcy bonus” would also provide a safety net for founders. Austria needs to create an environment of these types of programs.
Michael Richter: the role of energy and industrial strategy was mentioned. What are the most crucial policy adjustments Austria needs to make to ensure a competitive future?
Dr. Erika Schmidt: Cheaper energy is paramount in Europe. Tojner’s support for nuclear power as an option is something to explore. also, reducing non-wage labour costs. Young companies may relocate if costs are prohibitive. Focusing on these areas will encourage competition.
Michael Richter:Dr. Schmidt, thank you sharing your insights with us. What do you think the biggest hurdle will be towards overcoming the economic headwinds?
Dr. Erika Schmidt: The biggest hurdle to navigate is probably the shift away from conventional economic growth models. It will be challenging to implement new strategies, such as the SEIS model and the need for early education. But the possibility of the long-term effects of these strategies could offer benefits for the future.
Michael Richter: Thank you, it was a pleasure.
We encourage our readers to share their thoughts and suggestions in the comments below. What strategies do you think would be most effective in revitalizing Austria’s economy?
