The Innovation Act and the Procurement Act: A Good Start, Not Yet the Finish Line

On 9 September, the Commission unveiled two files that startups have been waiting years for: the European Innovation Act and the Public Procurement Act. Alongside them came a third, quieter proposal, a Recommendation on common principles for regulatory sandboxes.

Policymakers framed these as wins for founders, but the reality is more complex. If you only read the press release, you’ll miss where the substance was watered down on the way to publication. Here’s what you should know.

The Innovation Act

The Innovation Act is the Commission’s answer to a problem every founder is familiar with. Europe produces world-class research, but too many of the ideas coming out of it get developed, financed, and scaled somewhere else. It’s one of the flagship deliverables of last year’s Startup and Scaleup Strategy, and it targets two barriers in particular: innovative companies struggling to access finance, and fragmented, inconsistent rules standing between a good idea and a paying customer.

On the financing side, the Innovation Act does three things: builds an EU-wide framework to value intellectual property, creates a digital marketplace connecting buyers and sellers of that IP, and offers expert support to help companies bring innovations to market. On the commercialisation side, it sets up a harmonised EU framework for public buyers procuring R&D services, including pre-commercial procurement, plus an EU preference in that procurement. The Commission put forth ambitious numbers: up to €10.2 billion a year in additional financing unlocked, and roughly €35 million in administrative cost savings.

That’s the pitch. Here’s what it looks like once you get past the headline:

1. Doing IP valuation is voluntary. The Act sets a common EU methodology for putting a reliable price on patents and other IP, so it means the same thing whether a bank is looking at it in Berlin or Lisbon, but nothing requires a bank or investor to actually use it. The job of building that methodology, the certification scheme for valuers, and the digital IP marketplace itself falls to EUIPO, which gets a new mandate as a Competence Centre on IP-backed finance. (Stay tuned for a separate blog on this coming up soon). The catch on IP valuation? Your local lender can still refuse to count patents as collateral and be fully compliant.
2. The mandatory R&D procurement targets are gone. Earlier drafts would have required Member States to spend a minimum share of their procurement budgets buying R&D and innovative solutions, the one thing that creates demand for what startups sell into the public sector. The Regulatory Scrutiny Board issued two negative opinions on the impact assessment (January and February 2026), and the targets didn’t survive to the final text. The result is a harmonised framework, but with no obligation on any government to buy through it.
3. Financial guarantees are cut by half. The deposit or bank guarantee bidders must lodge as security when bidding on a public contract is cut by half for startups and SMEs. However, half of ‘too expensive for a pre-revenue company’ is still expensive: a 1 per cent tender guarantee on a €2 million contract is €20,000 even after the cut.

The Public Procurement Act

The Procurement Act is the bigger structural change: it folds three existing directives into a single Regulation, cuts five award procedures down to three, and makes quality, not price, the default basis for awarding contracts, with a minimum 30 per cent weighting (50 per cent for labour-intensive contracts). The Commission expects it to save around €650 million a year in admin costs across public buyers and bidders combined.

Baked into that quality criterion is a ‘European preference’. The instinct is understandable; the EU wants its own public spending to build EU capacity, but it lands unevenly on the companies it’s meant to help. As our founder Mike Sax put it:

‘The shift toward quality and innovation criteria, and the instinct to back European businesses, comes with good intention, but we need to be careful that SMEs and startups with specific or non-EU supply chains are not penalised for structural realities they can’t easily change’.

Most European startups don’t manufacture every component in the EU — they simply can’t.

And don’t forget the sandboxes

One more file landed alongside these two: a Recommendation on common principles for regulatory sandboxes. Sandboxes let companies test innovative products under supervised, temporary flexibility, instead of guessing how 27 different regulators will interpret the same rule. The Commission’s proposal gets the mechanics right: exit reports that capture what was learned, regulatory guidance, training, funding, and the option for sandboxes to run jointly across several Member States.

The catch, again, is the legal form. This is a Recommendation, not a directive or regulation, meaning no Member State is obliged to set one up, let alone to do it the same way as its neighbour. ACT’s members have been asking for EU-wide harmonisation on sandboxes for years, precisely because the current patchwork is the problem. A voluntary framework doesn’t fix a voluntary patchwork, it just gives it a common template.

The bottom line for founders

Three files, one direction of travel: the Commission keeps identifying the real barriers facing European innovators, and the legislative process keeps turning binding rules into optional ones. Sandboxes, IP valuation, R&D procurement targets — good ideas, each now resting on Member States choosing to act on them.

That’s not nothing. But it’s not yet the change founders were promised. The good news is that none of this is final. These are proposals that still need to be negotiated by the European Parliament and the Council. ACT will be working with all the institutions to make the final text as beneficial as possible to startups and SMEs.