Closing the scale-up financing gap is essential for the European Union to maintain its edge in technology. Scale-ups are young, medium-sized firms with high growth potential, more productive than the average company and leader in the development of new technologies. This report provides new evidence on the financial constraints faced by companies as they enter the crucial scale-up phase. The analysis follows firms that received venture capital backing and reached the scale-up phase in the European Union after 2013. By tracking these firms over time, the report examines the financing they receive and the investors they attract. The report also documents the link between financial constraints and firms’ outcomes, including relocations and likelihood to exit via initial public offering or acquisition. Addressing the scale-up gap requires the removal of investment barriers, including making advancements in deepening capital markets, particularly the venture capital market, and targeted public interventions to jump start the market.
Authors
European Investment Bank, Fratto, Chiara, Gatti, Matteo, Kivernyk, Anastasia, Sinnott, Emily, Wielen, Wouter van der
Organizations mentioned
- Catalogue number
- QH-09-24-635-EN-N
- Citation
- European Investment Bank, Fratto, C., Gatti, M., Kivernyk, A. et al., The scale-up gap – Financial market constraints holding back innovative firms in the European Union , European Investment Bank, 2024, https://data.europa.eu/doi/10.2867/382579
- DOI
- https://data.europa.eu/doi/10.2867/382579
- ISBN
- 978-92-861-5788-2
- Pages
- 56
- Published in
- Belgium
- Themes
- Enterprise , Economy — Finance
Table of Contents
- Executive summary 7
- The scale-up gap: a key policy challenge for Europe 7
- Addressing growth constraints to keep the European Union at the technological frontier 7
- A new firm-level analysis sheds light on EU scale-up growth constraints 8
- Innovative EU companies grapple with significant financing constraints, with scale-ups raising half as much capital as their Silicon Valley peers 8
- Deepening EU capital markets to unlock finance for scale-ups 9
- Removing investment barriers and targeting public intervention can unlock the full potential of the EU entrepreneurial ecosystem 9
- 1 About this report 11
- 2 Scale-ups are key drivers of growth 11
- 3 Examining European scale-ups 14
- 3.1 PitchBook data 14
- 3.2 A longitudinal study of scale-ups 14
- 4 Financial market constraints are holding innovative firms back 19
- Box A. Scale-ups and relocation abroad 29
- Box B. Enterome, a leading pioneer in the microbiome biotech industry 31
- 5 Deepening European capital markets can unlock finance for scale-ups 32
- 5.1 The impact of cyclical downturns 35
- 5.2 Greentech 38
- Box C. A skills gap hits EU high-growth firms 37
- Box D. The importance of the EU single market 40
- Box E. Umicore, combining cleantech research and artificial intelligence 41
- 6 Building momentum in scale-up finance: The catalytic role of public intervention 42
- 6.1 The EIB Group and the initiatives targeting scale-ups 43
- 6.2 Empirical evidence on the impact of EIB Group intervention in the venture capital and venture debt markets 45
- 6.2.1. EIF venture capital financing spurs innovation and successful exits 45
- 6.2.2. EIB venture debt crowds in private investment 46
- 7 Recommendations on how to close the scale-up gap 47
- 7.1 Complete the Capital Markets Union as a key priority to provide finance to innovative companies 47
- 7.2 The role of public support: catalyse private investment, de-risk early innovation and provide patient capital 48
- 7.3 Develop a strong EU domestic market and focus on skills 49
- References 50
- Appendix 53
- Additional results 53
- Sector definitions 53
- List of tables and figures 54
