The recently published Scale-up Financing Policy Report by the EIC Scaling Club reveals a strategic disconnect between policymakers and industry stakeholders regarding the regional fragmentation of capital markets and its consequences for European scale-ups. While policymakers prioritize long-term structural reforms to address regional fragmentation, industry stakeholders are more concerned about the immediate liquidity and growth capital shortages.
According to the study, policymakers rate the regional fragmentation of capital markets as a top challenge (4.0/5.0, where 0 means “least important” and 5 means “most important”), with a focus on long-term structural fixes such as the Capital Markets Union. Meanwhile, stakeholders rate fragmentation significantly lower (3.4/5.0), placing much greater importance on immediate capital availability and liquidity constraints. From their perspective, the medium- to long-term nature of structural integration does not directly address current, urgent capital bottlenecks.
While both groups agree on the availability challenge of private venture capital for deep tech scale-ups, rated 4.0/5.0 by both, they disagree on the solution in focus. For example, while the Capital Markets Union aims to harmonize listing rules and improve cross-border investment flows, its medium- to long-term nature might not directly address the immediate capital bottlenecks perceived by stakeholders.
As mentioned in the report, Europe attracts roughly 9 times less venture capital per worker than the United States – €50M vs. €456M per worker. Thus, Europe is effectively exporting its most competitive firms to deeper capital markets abroad, including the U.S – for example, almost 30% of European unicorns relocated their headquarters outside Europe from 2008 to 2021.
This issue is addressed by another study, which found that access to markets and the funding needed to scale up are the primary factors driving European startups and scale-ups to relocate abroad. This study also addresses the EU's patchwork of regulations and markets, which has become a strategic priority for the Commission as it seeks to pivot away from this trend.
The report – Scale-up Financing: How Can Policymakers Better Address the Growth Capital Gap for EU Deep-Tech Scale-ups? – is one of three policy reports conducted by the EIC Scaling Club and supported by the IESE Business School, the European Innovation Council, the European Institute of Innovation and Technology, the European Startup Nations Alliance, the EIC Scaling Club’s partners, and IESE Business School’s Scale-up Institute.
The Scale-up Financing study was conducted to explore how policymakers can better address the growth capital gap for EU deep-tech scale-ups, precisely by improving and attracting greater private venture capital and corporate venture capital. The research team followed a multi-step approach that combined literature reviews, exploratory interviews, expert workshops, surveys, reviews, and more.
To explore findings, read the full Scale-up Financing report here.
The EIC Scaling Club is a curated community where 120 European deep tech scale-ups with the potential to build world-class businesses and solve major global challenges come together with investors, corporate innovators and other industry stakeholders to spur growth.
The top 120 European deep tech companies have been carefully selected from a pool of high-growth scale-ups that have benefitted from EIC financial schemes, other European and national innovation programmes, and beyond.
The EIC Scaling Club is an EIC-funded initiative run in partnership by Tech Tour, Bpifrance (EuroQuity), Hello Tomorrow, Tech.eu (Webrazzi), EurA and IESE Business School.
Subscribe to our newsletter here to stay up-to-date!