Companies that have outgrown the startup stage and are in a phase of rapid expansion play a crucial role in creating jobs and driving innovation. The European Investment Bank has been a key player in advancing new technologies and supporting innovation in Europe. In 2023, the Bank invested €17.93 billion in innovation, digital infrastructure and workforce skills across Europe.
European scale-up companies face significant funding obstacles. This is especially true for “deep tech” businesses involved in artificial intelligence, robotics and quantum computing. These companies often struggle to find long-term growth capital because of a cautious investment climate and a shortage of investment teams focused on the sector. Addressing these problems is essential to help Europe’s scale-up companies thrive.
In July 2024, the EIB published an extensive report titled “The scale-up gap: Financial market constraints holding back innovative firms in the European Union.” This report studied firms that received venture capital funding from 2013 to 2023. It identified their sources of financing, including initial public offerings, mergers and acquisition funds and relocations outside the European Union. According to the report, by the time these companies reached ten years of operation, they raised 50% less capital than their peers in the Silicon Valley in the United States. When they reached the scale-up phase, they resorted to foreign investment outside the European Union to meet their growth needs.
By tracking these firms over time, the report examined the financing they received and the types of investors they attracted. The report looked at the sources and characteristics of funding throughout a firm’s lifecycle, from establishment to exit, whether through a stock exchange listing or an acquisition. Following the study, EIB Advisory launched a project to identify financing gaps, with a focus on growth-stage companies, and to propose solutions. This project was financed by the InvestEU Advisory Hub.
Based on an analysis, interviews and workshops, the EIB Advisory project proposed measures to improve financing for European scale-ups, such as direct equity instruments for deep tech sectors. It also proposed a series of initiatives to mobilise venture capital investments, including corporate venture capital, and attract institutional investors for growth-stage companies. Practical steps to a capital markets union for growth companies are also being considered.
The initiatives acknowledged the challenges in the deep tech sector, such as high upfront capital requirements, longer product-to-market cycles and specialised knowledge requirements. More recommendations from the studies will be developed in the future to help this sector.
