Financing Europe’s Startups and Scale-ups: Why Europe needs both deeper capital markets and better scaling conditions

Europe’s ability to innovate, compete and grow increasingly depends on whether startups and scale-ups can access the financing they need to expand. For many of these firms, especially those with intangible assets, long development cycles and uncertain early revenues, traditional bank lending is not enough. Venture capital, growth capital and functioning public equity markets are therefore essential. However, Europe’s weaker venture outcomes are not only a financial-market problem. They also reflect weak scaling conditions for the firms that demand risk-bearing capital.

The policy question should not be framed simply as how to mobilise more capital. The essential function of financial markets is to assess and price risk, helping direct capital to firms that can create value and scale. That function cannot easily be replicated by public funding.