Financial Market Constraints for Innovative Firms in the EU

This report is a thematic study that examines the financial market constraints affecting innovative firms in the European Union, particularly focusing on scale-up companies. It outlines the significant challenges these firms face in securing investment as they transition from startups to growth-stage entities. The report emphasizes that European scale-ups raise substantially less capital compared to their counterparts in Silicon Valley, with a noted 50% capital accumulation gap. This financial shortfall is attributed to a lack of sufficient EU investors capable of supporting scale-ups, compelling many firms to seek funding abroad. The document details the role of lead investors in funding rounds and highlights the trend of EU scale-ups relocating overseas for better market valuations, which poses risks to Europe’s technological competitiveness. Furthermore, it discusses the necessity for public intervention and the deepening of capital markets to enhance support for innovation and maintain the EU's edge in technology amidst global competition.