European technology companies are facing a roadblock, according to a report from the European Investment Bank (EIB). The report highlights the need for financing to drive innovation and expansion. Maintaining its position as a global technology leader is a priority for Europe, and the report stresses that overcoming investment barriers and strengthening support are key to nurturing a thriving tech sector.
The scaling gap
The study, “The Scaling Gap: Financial Market Constraints Hold Back Businesses in the European Union,” highlights Europe’s difficulty in attracting domestic funding for local innovations, despite being attractive to foreign venture capital investors. The report highlights that European venture capital investments are significantly lower than those in the United States, limiting the accumulation of capital for emerging companies poised to lead the wave of progress.
They have the potential for growth and job creation, but face obstacles in obtaining the financing needed to expand. According to the report, European companies receive 50% more capital than their Silicon Valley counterparts after a decade of operation, often turning to investors for financial support.
EIB President says EIB plays role in supporting innovation
EIB President Nadia Calviño highlighted the institution’s commitment to fostering innovation in Europe. “The EIB Group plays a role in supporting the European innovation ecosystem,” she noted. However, the report highlights the need for efforts to strengthen Europe’s capital markets by stimulating venture capital activities.
The report also highlights the importance of the government’s efforts to encourage investment by providing phased financial support and strengthening cooperation between EU and national policies aimed at creating an environment conducive to innovative businesses.
Looking ahead, Ursula von der Leyen, the newly elected President of the European Commission, stressed the urgency of implementing measures to facilitate financing for growing companies. By targeting pension funds and insurance companies, which constitute the largest market sector in the EU, there is an opportunity to use substantial national savings to invest in innovative companies.
European Technology Champions Initiative
The ideas and suggestions presented in this EIB report come at a timely moment. The European Tech Champions Initiative (ETCI), launched earlier in 2023, aims to provide late-stage growth financing to innovators in the EU. With a fund of €3.85 billion, the initiative has already attracted €10 billion in investments, strengthening venture capital markets.
As European businesses navigate a changing global technology landscape, it is becoming increasingly crucial to focus on improving financing strategies. The EIB findings highlight ways to strengthen and improve Europe, stressing the need for private sector collaboration to address financing challenges and drive innovation. This initiative is not only about ensuring Europe’s progress, but also about promoting job creation and sustainable development across the region.
Originally published in The European Times.
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