Study on Equity Investments in Europe: Mind the Gap

The creation of new companies with rapid scale-up potential is vital for growth and innovation in the European economy. For high-risk start-ups and scale-ups, equity investment is an important financing source, but these companies often face difficulties in obtaining equity financing. To address the scarcity of equity investments in Europe for small and medium-sized enterprises (SMEs), the European Commission has set up a number of initiatives.

This report delivers conclusive information on the equity investment situation for European SMEs, evaluates the existing EU support measures to equity markets, and provides a set of recommendations for EU policy intervention going forward. We find that:

• The European equity markets are trailing behind the US counterpart, especially for the small- and mid-cap segment there are large differences.
• From an intra-EU perspective, a market gap exists for equity investments both at national and sectoral level.
• The EU initiatives are on track overall, but the equity eco-system must be further strengthened, to fully utilise the potential of innovative SMEs.

We recommend that the existing measures should be streamlined and follow a more principle-based and risk-absorbing approach. In addition, more support should be devoted to the emergence of large later-stage equity funds.

The study is commissioned by the European Commission.