EU’s Start-Ups Lack Local Funding: Gap Filled by the Americans

Written by | Thursday, December 17th, 2015

The European start-up industry suffers from an acute lack of funding provided by European investors for projects worth more than €10 million. As a result, this gap must be filled in by American venture capital companies. Industry leaders say that the lack of financing demonstrates that in Europe, broad conditions for setting up a business are favorable, but when it comes to further development of newly launched enterprises, the situation is more difficult. According to Benoît Grossmann, the managing partner of Idinvest Partners, the real problem is not the fact that financing is done by American investors but the fact that national sources of financing are scarce.

It is generally believed that making investments of more than €10 million in mature start-ups is difficult. The European Investment Bank (EIB), the French Public Investment Bank (Bpifrance) and the German Development Bank (KfW) have therefore jointly decided to address this gap by providing €75 million in the Partech Growth Fund this October, trying to rectify “deficit of financing capital for sums of over €10 million, from which the European market is suffering”. Partech Growth is a capital growth fund launched by the Partech venture capital firm in January this year aiming to boost financing options for European start-ups. So far, it has raised €370 million and has ambitious plans to invest between €10 and €45 million in three to five high-tech European start-ups annually.

A recent new mapping of the EU start-up market, however, revealed that there was a 174 percent increase in total investment in EU startups between 2013 and 2014. There was also a substantial increase in total funds raised over the 12 month period, from €2.4 billion to €6.6 billion, throughout the continent, by startups in Berlin, Bucharest, Brussels, Helsinki, London, Madrid, Manchester, Munich, Paris and Stockholm.

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