09 Sep 2021

Enhancing capital market financing for Europe’s growth companies

Towards a Resilient and Sustainable Post-Pandemic Recovery

Working Group Report of the New Industrial Strategy for Europe Task Force

Willem Pieter De Groen / Inna Oliinyk

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If European industry is to thrive, innovative new companies with good business ideas must be able to obtain the finance they need. This may seem obvious, but European SMEs currently rely almost exclusively on banks for their external finance, and these often do not provide the risk capital that innovative companies need. For this type of financing companies rely on capital markets.

In the past few years, measures have been introduced to enhance the access to capital for these growth companies. These have been successful in lowering the barriers for public listings, but they seem less successful in creating a market attractive to investors. Therefore, more needs to be done to improve the functioning of the market, such as improving the access to information for investors and making other forms of equity financing accessible before public listing, including business angels, venture capital and other forms of private equity.