Funding for high-growth companies
Sponsor foreword by Simon Lewis, Chief Executive, Association for Financial Markets in Europe
We are delighted to be supporting 1000 Companies to Inspire Europe again this year. Europe’s economy is beginning to show improved growth, thanks in large part to successful businesses like those featured in this report. These companies, which add to the resilience of our economy, grow through a combination of innovation and access to the right type of funding.
However, Europe continues to face a shortage of risk capital for high-growth businesses. Raising finance and retaining investors to enable the next generation of high-growth and innovative companies like those featured in this report should be a top priority for industry and policymakers alike.
To understand the state of financing for small and medium-sized high-growth companies in the European Union, AFME – alongside 12 other stakeholders involved in pre-initial public offering (IPO) finance – published The Shortage of Risk Capital for Europe’s High Growth Businesses in March 2017.
Among some of the major barriers is the EU’s fragmented internal market, which makes navigating the rules and standards of 28 member companies particularly difficult. Another issue is the lack of awareness surrounding alternatives to bank lending and more should be done to encourage an entrepreneurial environment where a greater number of start-ups use this form of finance.
An additional concern for companies is of course Brexit, as illustrated in our most recent report with the Boston Consulting Group and Clifford Chance. We surveyed 62 large corporates, investment firms and SMEs across the EU, along with ten industry associations representing millions of SMEs. What is striking is that SMEs are the least prepared, yet could find themselves hardest hit by Brexit due to a potentially higher cost of capital and difficulty establishing new banking relationships for cross-border trade.
While there are plenty of challenges ahead, Europe has tremendous potential as a home for future high-growth businesses, with a market of over 510 million people and an annual GDP of €14.7tn. To harness this potential and enable our high-growth businesses to access the funding needed to compete on a global stage, momentum on the Capital Markets Union is more important than ever.