Innovative and growth-oriented small businesses need to acquire capital (equity investment) from external sources because they do not have their own or cannot access loans. Firms typically use venture capital to expand, break into new markets, and grow faster. Although only relevant to a smaller group, venture capital is essential for the growth of innovative firms.
Venture capital funds raise a large part of their funding from institutional investors and they usually invest large amounts into firms with the potential for rapid growth. However, many investors are reluctant to invest in start-ups and innovative firms because of high risks and transaction costs. They may also believe that the expected returns will not be worth the risk.
The Commission works closely with EU countries to improve the efficiency of equity investment markets so that sound projects can find suitable investors.
Related venture capital activities
To move towards a pan-European venture capital market, the EU adopted the Regulation on European Venture Capital Funds (EUVeCa) in 2013. It sets out a new ‘European venture capital fund’ label and includes new measures for venture capitalists to market their funds across the EU under a single set of rules.
Read more about the Regulation on European Venture Capital Funds (EUVeCa).
Under the 2014-2020 Multiannual Financial Framework, we're supporting SMEs and small mid-caps’ access to venture capital through various programmes.
- The Single EU Equity Financial Instrument supports European businesses’ growth, research and innovation (R&I) from the early stage, including seed, up to expansion and growth stage.
Read more about the single EU equity financial instrument.
- The European Fund for Strategic Investment (EFSI) also has an available equity instrument.
Read more about the EFSI.
- The Pan-European Venture Capital Fund-of-Funds programme (VentureEU) aims to further address Europe’s equity gap by investing in VC Funds-of-Funds.
Read more about VentureEU.
- The European Scale-up Action for Risk capital (ESCALAR) programme is a risk/reward mechanism to support scale-ups with venture capital and growth financing.
Read more about ESCALAR (financial intermediaries can apply until 30 June 2020)
In 2015, we launched the capital markets union initiative to unlock more investments, also for SMEs, and diversify sources of finance. Several actions addressed the shortages in the so-called 'funding escalator', including those related to venture capital.
Read more about the capital markets union.
In 2017, we published a study to evaluate existing tax incentives schemes for venture capital and business angels, analyse and assess possible designs for potential new schemes, and share policy recommendations for the future.
Read more about the study.