Independent report flags persistent equity gaps in EU finance landscape and urges simpler, risk-tolerant European funding
- ›A DG Research and Innovation commissioned expert study identified structural equity funding gaps for innovative European SMEs and small midcaps.
- ›Key recommendations include simplifying access to EU equity instruments, increasing the ability of EU programmes to absorb risk on a case by case basis, and improving coordination across EU financing actors.
- ›The report aims to inform the European Innovation Council and the EIC Fund which already manage direct equity investments in high risk innovations.
- ›Experts consulted included venture capitalists, investment bankers and broader SME finance stakeholders and the analysis covered data from the Horizon 2020 period.
What the report says and why it matters
The European Commission's Directorate General for Research and Innovation published an independent expert report on 5 February 2021 that maps shortcomings in the European equity financing landscape. The study was commissioned to clarify where investments are missing, why that shortfall persists, and what public policymakers can do to improve access to equity for innovative, high growth small and medium sized enterprises and small mid cap companies. Its findings are offered as guidance for EU-level actors including the European Innovation Council and the newly established EIC Fund which makes direct equity investments.
Headline findings
The report highlights a series of practical and structural obstacles that limit the flow of equity to innovative firms. Its central conclusions are not surprising to practitioners but matter because they come from an independent panel tasked with informing EU policy.
Recommendations and suggested priorities
The report sets out practical steps that range from procedural fixes to higher level policy adjustments. The recommendations are intended to help EU programmes such as the European Innovation Council and the EIC Fund to respond to equity gaps more efficiently and effectively.
| Challenge identified | Recommended response | Expected policy effect |
| Complex, heavy application and contracting procedures | Streamline application forms and increase procedural flexibility | Lower barrier of entry for SMEs and increase diversity of applicants |
| Limited appetite for equity risk in some EU instruments | Revise rules to allow case by case absorption of equity risk | Enable patient capital for high risk high potential projects |
| Fragmented later stage finance market across Member States | Improve coordination between EU financing actors and instruments | Build more competitive European late stage equity markets |
| Weak tech transfer from research to market | Increase support for tech transfer and tackle commercialisation bottlenecks | Deliver more investable deep tech opportunities |
Where this connects to the EIC and other EU instruments
The report is explicitly positioned as input for the European Innovation Council which already manages direct equity investments through the EIC Fund. The EIC Fund was designed to make high risk high impact investments in startups and SMEs that conventional investors tend to avoid. The report's suggestions to ease administrative burdens and to increase risk absorption are therefore directly relevant to ongoing EIC practice and to broader debates about the role of public capital in de risking private investment.
Context and wider dynamics in the EU venture ecosystem
The report reiterates long standing observations about the European venture ecosystem. Venture capital markets across the EU are concentrated in a few hubs and remain smaller and less deep than in the United States. That structural weakness shows up most clearly in the scarcity of later stage rounds that allow start ups to scale from successful prototypes into global businesses. Policymakers have for years tried to address this with a mix of instruments ranging from direct equity provision to guarantees and blended finance.
The report also highlights an implementation gap. While EU programmes have multiplied, overlap between instruments and complex governance can blunt impact. Practical issues such as the design of call for proposals and the administrative burden of compliance can reduce the reach of well intentioned funds. The study therefore focuses not only on the size of the funding pool but also on how accessible and useful those euros are in practice.
Critical caveats and implementation hurdles
The report's recommendations are technically straightforward but politically and operationally challenging. Relaxing equity risk constraints at EU level can clash with legal frameworks, public procurement rules and state aid concerns. Improving coordination among a long list of EU actors and national entities requires political will and sustained governance work. Likewise increasing support for tech transfer means not only funding but also reforming incentives inside universities and research organisations to prioritise commercialisation.
EU programmes and agencies will therefore need to reconcile two tensions. They must remain accountable and transparent as public funders while becoming fast and flexible enough to operate on the timescale that high growth innovation demands. Achieving that balance is an organisational and legal task as much as it is a budgetary one.
What to watch next
The report is explicitly offered as input to the EIC and its Fund. The practical test will be whether policymakers follow through with clearer rules, lighter administrative processes and better coordination across EU instruments. Observers should track three developments. First, whether EU programmes adjust eligibility and risk absorption rules in ways that are compatible with legal constraints. Second, whether administrative simplifications are implemented in practice rather than announced as pilot steps. Third, whether more resources are allocated to tech transfer and to building pipelines of investable projects from research.
For now the report is a useful diagnostic. It reconfirms persistent weaknesses in European equity markets and sets out pragmatic steps to address them. Translating recommendations into measurable change will be the longer term and politically difficult work.
Where to read the original material
The Commission published the report under the title "Study on equity investments in Europe" and made it available alongside EIC information on investment opportunities. The study draws on the Horizon 2020 period and the independent expert consultations conducted for the Directorate General for Research and Innovation.