Mind Europe's early-stage equity gap

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Mind Europe's early-stage equity gap

Remedying the European Union’s deficient overall business research and development performance requires the nurturing of more new companies in new s

Publishing date: 19 December 2011
Authors: Reinhilde Veugelers

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Remedying the European Union’s deficient overall business research and development performance requires the nurturing of more new companies in new sectors, enabling them to grow to leading-innovator status. This means addressing young leading innovators’ access to external finance, particularly early-stage venture capital.

The funding system for aspiring young leading innovators (‘yollies’) needs to be understood as an interconnected system comprising different types of funding at different stages of company lifecycles. Venture capital funds are critical at the early commercialisation stage.

Venture capital investors rely on a good deal flow of high-potential investment-ready firms, on skilled investment managers, and on developed exit markets.

Poor returns from early-stage investments in Europe on a smaller deal flow have significantly reduced the appetite for early-stage venture capital. This exodus has left a funding gap in Europe for aspiring yollies.

The evidence suggests that there are a number of ineffective public schemes supporting mediocre deals at mediocre funds. Shutting those down would free up enough funding to allow a significant shift towards a more effective venture investing system focused on high quality venture capital and innovative projects from aspiring yollies.

About the authors

Reinhilde Veugelers

Prof Dr. Reinhilde Veugelers is a full professor at KULeuven (BE) at the Department of Management, Strategy and Innovation. She has been a Senior fellow at Bruegel since 2009. She is also a CEPR Research Fellow, a member of the Royal Flemish Academy of Belgium for Sciences and of the Academia Europeana. From 2004-2008, she was on academic leave, as advisor at the European Commission (BEPA Bureau of European Policy Analysis). She served on the ERC Scientific Council from 2012-2018 and on the RISE Expert Group advising the commissioner for Research. She is a member of VARIO, the expert group advising the Flemish minister for Innovation. She is currently a member of the Board of Reviewing Editors of the journal Science and a co-PI on the Science of Science Funding Initiative at NBER.

With her research concentrated in the fields of industrial organisation, international economics and strategy, innovation and science, she has authored numerous well cited publications in leading international journals. Specific recent topics include novelty in technology development, international technology transfers through MNEs, global innovation value chains, young innovative companies, innovation for climate change, industry science links and their impact on firm’s innovative productivity, evaluation of research & innovation policy, explaining scientific productivity, researchers’ international mobility, novel scientific research.

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