The 2019 London Scaleup Summit — organised at the London Stock Exchange and backed by the Startup Europe Partnership — brought together entrepreneurs, investors and policy makers around a clear goal: accelerating European entrepreneurs’ paths to scaling.
As part of the summit, we launched a new report that aims to explain why few European startups scale. This is timely: new research presented by Mind the Bridge reveals a substantial scaleup gap between Europe and the US: the number of scaleups per capita in the US is almost six times higher than in Europe (7 per 100,000 versus 1.2 per 100,000). China is also catching up: although the number of scaleups per capita is still lower than Europe (0.7 per 100,000), the investment in scaleups in China is 2.5 times higher than in Europe (1.34 per cent of GDP vs 0.53 per cent of GDP).
Improving access to finance is often viewed as the key solution to tackle Europe’s scaleup gap. Past policy efforts in this area already seem to pay off: compared to 2017, the capital invested in European scaleups has almost doubled. However, increasing investment is only part of the answer. A panel discussion on European innovation and technology policy pointed to the non-financial barriers that hinder entrepreneurs’ paths to scaling. Panelists highlighted regulation, access to markets and talent as key concerns for startups seeking to scale.
During the launch of our Motivations to Scale report, we introduced other, sometimes overlooked, non-financial barriers to scaling. We emphasised that the path to scaling puts large demands on entrepreneurs. Not only do they need the right motivation, mindset and skills to grow, they also need to know how and where to seek finance to fuel that growth. These requirements can pose substantial barriers for many entrepreneurs and can even completely prevent them from scaling. Based on a review of various European data sources, we estimate that only two percent are likely to overcome these barriers necessary to seek finance for growth. We therefore suggest that one key lever to closing Europe’s scaleup gap could be creating a more responsive policy landscape based on entrepreneurs’ perceptions of growth and awareness of finance and support options.
Acknowledging the role of entrepreneurs as key innovators and job creators, policy makers work hard to support them in scaling. During a keynote, Fabienne Gautier (Head of Unit, ERA Policy and Reform in DG Research and Innovation) laid out the European Commission’s vision for boosting innovation in the coming years. It was encouraging to hear that helping startups scale remains a priority and will continue to receive policy support.
With our new report on entrepreneurs’ motivations to scale, we aim to assist policy makers in their ambition to tackle Europe’s scaleup gap. In our policy framework, we focus on addressing key non-financial barriers to scaling, related to entrepreneurs’ attitudes towards growth, awareness of finance options and risk preferences. We propose policy makers should work on three fronts to increase the number of startups that scale: nurturing entrepreneurial growth mindsets, improving awareness of and access to resources for growth and creating spaces that facilitate risk-taking. For each of these areas, the report offers key actions and best practices across Europe. Through these calls for policy actions, we hope to encourage more European entrepreneurs to seek high growth and external finance -— and to put Europe on the map as a thriving scaleup scene.