Future underfunded
The winner takes it all: this is the best way to describe the financing situation of young companies in the EU. Despite COVID-19, capitalization of startups has multiplied in 2020 and 2021. According to Dealroom, around EUR 49 billion in funding was raised in the first half of 2021 alone. This means that the venture capital sector in the EU is growing faster than in China and the USA - so far so good. However, it is interesting to take a closer look at the asset allocation in relation to the maturity of the funded companies. Where is the money coming from and who is benefiting from the capital boom?
Several financiers are vying for profitable investments: International PE investors, U.S. hedge funds and, of course, government funding programmes such as the German "Zukunftsfonds" push capital into a market that is already overvalued rather than undervalued due to an expansive monetary policy. The high number of financing rounds, however, is mainly beneficial for more mature startups with good reputation and on their way to becoming unicorns. For founders just starting their first funding round, on the other hand, it has become more difficult to collect funds. A forward-looking economic policy will have to address this situation.
