Technology start-ups are set to benefit from financial investment provided by two of the largest economies in the region.
The governments of France and Germany plan to use funds from their respective state investment banks to give backing to budding businesses in the region. The EU has also pledged a monetary amount alongside the two nations.
I’m looking into the news, reported by the Wall Street Journal, and drawing conclusions on the announcement.
A total of €75 million is being invested by France, Germany and the EU in the latest fund from French venture-capital firm Partech Ventures. Telecommunications company Orange SA and advertising firm Publicis also intend upon establishing a fund.
Commenting on the investment, French President François Hollande said:
“In an economy of innovation, capital is decisive. More money must always be found to ensure faster development”
President Hollande made his comments at a conference in Paris.
The initiative is a small step toward addressing what officials say is a major challenge for the growth prospects of the European economy – the fragmentation of venture capital. The issue is faced by already-established start-ups that struggle to find investment in Europe – new companies have less of a struggle. The dilemma often leads said companies to look outside of Europe for investment, thus removing the start-up from the European arena.
Europe’s various borders and different national rules surrounding venture capital play a part in the issue, as highlighted in the article.
Concurrently Andrus Ansip, the EU commission’s vice president in charge of creating a single digital market, said:
“Venture capital wants large markets and legal certainty across Europe, not a string of requirements and obligations”
Europe’s recent growth in VC funding for new tech start-ups has increased, but the expansion is dwarfed by that in the USA, both in terms of growth and absolute figures.
In summary, investment in start-ups is well-established in regions outside of Europe. The continent’s nations and the EU need to catch up in order to compete.
Nery Alaev is the current Director of ESN Investments GmbH, which engages in acquisition and development of commercial and residential property in Germany and Austria.