To make its startup market as competitive as the US markets, France is looking forward to strengthening the fragmented European Union capital market. Prominent Investors and CEOs said that fragmented EU markets need to be integrated to give them a scale-up and penetrate the flourishing US startup market.
Europe’s markets are mainly shaped by national borders and local rules and regulations, which prevents it from competing with the rival United States. Since there are no big investors in France or in the EU, investors and businesses have to turn towards US venture capital – private equity funding of early-stage promising companies to accelerate the growth of the startup market.
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French start-ups at the VivaTech Fair in Paris
Matthieu Rouif, CEO of French startup Photoroom, said, “A huge amount of wealth has been created over the past 20 years, created off the back of tech innovation, and the fact Europeans don’t have access to that is a big issue.” This was his address at the recently-held VivaTech fair in Paris. The Photoroom has recently raised $43 million from UK fund Balderton and Silicon Valley’s Y Combinator.
According to the French Central Bank, the top 10 biggest venture capital firms are from the United States and they dwarf their European counterparts. As per the report by Atomico, European startups would raise $45 billion in 2023, compared to the $120 billion raised in the U.S.
France’s bid to integrate the EU markets
The government of France is pushing for the next European Commission to revivify the long-stalled plans for the EU capital market union to harmonize financial regulations and supervisions across the 27-nation bloc.
At least in principle, a consensus is emerging in the bloc regarding the push. However, there is some reluctance over losing their regulatory control in the capital market. The french finance minister, Bruno Le Maire, citing the example of startup Minstral AI, remarked that France cannot afford to keep dithering. “Mistral needs to raise money in the next six months, and it’s going to be a lot of money. So either we move ahead with capital markets union or else they will go somewhere else”, he said at the VivaTech fair in Paris.
Bank of France Governor Francois Villeroy de Galhau said that another way to scale up the startup industry in the EU is to get more public sector investors, such as the European Investment Bank. Public sector investors should be more involved in financing startups by accepting more risk than private investors.
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Word from the Investors
Antoine Moyroud, who works at a Silicon valley venture capital funding firm called Lightspeed, had said that, “As a French citizen, it’s a shame to see that the value creation flywheel isn’t spinning as fast in Europe as it is in the U.S.” The Lightspeed is one of Mistral AI’s investors.
European startups can get more investors from a stable investor base from the U.S. markets. In the US, the investors are more likely to sell downholding to foreign firms, says Louis Dussart, who works at a venture capital group called RTP Global.
“It would truly be a pivotal moment if we could establish Europe as an attractive place to exit and bring liquidity back into the ecosystem”, Dussart says.
About Author
This article is written by Janvi Singh, a seasoned content writer and aspiring business journalist. She holds a postgraduate degree in media studies, and although she has gained experience in writing for various digital platforms, she has a keen interest in writing business news.
