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Executive Forum: the scale-up gap: and how to address it

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  • Rudy Aernoudt

Abstract

There is academic unanimity concerning the fact that the equity market does not function at the lower end. Risks are too high and not rewarded by sufficient return. Hence, companies looking for small amounts of money in the seed or early stage phase do not find it. This paper argues that second- and third-round financing, even though less risky, has also become problematic, especially in Europe. While start-ups are confronted with the small equity gap at seed and early stage, scale-ups are also confronted with an equity gap at later stages. A holistic policy, not focused on a specific stage of investment, should therefore replace a targeted one. The paper shows that in this context a government-backed debt-financing instrument delivers better value for public money than a fund-of-funds approach and increases the efficiency of the latter.

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  • Rudy Aernoudt, 2017. "Executive Forum: the scale-up gap: and how to address it," Venture Capital, Taylor & Francis Journals, vol. 19(4), pages 361-372, October.
    • Handle: RePEc:taf:veecee:v:19:y:2017:i:4:p:361-372
    DOI: 10.1080/13691066.2017.1348724
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    References listed on IDEAS

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    1. Kraeussl, R. & Krause, S., 2011. "Has Europe Been Catching Up? An Industry Level Analysis of Venture Capital Success over 1985 - 2009," Working papers 327, Banque de France.
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    Cited by:

    1. Mihailova, Irina, 2023. "Business model adaptation for realized international scaling of born-digitals," Journal of World Business, Elsevier, vol. 58(2).
    2. Antonia Nörthemann, 2023. "Industry-specific specialization in venture capitalists’ internationalization decisions," Journal of Business Economics, Springer, vol. 93(5), pages 891-927, July.
    3. Bohan, Sarah & Tippmann, Esther & Levie, Jonathan & Igoe, Josephine & Bowers, Blake, 2024. "What is scaling?," Journal of Business Venturing, Elsevier, vol. 39(1).
    4. Burger, Anže & Hogan, Teresa & Kotnik, Patricia & Rao, Sandeep & Sakinç, Mustafa Erdem, 2023. "Does acquisition lead to the growth of high-tech scale-ups? Evidence from Europe," Research in International Business and Finance, Elsevier, vol. 64(C).
    5. Botsari, Antonia & Kiefer, Kilian & Lang, Frank & Pal, Kristian, 2021. "Scale-up financing and IPOs: Evidence from three surveys," EIF Working Paper Series 2021/69, European Investment Fund (EIF).
    6. Richard T Harrison & Babangida Yohanna & Yannis Pierrakis, 2020. "Internationalisation and localisation: Foreign venture capital investments in the United Kingdom," Local Economy, London South Bank University, vol. 35(3), pages 230-256, May.
    7. Katarzyna Szkuta & Blagoy Stamenov & Anna Ianshyna, 2017. "Improving access to finance for young innovative enterprises with growth potential: evidence of impact on firms' outputs: Part 1. Equity instruments: lessons learned from policy evaluations," JRC Research Reports JRC109163, Joint Research Centre.
    8. A. Rebecca Reuber & Esther Tippmann & Sinéad Monaghan, 2021. "Global scaling as a logic of multinationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(6), pages 1031-1046, August.
    9. Kraemer-Eis, Helmut & Botsari, Antonia & Gvetadze, Salome & Lang, Frank & Torfs, Wouter, 2021. "European Small Business Finance Outlook 2021," EIF Working Paper Series 2021/75, European Investment Fund (EIF).
    10. Louise Taupin & Pascal Le Masson & Blanche Segrestin, 2021. "Scale-up phase in deeptech start-ups: Replication or massive learnings?," Post-Print hal-03383828, HAL.
    11. Louise Taupin & Pascal Le Masson & Blanche Segrestin, 2022. "Observing preservations in apparent ruptures with a design approach: Scale-up of deeptech start-ups as an exploratory phase," Post-Print hal-03752338, HAL.

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