The Capital Cliff at the Top

For innovative start-ups in the EU and the US, the financing question changes as a company grows. Early money pays for experimentation and first market entry; later money must support a larger organisation, broader markets, and strategic bets whose returns remain uncertain. This chapter asks where the EU–US financing gap actually appears and what investor structure contributes beyond cash. The answer helps distinguish a shortage of seed capital from a shortage of coordinated, risk-tolerant resources for the small group pursuing extreme scale.

The Funding Path Changes After the First Years

Finance is not a single input that a start-up either has or lacks. A young firm may need enough capital to test a product, then enough follow-on funding to hire, build infrastructure, acquire customers, and survive the period before expansion pays for itself. The size, timing, and coordination of those rounds matter. A financing environment that supports experimentation may still be unable to fund the concentrated risk of a company trying to become a global leader.

The OECD study’s comparison of cumulative pre-scaling funding makes this distinction visible. During roughly the first five years after founding, the average and median funding trajectories of EU and US rising superstars are broadly similar. For growth-oriented start-ups, the trajectories remain broadly similar across the two regions. The large divergence appears later, and primarily for rising superstars: average cumulative funding accelerates sharply in the US while the EU mean grows more gradually.

The mean–median contrast is the key to interpreting that result. The median describes the firm near the middle of the category; the mean is pulled upward when a small number of firms receive exceptionally large rounds. Median funding for rising superstars evolves more similarly across the EU and US than the average does. The gap is therefore concentrated in the upper tail, where the US ecosystem is better able to put very large sums behind a few firms judged to have exceptional scaling potential.

This is a different claim from saying that the typical European scale-up cannot raise early capital. The evidence suggests that many firms can navigate the initial stages, and that financing conditions for intermediate growth are less sharply separated. The challenge emerges when an ambitious company needs a much deeper pool of capital at the same time as it must expand its workforce, product, market reach, and governance. At that point, a collection of small or nationally bounded funding sources may not be an adequate substitute for a coordinated late-stage market.

The distinction between growth-oriented firms and rising superstars explains why a single “venture capital gap” is too blunt. A firm that has raised USD 50 million has demonstrated substantial financing and growth potential, but it has not necessarily faced the requirements of a USD 1 billion valuation. The latter may demand larger and more sustained investments in commercialisation, infrastructure, acquisitions, and international expansion. The report’s stage-based comparison therefore asks not only whether capital is available, but whether its depth matches the scale of the opportunity.

The upper-tail pattern also carries a trade-off. Concentrating resources on a small group can give a rare, high-potential firm the means to move before a market closes or network effects strengthen a rival.