France Pushes for EU Capital Markets Integration to Boost Startup Sector

France Pushes for EU Capital Market Integration to Boost Startup Sector

France is leading the charge for a new push to integrate the European Union’s fragmented capital markets in order to give them the scale needed to reduce reliance on dominant U.S. venture capital for its flourishing startup sector, ministers, CEOs, and investors have said.

Currently, a patchwork of local regulations and oversight has kept Europe’s financial markets largely shaped by national borders, hindering the emergence of deep capital markets to rival those in the United States. As a result, startups in France and across the EU often turn to U.S. venture capital to fund their growth, as there simply are not enough big investors at home.

Matthieu Rouif, CEO of French startup Photoroom, highlighted the missed opportunity for Europe, stating that “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.”

The French government is advocating for the next European Commission to prioritize reviving plans for an EU capital markets union, which would harmonize financial regulations and supervision across the 27-nation bloc. While there is a growing consensus among EU governments in principle, some remain hesitant to relinquish regulatory control of their financial markets.

French Finance Minister Bruno Le Maire emphasized the urgency of the situation, warning that without progress on capital markets union, startups like Mistral AI could be forced to seek funding elsewhere. Another proposal to boost EU venture capital involves getting public sector investors, such as the European Investment Bank, more involved in financing startups by assuming more risk than private investors.

A unified market would also make it more attractive for European venture capital firms to list the companies they fund in Europe rather than in the U.S., offering a more stable investor base during market downturns. Antoine Moyroud at Silicon Valley venture capital fund Lightspeed expressed the importance of establishing Europe as an attractive place for startups to exit and bring liquidity back into the ecosystem.

Overall, the push for EU capital market integration represents a pivotal moment for Europe’s startup sector, with the potential to reduce reliance on U.S. venture capital and foster growth and innovation within the region.