About private equity

How private equity invests in privately-owned businesses, supports jobs and creates prosperity.


Login to access your exclusive member-only content and account information.


Not a member? Join us

  • Operate to the highest level of professional standards
  • Access authoritative industry research and data
  • Navigate the complex EU regulatory environment
  • Network and engage with industry leaders
News & opinion

Europe needs an equity culture!

12 Dec 2014

Europe is geared up for banks. If a company needs capital, its Directors go and talk to a bank. And most SMEs have a trusted bank with which they do most of their business. With banks struggling to fulfill this role, Europe needs to think long and hard about equity financing. Equity investment for companies is precious. But the bad news is: there’s not enough available in Europe. The good news: this can be changed.

Equity is like a shy animal that is extremely cautious about coming closer. It is demanding: equity requires special treatment and likes to be fed by lots of information. After all, if things go wrong, then equity is lost. However, once an equity investor has bought into an idea, he or she becomes the most faithful companion you could wish for.

Equity has many benefits. It makes a firm more stable if times get tough. Indeed, the better a firm’s equity position, the better its credit risk, a condition that encourages banks to offer more favourable terms and conditions.

Equity is willing to take risks. You have a great new business idea? You want to take your company to new markets? This is where equity financing comes in. It comes in different forms and sizes: public equity for listed companies or private equity for privately-held companies. And within private equity, there is venture capital for young start-ups, and growth capital and private equity for more mature companies.

While we have public and private equity in Europe, we do not have enough of it. According to a recent study by think tank New Financial, the IPO markets in Europe are only half of the size as the ones in the US, even when adjusted for GDP. The same goes for private equity, with the European market less than half the size of the US. The difference for venture capital is even more marked: the US market is about 7 to 8 times bigger than the European one.

Contrast that with the credit market. Reliance on bank loans is particularly clear from company balance sheets. In aggregate terms, bank loans to companies amount to €5.4 trillion, while other forms of debt, such as high-yield bonds, add up to €1.7 trillion.

Times have changed from the lending heyday and banks are struggling to do what they need to do: lend to companies. Reforming Europe’s capital markets so that companies can access alternative sources of finance including equity is at the heart of the job for Britain’s new Commissioner in Europe, Lord Hill.

But why is there so little equity in Europe?  One important reason is that providing equity means taking a risk. If the company fails, the equity is fully liable and stands to be lost. Risk-taking doesn’t really fit with the European profile. We are more on the cautious side, aren’t we? We tend to seek the security of a job at a big corporation or, better still, in government rather than striking out on our own.

Even more problematic is the fact that risk-taking is not rewarded in our society. Starting your own business is high risk because if you fail, you will lose out badly. You’ll lose your credit rating and your personal reputation.

We need a change of mindset here. We need to encourage each other to take risks and celebrate the entrepreneurial spirit. Yes, you might fail. But if you do, you will have learned a lot. And the next time you will do better. We have great success stories that we should showcase: Spotify and Skype are two examples of European start-ups where the founders and backers took enormous risks to succeed.

We need to educate our children to become risk-takers. We need to welcome those willing to provide equity and take risks into our economies. Europe definitely needs an equity culture!

Dörte Höppner, Chief Executive Officer, EVCA

Want to discuss?

We are always keen to hear from you.


What can I do to manage cookies stored on my computer or phone?

You can accept or refuse cookies. Accepting cookies is usually the best way to make sure you get the best from a website.

Most PCs automatically accept them but you can change your browser settings to restrict, block or delete cookies if you want. Each browser is different, so check the 'Help' menu of your particular browser (or your mobile phone's handset manual) to learn how to change your cookie preferences. Many browsers have universal privacy settings for you to choose from.

Help on how to set and customise your cookie settings for your browser

How to manage cookies in Internet Explorer

Cookie settings in most versions of Internet Explorer can be found by clicking the tools option and then the privacy tab.

How to manage cookies in Firefox

Cookie settings in Firefox are managed in the Options window's Privacy panel. See Options window - Privacy Panel for information on these settings.

How to manage cookies in Chrome

Click on the spanner icon on the toolbar, select settings, click the under the bonnet tab, click on content settings in the privacy section.

How to manage cookies in Opera 

You can manage cookies in Opera if you Click on settings, then Preferences, then Advanced and finally Cookies

How to manage cookies in Safari

Choose Safari, then preferences and then click security. You should then be able to specify if and when Safari should accept cookies.

To manage cookies on your mobile phone please consult your manual or handbook.

Get more help about how cookies work with specific browsers.

What happens if I don't accept cookies?

If you decline cookies, some aspects of Invest Europe site may not work on your computer or mobile phone and you may not be able to access areas you want on the website. For this reason we recommend that you accept cookies.

What happens if I delete my cookies?

If you delete all your cookies you will have to update your preferences with us again and some aspects of our site may not work.

What happens if I change computers or mobile?

If you use a different device, computer profile or browser you will have to tell us your preferences again.

If you'd like to learn more about cookies in general and how to manage them, visit aboutcookies.org.

We can't be responsible for the content of external websites.

Opt-out of cookies


Join today

This is for members only. To view in full login or join Invest Europe today.