European Capital Markets: Progress, Persistent Gaps and the Role of Business Angels
The latest AFME Capital Markets Union KPI Report highlights encouraging developments in European capital markets, while underlining the need for stronger access to risk capital, deeper investment pools and greater market integration.
The Association for Financial Markets in Europe (AFME), in collaboration with eleven European and international organisations, has published the ninth edition of its Capital Markets Union: Key Performance Indicators report.
The 2026 edition provides an overview of the development of European capital markets during the first half of the year, assessing progress across nine key indicators and comparing the EU with other major global markets. Business Angels Europe (BAE) is proud to have contributed to this year's edition alongside other organisations representing the European investment ecosystem.
The report points to broadly positive developments in access to finance, risk capital and market integration. However, it also highlights structural challenges that continue to affect Europe's ability to finance innovation, support business growth and remain globally competitive.
Risk capital is gaining ground in Europe
One of the most encouraging findings concerns the recovery in risk capital investment.
According to the report, risk capital accounted for 5.1% of total SME funding in the EU in 2026, compared with 3% in 2025. This indicator includes venture capital, growth private equity, business angel investment and equity crowdfunding.
Investment across these different forms of risk capital increased during the reporting period. Business angel investment, in particular, recorded an annualised increase of 44%, highlighting the continued contribution of private investors to the financing of European businesses.
Risk capital is also increasingly supporting companies active in strategically important sectors, including artificial intelligence, defence, technology and decarbonisation. Significant funding rounds across Europe demonstrate the capacity of private investment to support companies developing solutions to some of Europe's most pressing economic and societal challenges.
Nevertheless, the report also identifies an important concern: access to risk capital is becoming increasingly concentrated. While larger, established scale-ups continue to attract substantial funding, smaller and earlier-stage companies may face greater difficulties securing investment. In the business angel market, investment amounts have increased, but the number of investment rounds has declined in recent years.
This underlines the importance of maintaining a broad and accessible investment ecosystem, with sufficient capital available throughout the different stages of a company's development.
Business angels remain an important part of the funding ecosystem
Business angels play an important role in bridging the financing gap between early-stage entrepreneurship and larger institutional investment.
Beyond providing capital, they often contribute their entrepreneurial experience, industry knowledge, professional networks and strategic guidance. This combination of financial and non-financial support can be particularly valuable for startups seeking to validate their business models, enter new markets and prepare for subsequent funding rounds.
The AFME report recognises business angel investment as one of the key components of pre-IPO risk capital. Its findings reinforce the importance of a well-functioning early-stage investment ecosystem in supporting innovative companies and strengthening Europe's capacity to scale successful businesses.
Ensuring that early-stage companies can access appropriate funding remains essential, particularly as Europe seeks to strengthen its position in strategically important sectors.
European capital markets are making progress, but the global gap remains
Beyond risk capital, the report identifies several positive developments across European capital markets.
Market-based financing accounted for 13.7% of EU non-financial corporate funding in the first half of 2026, compared with 12.2% in 2025. The increase was primarily driven by stronger bond issuance and a recovery in equity financing, with IPO activity reaching its highest level since 2022.
The integration of European capital markets also improved, supported by cross-border mergers and acquisitions, private equity investment and portfolio holdings.
Furthermore, Europe maintained its leading position in sustainable finance, with ESG-labelled bonds representing 12.3% of total EU bond issuance in 2026.
Despite these developments, the overall competitiveness gap with other major economies remains substantial. In the first half of 2026, US companies raised more than €1 trillion through public equity and debt markets, compared with €290 billion in the EU.
Europe also continues to lag behind other major markets in the availability of investment capital. European adults held an average of approximately €48,300 in market-based financial assets, considerably below the corresponding levels in the United States, Australia and the United Kingdom.
Mobilising more European savings towards productive investment will therefore be an important part of strengthening the continent's capital markets.
Turning progress into long-term competitiveness
The findings of the 2026 report highlight both the progress made and the work that remains to be done.
As the European Commission advances its Savings and Investments Union agenda, strengthening the capacity of European capital markets to channel savings into productive investment will be essential.
This requires a combination of measures: mobilising more household savings, improving access to finance for businesses, strengthening public and private investment markets, further integrating national capital markets and developing a more competitive environment for innovation and growth.
For the European startup and scale-up ecosystem, ensuring access to risk capital at every stage of development is particularly important. Business angels, venture capital investors and other private market participants all have a role to play in connecting entrepreneurial talent with the capital and expertise needed to grow.
Building a more integrated and competitive European capital market is not simply a financial market objective. It is a prerequisite for supporting entrepreneurship, innovation and sustainable economic growth across Europe.
Business Angels Europe welcomes the continued work of AFME and its partner organisations in monitoring these developments and contributing to the discussion on Europe's investment priorities.
Business Angels Europe is pleased to have contributed to the ninth edition of the AFME Capital Markets Union: Key Performance Indicators report.
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