Channel’s report, Financing Growth in Europe’s Innovation Economy, shares its analysis of 250 technology startups achieving the greatest revenue growth between 2021 and 2024. Informed by company filings and other data sources, Channel’s report reveals that:

• Europe’s startups are growing faster than ever, with the median growth rate for the 250 fastest-growing tech companies increasing by more than a quarter between 2017 and 2024. Progress in recent years was fuelled by record investment levels secured in 2021 and 2022, although startups have had to adapt to a more challenging funding environment since then.

• Over half (59%) of Europe’s high-flying startups continue to burn through cash faster than they can earn it despite growing by at least 84% a year since 2021. Company filings show that one in ten (10%) of the startups studied was in negative equity in 2023, and one in five (21%) is on track to run out of cash by the end of 2025 without more funding or significant further changes to income and expenditure.

• The ability of Europe’s fastest-growing tech companies to secure new funding at favourable rates is constrained. Less than half (41%) of those who secured investments in 2021 and 2022 have since secured more substantial follow-on rounds, despite strong growth making them prime candidates for further funding.

• Channel’s analysis indicates that startups have turned to venture debt credit to maintain their trajectory. Between 2022 and 2023, liabilities increased more rapidly than assets for Europe’s fastest-growing tech companies. As a group, these startups are more highly leveraged than ever, with over half (54%) having a debt-to-equity ratio that financial experts might consider ‘higher risk’.

Tony Smedley, Director of Sales at Channel, said: “Europe’s fastest-growing technology companies, like many others, have flourished in an era of cheap money from the period 2020 to 2022. Our analysis indicates that a fifth of them are now in a very difficult position. Innovation economy founders require sensible funding options to establish strong, sustainable businesses, but higher rates for longer and dilutive equity raise can magnify challenges for many.”