By Anna Khechoyan
You’re navigating an economy where traditional funding feels increasingly out of reach, and yet the need to digitize, scale, and stay competitive has never been more urgent. Anna Khechoyan argues that private equity is not just a lifeline but a smart strategic partner powering Europe’s digital evolution when it matters most.
The 2024 EIB Investment Survey reinforces market trends supporting a shift in Europe’s current investment landscape. Economic changes and geopolitical uncertainty are placing more significant stress on business owners. Where some industries struggle to adapt, digital innovation is seeing a renaissance through private equity (PE) support. Private equity (PE) firms are increasingly stepping in to fill the financing gap left by traditional lenders, supporting digital-first companies and driving innovation across Europe.
A Quick Investment Climate Overview
Traditional European organizations are slowing investment capital. According to the same EIB reporting, the net increase fell from 14% in 2023 to 7% in 2024. Instead of viewing digital resources or new growth as profitable, many companies are shifting focus to older assets to “weather” the financial storm. That need for resilience differs from the U.S., where 47% of local firms focus on expansion instead of only 26% in the EU.
It is clear firms are struggling to access external or angel funding. Bank lending remains tight as global monetary policies shift – especially considering political moves forcing higher-level trade negotiations with no end in sight. The result is that more and more companies are seeking alternative financing solutions like PE to bridge any operational or expansion gaps.
What could be viewed as an emergency is actually an excellent opportunity. Digital transformation is crucial for a business to maintain a competitive level with the market. Using alternative investing to solidify digital assets ensures Europe slows the risk of falling behind in upgrading technology assets, integrating automation, and upscaling infrastructure.
The fact is that the EU’s economic growth is directly tied to technology adoption. The more businesses have access to capital investment for new and innovative tools, the greater the resilience of the region as a whole. Prioritizing maintenance over expansion puts companies at risk of more agile competitors from Asia, the U.S., and MENA SA.
Why Tech Investment is Crucial to Growth
The digital economy is no longer a pipe dream sold in tech magazines. Modern businesses are leveraging everything from AI (artificial intelligence) in data analytics to AR (augmented reality) for eCommerce engagement. Yet, even with greater access to such tools, European firms fall behind U.S. counterparts.
Roughly 81% of U.S. firms used advanced digital technologies, while only 74% of EU firms have integrated such tools into regular operations. That gap grows when you look at more advanced options like AI, automation, and logistics.
Such a drastic “digital lag” impacts how efficient, productive, or competitive a business is compared to others in the market. If EU firms wish to remain at the top of any industry, effort and investment must be spent to embrace AI, SaaS, and automation. That will ensure higher operational efficiency, optimize expenses, and deliver superior customer service.
R&D (research and development) is another area where investment is lacking. Only 32% of EU firms focus on active innovation, limiting the development of scalable solutions. There is a direct correlation between countries that invest in R&D and their global economic ranking. Without proper funding to support new tech startups and high-growth companies focused on developing products as they move into commercialization, EU firms cannot keep pace with global actors.
Here is where private equity can make all the difference. PE firms offer financial backing and strategic guidance. These leaders have operational expertise and access to new and emerging markets that a business would otherwise not receive. PE support means access to AI, automation, and digitalization, positioning a young startup for long-term resilience in the global economy.
In addition, PE-backed organizations are more likely to focus on R&D. Studies show PE support allocates greater resources to innovation and product development. Those controlling the purse strings of private firms understand bringing a new product to market through R&D is the lifeblood of many startups.
PE for Funding High Growth Technologies
Bank loans are traditionally unsuitable for high-risk projects. Banks love predictability and focus on tangible assets as collateral should a contract fall through. The tech sector requires more of a high-risk, high-reward scenario. PE can step in and fill this gap through funding that supports R&D, strategic investment, and access to industry networks – allowing businesses to scale rapidly as they expand into new markets and refine operational models.
How can PE transform business performance?
- Firms experience 2 to 4 times the growth compared to traditionally funded counterparts.
- Companies leveraging PE investment outperform on financial KPIs, including revenue growth and profitability metrics.
- More successful exits (IPOs & acquisitions) are far more common with PE backing than traditional banking as they demonstrate longer-term potential.
It is easy to measure the success rate of PE-backed companies through the current trends of “buy and build” strategies. Here, PE investment leads companies to leverage capital for internal growth and smaller firm acquisitions. That directly leads to accelerated expansion and consolidation in tech sectors like cloud computing, cybersecurity, and Fintech.
Another trend through PE funding focuses on digital innovation. Many PE-backed firms use financial resources to invest in powerful AI tools, integrative automation, and SaaS. Such digital assets improve the longevity potential of the business, making it more attractive to other investors as it solidifies a space in the competitive marketplace.
Closely tied to PE funding is strategic oversight. PE firms want to be involved in the success of a company. They will introduce new resources, refine go-to-market strategies, and optimize operations. Such expertise quickly scales a business while simultaneously making it more efficient in the digital transformation landscape.
Case Study: Supporting Early-Stage Digital Innovation
One example of how private equity engages with the European digital economy is the investment made in amma, a mobile platform supporting pregnant women and young families. The private equity partner, Zubr Capital, worked closely with the team to refine growth priorities and strengthen business fundamentals.
This collaboration involved not only capital but also operational input — a hallmark of how PE firms can contribute to strategic clarity and resilience in early-stage companies. The amma case illustrates the broader trend of PE involvement in digital services with scalable, impact-driven models.
PE and the Future of Europe’s Digital Economy
Recent examples of PE engagement — such as support for early-stage platforms like amma — demonstrate how private capital can unlock digital growth opportunities. Instead of relying solely on traditional financing methods, these partnerships combine flexible funding with strategic guidance to help companies scale, innovate, and compete globally.
For Europe to remain competitive, it must have “smart capital.” PE offers the catalyst that will drive a new phase of digital expansion. Firms must understand the crucial role technologies play in remaining competitive with modern global businesses. Any company failing to adapt will struggle to survive.
As more tools like AI, SaaS, and automation are onboarded every day, the role of PE in Europe is expected to grow. Flexible funding, operational support, and long-term partnerships make PE a fundamental building block of Europe’s future innovative ecosystem. Greater competition from the US, Asia, and MENA SA regions. For Europe to compete – it must secure access to modern tools.
The European Commission recognizes the importance of alternative “smart capital” in playing on these tech mechanisms. Policy development is shifting, and a call for investment in high-growth, high-tech industries is being made to all corners of the EU.
As more regulatory support grows, so does the availability of venture capital, private equity, and growth funds. It is no longer a question of whether PE will play a role in Europe’s future, but rather, how quickly forward-thinking businesses will embrace such opportunities to reach new operational success and competitive resilience.
About the Author
Anna Khechoyan is an Investment Manager at Zubr Capital, a growth equity firm basedin Limassol, Cyprus. With a strong background in finance and investment analysis, sheis involved in sourcing and evaluating investment opportunities, leading deal execution,and conducting due diligence. Beyond the investment stage, Anna works closely withportfolio companies to scale operations, refine strategy, and drive long-term valuecreation. With a sharp eye for opportunity and a hands-on approach to growth, she ispassionate about helping founders turn bold visions into sustainable success
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