As venture debt continues to mature in Europe, a critical financing gap has emerged for early-stage startups seeking modest amounts of growth capital. In this episode of 0100 Impact Talks, Alexandre Bartolini, Managing Partner at GPI, explains why the shift of venture lenders toward larger deals has left smaller companies underserved—and why early-stage growth lending could become one of the next major opportunities in European private credit.
The Evolution of Venture Debt in Europe
Over the past decade, venture debt has evolved from a niche financing instrument into a mainstream asset class within European venture ecosystems. As venture capital markets expanded and startup valuations climbed, lenders increasingly stepped in to provide non-dilutive capital that could extend runway, finance growth, or bridge companies between equity rounds.
However, as the market matured, venture lenders began shifting their focus upmarket. Larger funds and institutional players now predominantly target later-stage startups with stronger balance sheets and sizable funding rounds, often providing debt tickets of €10 million or more.
This shift has created a structural gap in the market—particularly for earlier-stage startups that require smaller amounts of capital to scale.
The €1–5 Million Gap
According to Bartolini, the most underserved segment lies in the €1–5 million lending range, where many promising startups struggle to secure appropriate financing.
For lenders managing larger funds, deploying smaller tickets is often economically inefficient. The operational cost of underwriting and monitoring a €2 million loan can be similar to that of a €20 million facility, making smaller deals less attractive for large venture debt providers.
At the same time, startups at earlier stages often lack access to traditional bank lending, leaving them caught in what Bartolini describes as the “missing middle” of venture financing.
These companies typically already demonstrate:
strong product-market fit,
growing revenues,
backing from reputable investors.
Yet they remain too early for large venture debt providers and too risky for banks.
Why Early-Stage Growth Lending Matters
Early-stage growth lending aims to address precisely this gap. Instead of focusing exclusively on late-stage companies, the model targets startups that have already validated their products but still operate at relatively early stages of growth.
The approach offers several advantages.
First, non-dilutive financing allows founders to preserve ownership while continuing to scale their businesses. In volatile venture capital markets, this can be particularly valuable as companies seek alternatives to equity funding.
Second, smaller debt facilities can serve as strategic growth catalysts, helping companies finance hiring, product development, or market expansion without immediately raising new equity rounds.
Finally, from an investor perspective, early-stage lending can offer attractive risk-adjusted returns if underwriting is done carefully and the lender has strong access to venture ecosystems.
A New Generation of Lenders
Bartolini believes that addressing this gap requires a new generation of specialized lenders—firms designed specifically to operate efficiently at smaller ticket sizes.
Unlike large venture debt funds, these lenders focus on:
lean operational structures,
close collaboration with venture investors,
deep understanding of early-stage B2B business models.
The strategy is particularly relevant for B2B startups, which often have predictable revenue streams and contractual customer relationships that make debt financing more feasible.
By combining venture ecosystem knowledge with private credit discipline, specialized lenders aim to build a sustainable model for supporting earlier-stage companies.
The Role of Private Credit
The rise of early-stage growth lending also reflects broader shifts in global financial markets. Private credit has expanded rapidly over the past decade as institutional investors seek yield and diversification beyond traditional fixed income.
Within this context, venture debt—and its earlier-stage variants—represents a natural extension of the private credit ecosystem into innovation-driven sectors.
Europe, in particular, still offers significant room for development. Compared with the United States, the continent’s venture lending market remains relatively underpenetrated, suggesting that new strategies and specialized funds could play a growing role in financing the next generation of startups.
Looking Ahead
As capital markets evolve and venture funding cycles become more volatile, founders are increasingly exploring hybrid financing structures that combine equity and debt.
For Bartolini, this shift underscores the growing relevance of early-stage growth lending. By targeting the €1–5 million segment, lenders can unlock opportunities that traditional venture debt providers have largely overlooked.
If successful, this approach could help bridge one of the most persistent funding gaps in the European startup ecosystem—providing ambitious early-stage companies with the capital they need to scale while preserving flexibility for the future.
