The innovation economy — an ecosystem fueled by new ideas, technology and entrepreneurial spirit — is the engine of global progress. These are not just high-growth companies; they are the organisations shaping the future of how we live and work.
Their economic impact is profound. At least 15% of the world’s largest companies, as ranked in the Fortune Global 500, are primarily engaged in innovation economy activities. Their performance metrics outstrip traditional peers.
Although these innovation economy companies don’t struggle to access finance, the potential of many, particularly at the startup and scale-up phase, is being hindered by a critical funding gap. The core problem is a fundamental mismatch between the unique characteristics of innovation-driven businesses and the traditional financing approaches of banks.
Banks, driven by more conservative risk appetites and increasing regulatory capital requirements since the global financial crisis, have retreated from financing high-growth companies. They prioritise lower-risk, higher-volume lending to their largest corporate clients, abandoning innovation firms that may lack established financial records or consistent revenue streams.
Data confirms this retreat: SME loan rejection rates have increased worldwide since 2019, and lending levels have declined in many developed countries globally (ECB Euro Lending Survey 2023, US Federal Reserve and Apollo Economist, 2023).
Further, key alternative sources of capital are also drying up. Venture Capital and Private Equity funding have cooled significantly since the peaks of 2021 and 2022, and the IPO market remains suppressed. This triple-whammy of challenges is stalling progress.
This failure of traditional finance also presents a powerful opportunity for adaptive, non-bank alternatives.
By embracing smarter funding models that assess potential beyond conventional metrics, alternative lenders can unlock the full financial and societal gains of the innovation economy. History shows that it is possible to achieve this, while also generating attractive risk-adjusted returns.
To understand the full scope of this funding crisis and opportunity to address it with alternative forms of finance, download our new report: Filling the Innovation Economy Lending Gap.
About Channel
Channel is a leading global alternative asset manager with deep industry expertise that deploys private capital across asset-based lending solutions to the innovation economy and specialty finance sectors. Since 2007, our investing expertise has served the financial return needs of our clients and provided businesses with innovative debt capital solutions for growth. As of September 30, 2025, Channel had approximately $26 billion in cumulative capital invested and facilitated financing in over 35 countries. For more information, please visit www.channelcapital.io.
