Originally published here.

It’s a familiar story. Exceptional founders, rapid growth, a real moat, and customer traction are building a brand. But when it’s time to supercharge scaling with a growth round, it’s rarely a European fund at the table leading the deal.

It’s partly the market, partly history, and partly - quietly - the natural reality of things, that the biggest and best of European tech have all been funded at the growth stage by US VCs. No one is shocked here - the greatest innovation ecosystem on earth has produced both the biggest outcomes and, by extension, the biggest returns for marquee venture funds that can raise eye-watering sums to back companies at any stage of their journey. 

Beyond simple nativism about Europeans backing Europeans, it’s a reminder that most tech exit success still flows through the US. Deeper capital markets, stronger analyst communities for public markets, higher valuations, and a record of producing some of the biggest tech companies on the planet. 

If Europe wants to be serious about converting undoubted talent, innovation, research, and ultimately untapped resources into greater prosperity and global champions, then it has to fix its approach to capital. 

In this Build in Europe article, we spoke to founders, politicians and policymakers, investors, and executives, to dial into what can be done to address Europe’s growth capital gap. 

The demand for change is clear, with President of the European Commission Ursula von der Leyen emphasising that: “We need a large-scale, deep and liquid capital market that attracts a wide range of investors… This will allow businesses to find the funding they need – including equity – at lower cost here in Europe.”

European startups regularly cite a lack of capital and access to markets as their major barrier to growth, according to research from the EIB on why founders relocate. And, with a changing ecosystem, based on greater ambition and a willingness to fully engage in a venture culture, things must be improved to ensure founders have not just the desire, but the ability, to Build in Europe.

The statistics are stark: Compared to US startups, European startups attract 54 per cent less private funding nine years after foundation. From 2008 to 2021, nearly 30% of European unicorns relocated their headquarters, predominantly to the United States.

Keeping the best companies in Europe is crucial for the continent’s success, generating larger outcomes, more jobs, and wider prosperity. As has already been established, Europe’s quality of life can be exceptional, but the ambition of the region’s best founders has to be matched by funding.

Currently, Europe has a shortfall of funding options for growth, with only a handful of funds able to commit to major rounds. To solve this, institutional investment options must change. Since 2013, there have been 137 VC funds larger than $1 billion in the US compared to only 11 in the EU, according to the Draghi report.

Unsurprisingly, with more capital, companies can invest in growth initiatives, hire talent, and expand their operations more rapidly than they could in the European Union. Europe currently invests up to 3x less per capita in late-stage VC than the US.

Unlocking some of the approximate €10 trillion in pension fund capital in Europe would be crucial to creating larger funds with the ability to back growth-stage companies on the continent. Currently, around 0.12% of European pension capital is allocated to venture and growth, while in the US, pension funds occupy five of the top 10 positions among institutional VC LPs, allocating roughly 3% to the asset class. As of 2023, US pension funds commit over 11 times more to venture capital than European ones, despite only managing 2.7 times more capital.

“The bigger potential is on the institutional investor side, but it’s cultural, and it’s an effort problem,” according to Damian Boeselager, a Member of the European Parliament.  “There are lots of savings, but the transfer from retail savings, or even institutional investors, into venture capital, that channel isn’t really working.”

A culture of risk aversion limits the potential of European pension AuM. If VC allocations increased to even 2% of pension fund capital, it would unlock roughly €200 billion for the ecosystem. Currently, the approximate €36 billion in allocations are often domestic or regional, with Nordic funds leading the way, but deeper pools of capital could be used to benefit the wider continental ecosystem. 

“Creating specific incentives for pension funds and insurance companies to invest in European venture capital, following examples like the UK’s Mansion House reforms, would be a major unlock,” Conor McNamara, CRO EMEA at Stripe, said. 

Currently, the UK invests 0.5% into venture capital from pensions, but the Mansion House Compact has set an ambitious goal to increase this to at least 5% by 2030.

Existing schemes like TechEU are expected to mobilise €250 billion in total investments by 2027. The EIB Group is also working to support innovation through the European Tech Champions Initiative, a fund-of-funds that invests in large-scale venture capital funds (typically €1 billion or more).

Another key lever is Solvency II, the prudential regime for insurance and reinsurance undertakings in the EU since 2016. 

“Right now, insurance companies have to hold capital equivalent to their VC investments, which cuts their returns in half. That’s a major disincentive,” Thomas Jarzombek, a Member of the German Bundestag, said. “We have to create stronger incentives for private investment, and that brings us full circle, back to the urgent need to reform Solvency II.”

Capital markets in Europe are fragmented with diverse regulatory frameworks, language barriers, and varying consumer behaviours across Member States. This fragmentation often results in additional costs and delays for companies attempting to expand across borders within the European Union, a major cause of difficulty for founders. 

“People talk about no one IPO-ing in Europe, but it's a foundational problem, and also an investor problem. We need to have more growth-minded investors who invest in capital markets in Europe,” Refurbed cofounder Peter Windischhofer said. “I think the EU needs to come up with a single capital market and a way to make it much easier for us as growth companies to IPO in Europe.”

Moves are being made in this direction, such as proposed changes to the Savings and Investment Union (SIU). But Europe’s difficult IPO conditions are a clear demonstration of the issue at hand, with Germany, the continent’s largest economy, having only one tech IPO in 2025, being a “fundamental flaw” according to Boeselager. 

“I believe it’s essential to advance the Digital Single Market as well as the European Capital Markets Union. Both are key tools for creating a larger, unified market in Europe. More investment will flow into startups if there’s a chance to make money at scale,” Jarzombek added. 

Addressing fragmentation in capital markets is one of the biggest levers Europe can pull to turn a large aggregate market into a true innovation powerhouse.

One of the largest tech IPOs of 2025 was Klarna. A company from Sweden, famed for its high venture allocation and unicorn density, that, like so many European successes, chose to list in the US. It’s hardly the company’s fault. High regulatory burdens, a lack of passporting and analyst coverage, and a fundamental lack of liquidity make it hard for any single European stock exchange to compete.  

“To generate true, outsized venture returns, we need to address fragmented stock exchanges and a dysfunctional IPO market across Europe and the UK,” Leyla Holterud, a Partner at Vintage Investment Partners, said. 

“There’s a myth that European venture capital returns can’t keep up. In reality, median TVPIs track the US closely, and the top quartile of European funds has shown consistent outperformance. The main area where Europe still lags is DPI,” she added. 

Addressing the lack of liquidity in European public markets is a major challenge, but the logic follows that if more European companies were backed by European funds at the late stage, and listed in European markets, then the size of the overall pie increases. 

“We don’t see big exits in Europe, and that’s why our growth funds are smaller. The US has more capital because it had more successful exits,” Boeselager added. 

Fixing institutional capital and exits addresses the private side of the equation. But Europe also controls a powerful lever of its own: public capital.

Europe already benefits from effective public tools such as the EIF, EIB, and EIC. The issue remains the scale, speed, and mandate clarity for these bodies. 

As it stands, key innovation sectors like Deep Tech lack sufficient anchoring, patience, and capital to grow at scale. The role of public capital should be to help de-risk, rather than replace or emulate private markets.

Deep Tech, in particular, is known for its long and often cumbersome horizons to grow, often taking longer than other sectors to reach revenues with lower graduation rates than other tech businesses. The resilience to build hard technical companies in Europe should be rewarded, and green shoots are possible here. 

Within the Speedinvest portfolio, Dronamics has spent long stretches building the world’s first cargo drone airline with a European license.  Last year, the company was selected for a €30 million EU Investment designed to advance strategic technology in Europe, further validating the business’s consistent and pragmatic approach to growth. 

“We’ve actually been the beneficiaries of public capital from day one… the EIF, the EIC Fund, and now the STEP program are helping ensure that our technology stays European,” Svilen Rangelov, Dronamics cofounder, said. 

In Europe, deep-tech scaling is rarely a purely private endeavor. The smartest founders learn to navigate both public and private rounds, as well as grants and tenders, as part of a single capital stack. Similarly, our battery recycling company Cylib recently received a €63.4 million grant from the German Federal Ministry for Economic Affairs and Energy (BMWE) to finance the second build-out stage of its Dormagen facility.

Crucially, even projects like Northvolt, despite its bankruptcy, underline an important point: if Europe wants to pursue ambitious industrial innovation, it must be prepared to deploy capital at scale and accept risk. Breakthrough technologies require a blended capital stack, combining public anchoring with private investment to build the flywheel of entrepreneurship.

The European Innovation Council’s €1.4 billion deep tech program reflects this shift, drawing inspiration from the US Advanced Research Projects Agency (ARPA) model.

“I don’t think the state is actually very good at allocating venture capital; it’s really about unlocking private capital,” according to Boeselager. “But if public capital is run privately and incentivises additional private investment, it can help; it’s a second-best solution.”

Improving the speed at which grants and funding are allocated, alongside increasing the size of the resources available, could be transformative to Europe’s research and development economy. 

“Europe should not be ashamed to look out for itself. Public capital and procurement can give innovation the lifeline it desperately needs,” Rangelov added. 

Europe has the capital to compete, but as ever, it needs fewer barriers and clearer pathways. Capital has to move as fast as innovation to succeed. 

The issue is not scarcity. European households, pension funds, insurers, and public institutions manage trillions. The problem is alignment: long-term capital that struggles to reach long-term innovation; fragmented markets that limit liquidity; public tools that work, but not yet at sufficient scale or speed.

Institutional reform, deeper capital markets, and smarter public anchoring are not separate debates; they are parts of the same flywheel. When pensions allocate more to venture, funds grow larger. When exits happen locally, returns are recycled. When public capital de-risks frontier sectors, private capital follows. Scale compounds.

Europe has proven it can produce world-class founders and globally competitive companies. What it has not yet built is a capital system that consistently backs them from seed to IPO without losing momentum or headquarters along the way.

Build in Europe is not about protectionism. It is about ensuring ambition does not have to cross the Atlantic to be funded. Europe does not need to copy other ecosystems, but it must match their scale, speed, and conviction.

If capital cannot scale in Europe, neither can its companies.