Europe’s Deep Tech Moment
But Are We Wasting It?
Let’s get this out of the way: I genuinely believe in Europe’s deep tech. The potential is massive, our scientific talent is world-class, and the need - for sovereignty, sustainability, and security - has never been clearer. AI breakthroughs, biotechnology leaps, and energy innovations are all on our doorstep, demanding bold action. You’ve probably heard this and read it hundreds of times. So why would you bother and read on? Why did I personally take the time to write this?
Because belief alone isn’t enough. While the macroeconomic context is finally leaning in our favour - the Eurozone’s GDP is projected to climb from 1.3% in 2025 to 1.8% by 2026 - Europe is still wrestling with an old villain: bureaucracy. And if we’re honest, it sometimes feels like we’re taking a Formula 1 car (our big ideas) and a world class Formula 1 driver (European founders) and dragging it through sand (institutional red tape).
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Macroeconomic Tailwinds May Not Be Enough
We can’t ignore the positive signs: The Eurozone’s slow-but-steady growth is bolstering investor sentiment, and the region is finally emerging from a prolonged period of sluggish capital deployment. Private equity dealmaking hit €2 trillion in 2024 globally, making it the third-most-active year on record. Meanwhile, venture funding in Europe’s deep tech stood at around €14 billion in 2024 - an 85% increase from 2020.
So, yes, there’s momentum. But let’s keep the perspective in check: Europe’s deep tech investment is still roughly 75% lower than what we see in the U.S. That gap doesn’t magically vanish just because our GDP is inching upward. And with half of EIC-backed companies struggling to secure private co-investors, it’s not time to pop the champagne yet.
Why the Macro Matters
Confidence Boost: Economic recovery can trigger greater risk tolerance among investors - potentially good news for capital-intensive sectors like quantum computing or biotech.
Public Funding Bump: Policymakers feel emboldened to allocate bigger budgets (like the EIC’s €1.4 billion for 2025) to future-tech initiatives.
Global Competition: China and the U.S. aren’t sitting still; their own deep tech budgets dwarf ours. A better macro environment in Europe simply means we’re less disadvantaged - not that we’re suddenly outpacing anyone.
EIC 2025: Gains, Gaps and the Reality Check
The European Innovation Council has indeed been a game-changer. It’s a rare example of a public institution aiming to fund truly disruptive technologies at scale, with equity checks of up to €10-30 million. Plus, it claims a 1:3.8 leverage ratio - for every euro the EIC invests, private investors add nearly four euros more. That’s not trivial.
Through many conversations with founders and investors, aside from what was featured on media, we realised the lived experience can be more complicated:
Bureaucratic Drag: Even with streamlined processes, many deep tech founders lament the months-long evaluation phases and complex governance requirements.
Co-Investment Reluctance: Private funds often grumble about EIC terms that don’t always mesh with standard VC exit horizons (5 - 7 years). The requirement to find lead investors - often at least 50% of the round - can be a bottleneck.
Seal of Excellence, But No Cash: Dozens of startups earn the EIC’s “Seal of Excellence” each year, only to get zero actual financing. While it’s meant to be a “quality stamp,” it’s also a frustrating consolation prize when budgets fall short. Has ‘Seal of Excellence’ become the EU’s version of ‘thoughts and prayers’ ?
The Good, The Bad, and The Ongoing
The Good: EIC’s portfolio is broad, cross-border, and includes everything from AI to green tech - aligning well with the EU’s digital and climate agendas.
The Bad: 45% of EIC-backed companies fail to find private co-investors, which suggests the real or perceived risk is still too high - or the structure is too cumbersome (yours faithfully has a gut feeling - it’s likely the latter)
The Ongoing: Continuous improvement is key. We need more direct investor feedback to refine the EIC’s terms, streamline co-investment procedures, and ensure we’re not solving last decade’s problems with next year’s budget.
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Deep Tech’s Strategic (and Unfinished) Business
When we talk about “deep tech,” we’re really discussing a basket of sectors where Europe can either lead - or get left behind:
AI & Robotics
AI alone accounted for 28% of VC funding in Q3 2024, but rolling out industrial-grade solutions often takes longer and demands far larger checks than typical software ventures. Despite Europe’s strong R&D pipeline, scaling AI startups from lab to global market remains an uphill climb - especially when foreign competitors offer quicker funding cycles and deeper pockets.
Climate, Sustainability & Biotech
Driven by the EU’s Green Deal, interest in carbon capture, advanced materials, and renewable energy has soared. The EIC invests heavily in these fields, seeing them as cornerstones of Europe’s transition to a lower-carbon future. Yet biotech - which increasingly intersects with sustainable agriculture, novel materials, and even environmental diagnostics - faces notable barriers. In fact, 65% of biotech ventures encounter clinical or regulatory delays, severely slowing time-to-market. This overlap of biotech and climate tech can be a double-edged sword: big impact potential, but heavy red tape.
Quantum & Emerging Tech
From quantum computing to post-quantum cryptography, these “holy grails” of innovation command global attention. Europe’s academic and research pedigree is top-tier, yet it struggles to convert breakthroughs into scale-ready businesses. VC interest is there, but the long commercialisation timeline - coupled with the region’s patchwork of regulations - often deters later-stage investors.
The Funding Chasm
A consistent headache across all these domains is late-stage (Series B+) funding. With only 10% of EU-based funds able to write checks above €30 million, promising deep tech ventures frequently turn to U.S. or Asian mega-funds for follow-on rounds. That dynamic too often rebrands Europe as an “exit region,” with larger foreign investors swooping in when our startups are finally ripe for scale. Addressing this chasm is critical if we’re serious about retaining the intellectual property and economic growth that deep tech can deliver for Europe.
Overcoming the “Formula 1 in Sand” Syndrome
So, how do we move from potential to performance?
Revamp Public-Private Synergies: The EIC’s 50% blended financing model is a start, but private VCs need more clarity on governance terms, exit paths, and how the EIC will behave in follow-on rounds.
Accelerate Decision Timelines: The R&D cycle for deep tech is already slow; add bureaucratic timelines on top, and you risk losing the “next big thing” to a competitor in Silicon Valley or Shenzhen.
Prioritise Cross-Border Harmonisation: Tax laws, investor protections, and IP regulations still vary widely across EU member states. A founder in Lisbon can’t easily replicate the environment in Berlin, even if both are “EU.”
Reward Actual Commercial Outcomes: Grants and equity are great, but we also need real accountability. Are EIC-backed companies hitting commercial milestones or just building prototypes?
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Europe’s Path Forward: Radical or Incremental?
Here’s the thing: Europe’s deep tech future isn’t doomed, but nor is it guaranteed. We’re at a precarious juncture:
The Optimistic Take: Our labs and universities consistently rank among the world’s best, and the EIC’s willingness to back early-stage moonshots is commendable. The macro context is better than it was five years ago, with the Eurozone recovering.
The Skeptical Stance: We’re still overshadowed by the U.S. in pure capital terms. The complexity of EU processes can derail founders who might otherwise thrive. And if half of the startups can’t find private co-investors, that’s a structural red flag, not a rounding error.
An honest solution likely involves continuous improvement - a series of quick, iterative fixes - rather than a single grand overhaul. The EIC, national funds and private players must talk (and listen) to each other in real time, ensuring funding terms reflect the genuine realities of deep tech risk and reward.
Enough talk - let’s turn Europe’s deep tech ambitions into action.
Because the next wave of breakthroughs shouldn’t get stuck in the bureaucratic sand. Brussels is listening - and so are we.
Thanks for writing this insightful but important Post on DeepTech in Europe David and EUVC. Appreciated!