European tech has unprecedented chances–but action is needed

Posted by Admin February 27, 2025 Tech

European tech has, more than ever, the chance to grow, leveraging its innovation potential. With the world’s widest pool of early-stage startups and talent, innovation can create new jobs and keep the economy competitive. Yet, bold actions need to be taken to address some of the most pressing issues, primarily the lack of growth capital funding.

Dealroom. co-published Accelerating Europe, a report giving an overview of the status of European growth in relation to innovation, competitiveness, entrepreneurship, and venture capital (VC). The 76-page report points out challenges and gives a positive outlook on Europe’s potential to grow more tech companies.

The European tech ecosystem is growing

More than any other region, Europe has 35,000 early-stage startups but faces a $375 billion growth capital funding gap, making startups half as likely to raise growth rounds as the US. Increased investment from pension funds and insurers is crucial for addressing this gap. With 350 billion-dollar companies, Europe’s founders are poised to meet ambitious goals despite challenges.

Europe is now producing unicorns—companies valued at $1 billion–virtually at the same rate as the US, but is missing the scale of investments. Dealroom.co’s analysis shows how, after a 30-year late start, VC-backed startups are claiming a growing share of global new enterprise value.

Although US tech companies dominate key segments, there are some exceptions. UK’s ARM is the market leader in mobile chip architecture, while ASML is in EUV lithography.

ASML to invest €80 million in research at the TU/e

Following the impulse given by project Beethoven, ASML is strengthening its partnership with the Eindhoven University of Technology.

Problems to be addressed

Data presented in the report shows a productivity slump, as Europe trails the US by 25%. In the past decades, leading European countries have seen their productivity rates slowing down. The Netherlands, for example, used to be ahead of the United States, but has fallen behind since 2008. Most Eurozone countries saw stagnation.

Meanwhile, the US saw its productivity improve. These high productivity rates are directly linked with more innovation and VC-backed tech. In the US, VC-backed tech jobs account for a quarter of all jobs, while in the EU, they account for 1.8%. The paper underlines how well-paid and highly productive jobs boost the economy.

In addition, US stock markets consistently outperform European ones, which are more tilted towards high-tech. Moreover, the American economy is adjusted to a higher risk, higher reward approach, also thanks to more aggressive fiscal and monetary policies.

Solutions

Accelerating Europe has some ideas to improve the European tech environment–and with it, the whole economy. It calls for reforms to mobilize the available capital, put it to work, and encourage innovation. The fragmented market and inconsistent policies represent a big hurdle for European entrepreneurs, who can’t compete globally.

At the same time, the paper advocates for greater support for entrepreneurship, fostering risk-based approaches, and empowering innovators.