The European Union has announced that it is teaming up with 71 investors that will co-invest in innovative tech projects in the region. Together, the venture capital funds, public investment banks, foundations, and corporate venture funds represent over €90 billion of assets.

The so-called “Trusted Investors Network” was launched on Monday to help finance “high-risk deep tech companies that have a great potential, but often struggle on the European market to find the right investors.”

Union investment comes from the European Innovation Council Fund, which was established to support start-ups that have the potential to be scaled in “unicorns” — companies with a valuation exceeding €1 billion. So far, it has invested nearly €1 billion in 251 companies, and attracted over €4 billion of co-investments.

SEE: European investment shows a surge in data startups

Members of the Trusted Investor Network will strengthen the EIC’s co-investments so companies in critical technologies can access the capital they need to compete on a global scale. They all signed the Trusted Investors Network Charter, which outlines the group’s values and investment best practices.

The launch occurred at the EIC Scaling Summit in Athens, where 72 new tech startups also joined the EIC Scaling Club. The E.U. aims to scale 20% of Scaling Club members into unicorns, and so far they have collectively raised over €73 million.

Then, on Tuesday, the Commission announced new plans to enhance the European Research Area, a policy framework that promotes unified research collaboration in the region. The Communication focuses on increasing investment, improving research quality, and translating scientific advancements into economic benefits.

Ultimately, the E.U. is trying to prove its dedication to bridging the funding gap necessary to grow its tech sector to compete with the U.S. and China. A Google report published in October found that Europe spends only 2% of its GDP on tech research. In comparison, the U.S. spends 3%, and South Korea and Israel spend over 5%.

Furthermore, in July, venture capital funding reached a two-year high in the U.S., largely thanks to AI companies CoreWeave and xAI.

EU receives criticism for falling behind on developing cutting-edge technologies

Just this week, Wolfgang Ischinger, the former German Ambassador to the U.S., said that the technological gap between the E.U. and other global superpowers is “the single biggest long-term challenge” to the continent’s security, as per Politico.

Plus, earlier this month, former European Central Bank President and economist Mario Draghi said in a report that the bloc’s lack of innovation has led to the U.S.’s GDP dwarfing the E.U.’s by $9 trillion in 2023.

Despite the top three R&I investors in Europe being in tech, “we are failing to translate innovation into commercialisation,” he said, pushing entrepreneurs to the States. Currently, only four of the world’s top 50 tech companies are European.

“By joining forces with venture capital, we are responding to the urgent challenges laid out in the Draghi report that call for bold action to ensure Europe’s competitiveness in critical technologies,” said Iliana Ivanova, European Commissioner for Innovation, Research, Culture, Education and Youth, in a press release.

Europe specifically lags in AI innovation. The region only filed 2% of global AI patents in 2022, while China and the U.S., the top two largest producers, filed 61% and 21%, respectively. The Google researchers also found Europe performs badly in AI talent, research, development, and commercial uptake.

SEE: UK Government Scraps £1.3bn Earmarked for AI and Tech Innovation

“Present gaps indicate that the EU risks falling behind the next wave of AI and needs to ramp up its efforts to remain competitive,” they wrote. Among other recommendations, the report suggested that Europe invests in AI research to make it more accessible.

Regulations could be holding the EU back

Both the Google and Draghi reports placed significant blame on E.U. legislation for the region’s struggles to innovate in advanced technologies.

“Innovative companies that want to scale up in Europe are hindered at every stage by inconsistent and restrictive regulations,” Draghi wrote.

He added that inconsistent regulations across E.U. member states limit cross-border operations and hampers innovation by preventing companies from scaling up.

“Since 2019, the EU has introduced over 100 pieces of legislation that impact the digital economy and society. It’s not just the sheer number of regulations that’s the challenge — it’s the complexity,” said Matt Brittin, president of Google EMEA, in a blog post.

But legislation, like the E.U.’s AI Act and Digital Markets Act, can hinder large tech companies like Google just as they do start-ups, which has led them to be open with their criticism. Indeed, the bloc represents a huge market, with 448 million people, but regulations have deterred tech giants from launching their latest AI products in the region.

For instance, Google’s Bard chatbot was released in Europe four months after its U.S. and U.K. launch, following privacy concerns raised by the Irish Data Protection Commission. Similar regulatory pushback is believed to have delayed the arrival of its second iteration, Gemini, in the region.