Since 2005, the total amount invested in European startups has increased tenfold. That’s impressive, but a problem remains: we rarely manage to take our most promising companies to their full potential. Too often, they struggle to secure the necessary funding or end up being acquired by foreign players.

A recent report from the European Investment Bank (EIB) puts concrete numbers to this reality:

  • European scale-ups raise 50% less capital than their Silicon Valley counterparts.
  • 82% of fundraising rounds in Europe involve foreign investors, compared to just 14% in San Francisco.
  • 15% of European companies relocate outside of Europe, primarily to the United States, to access funding or opportunities they can’t find locally.

These figures raise a key question: what’s stopping us from keeping our companies and enabling them to grow here at home?

Europe and the United States: A necessary comparison

Some might argue that Europe and the United States are not comparable. After all, Europe is a patchwork of countries with different cultures, languages, and financial markets, while the United States benefits from a single market and harmonized legislation.

But it’s still worth looking at what the United States has done differently, particularly in 1974 with the ERISA Act, which allowed American pension funds to invest in venture capital. Today, this represents 10% of U.S. pension fund investments, whereas in Europe, this figure is stuck at 0.01%.

The result? European startups lack competitive local funding, and European savings often flow into American funds that support their companies.

What’s Holding Europe Back

The EIB report identifies three major obstacles:

  1. A lack of funding for Series B and C rounds: While early-stage financing (seed and Series A) is well-covered, it becomes much harder for companies to raise significant capital at growth stages.
  2. Fragmentation of financial markets: Startups often have to look beyond their home countries for funding but regulations and ecosystems vary from one market to another.
  3. Few local buyers for scale-ups: Without strong local alternatives, promising companies are often acquired by foreign players, mainly from the U.S. or Asia.

Solutions to Make a Difference

Fortunately, there are concrete ways to bridge this gap and strengthen Europe’s role:

  • Create large pan-European funds capable of supporting scale-ups at all growth stages, particularly in Series B and C.
  • Encourage European pension funds to invest in venture capital by reducing regulatory constraints and offering clear incentives.
  • Strengthen local opportunities for company sales to favor acquisitions by European players and support local champions.
  • Why not a common European stock market? Such a market could offer a unified platform for IPOs, attract more investors, and enhance the visibility of European companies on the global stage.

At dups, we support startups and scale-ups in their fundraising efforts or strategic sales. We see every day how critical it is to have a range of financing options, whether from local or international funds, to meet the specific needs of entrepreneurs.

American funds play a crucial role for European companies aiming at international markets, particularly in the U.S. However, strengthening local financing opportunities in Europe would simplify the journey for startups and improve their success rates.

Europe has the talent, ideas, and opportunities to play a key role on the global stage. By diversifying financing options and creating synergies between local and international funds, we can truly support entrepreneurs at every step of their journey.

If you’d like to read the European Investment Bank report, you can access it here.

Contact us