Brussels hopes a new fund will stop promising tech firms from fleeing to America.
Europe has long been plagued by a peculiar malady: it excels at birthing innovative companies but struggles to nurture them into adulthood. On October 29, the European Commission announced yet another remedy—the Scaleup Europe Fund, a multi-billion-euro investment vehicle designed to prevent the continent’s most promising technology firms from decamping to Silicon Valley or other more fertile pastures.
The fund addresses what Mario Draghi, a former prime minister of Italy and European Central Bank president, identified in a recent report as one of Europe’s cardinal competitive weaknesses. Despite spawning more start-ups annually than America, the continent captures a measly five per cent of global venture capital, compared with 52 per cent for the United States. Some 30 per cent of European unicorns—private firms valued at over one billion US dollars—have relocated abroad in the past 15 years, lured by America’s deeper pockets and lighter regulatory touch.
“Europe has the ideas and the talent to build the most innovative companies in the world,” declared Ursula von der Leyen, the Commission’s president. “But as they scale up we need to ensure they have the means to grow, attract investment and thrive right here at home. High quality jobs and Europe’s overall competitiveness depends on it. The Scaleup Europe Fund is an essential part of our work to make sure the best of Europe can choose Europe.”
Strategic sectors
The fund will target late-stage investments in strategic sectors including artificial intelligence, quantum computing, semiconductors, robotics, biotechnology and advanced materials—the sort of deep-tech ventures that require patient capital and tolerate high risk.
Ekaterina Zaharieva, the commissioner for startups, research and innovation, convened an assembly of Europe’s financial elite to launch the initiative: Novo Holdings, Denmark’s EIFO sovereign wealth fund, CriteriaCaixa, Santander’s Mouro Capital, the Wallenberg family’s investment arm and others. Together with the European Investment Bank, they aim to deploy capital in chunks exceeding 100 million euros—the kind of firepower that can keep companies competitive as they mature.
The structure is telling. The fund will be privately managed and market-based, suggesting Brussels has learned that bureaucrats make poor venture capitalists. A management company will be selected through public tender, with first investments expected by spring 2026. Initial commitments total three billion euros, with one billion euros more earmarked from the European Innovation Council. The ultimate ambition is 25 billion euros, though such targets often prove aspirational.
Grasping the urgency
Whether the fund succeeds depends on more than just capital. Europe’s scale-up problem stems from fragmented markets, inconsistent regulations and a cultural aversion to the sort of risk-taking that venture investing demands. America’s advantage is not merely financial; it is structural and psychological.
A fund, however large, cannot by itself conjure a unified market or transform regulatory attitudes overnight.
Still, the initiative signals that Europe’s policymakers grasp the urgency. If the continent cannot retain its technological champions, it risks becoming a farm system for American and Chinese tech giants—producing talent that matures elsewhere. Whether Brussels can change that trajectory remains to be seen. But at least it is trying.
Photo: Dreamstime.
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