The 282-page report dives deep into the challenges and opportunities European tech is facing. The report includes the results of their survey of more than 2,500 startup founders, VC investors, policy makers, and others in the tech ecosystem.
Europe at a Crossroads
The past decade has seen exponential growth from the European tech landscape. Tech around the world is on the edge of major changes: Artificial intelligence revolutionizing industries, the climate transition threatening our way of life, and new breakthroughs in healthcare pushing the limit on what’s possible. This can be Europe’s chance to become a global tech powerhouse, but in order to capitalize on these changes Europe must first address the main roadblocks to success.
1. Europe’s Operating System
70% of founders surveyed believe that Europe’s operating environment is too restrictive. The current status quo with rules being interpreted by each country is blocking expansion and cross-border collaboration. The European Commission has promised to create a “28th regime” which will allow for seamless scaling up across the continent, but much of what that will mean remains vague. More than 15,000 people have signed the EU–INC’s petition to get the Commission to follow through on its word.
2. Talent Market
Europe has no shortage of tech talent; the workforce continues to outpace the US in growth and quality. This year saw 28 new unicorns appear on the European tech scene. There is strong growth year over year within Europe with company creation up 35% from last year and a 60% growth from 2023.
At 27,000+, this is the highest number of founders starting new ventures in Europe than any other year.
However, Europe is still facing the issue of brain drain. 30% of Startups at the Series C stage and later relocate their headquarters outside Europe. Once they leave, they aren’t likely to come back; in 2016 10% of repeat founders had headquarters in the US, this number is now up to 18%.
3. Venture Capital Funding
Europe is seeing steady year-over-year growth in funding, with a projection of total venture investment of 4B for 2025. Europe’s venture investment now accounts for 17% of global enterprise value creation and delivers returns that match those of in the US.
On a per-dollar basis, European VC is now creating as much long-term value as its US counterpart
European investments are focusing on deep tech capturing 36% venture capital funding, up from 19% in 2021. Another key area of investment in Europe is climate tech, becoming the world leader in sustainability focused investment with 18% of investment dollars. However, this is a massive decline from the 32% it represented in 2023.
Overall Europe still lags the United States in total funding, the US accounted for two thirds of global private tech investment this year. This gap is easy to see in emerging tech categories, AI related capital raised totaled 4B in Europe compared to $146B in the US. A large percentage of the US funding is concentrated on major companies, $40B went to US AI giant OpenAI, and .5 billion to Anduril.
4. Risk Culture
Europe lacks the same risk culture found in other parts of the world that allow for massive growth, and massive failure. This risk averse attitude is seen in many areas, the lower levels of venture capital investment, the smaller percentage of pension fund spending allocated to venture ideas (0.03% in the US VS 0.01% in Europe), and lower innovation procurement. Europe only has 9% of public procurement targeting European innovation, well below the goal it set in 2014 of 20%.
Don’t accept status quo, take the bold bet, fund the hard company, chase the audacious idea
The report calls for European changemakers to embrace risk.
The gender gap is growing
While all-women founded startups account for 6% of all startups created, they only represent a fraction of that when it comes to funding. Across funding rounds all-women lead startups are underrepresented; in pre seed they 2% of total funding, down 1% from 2016, seed funding has the best rate with 4% of funding going to all female teams, but that has shown no growth in the past decade, Series A, B and beyond they represent only 1% of fund allocation. There is also a drop in mixed gender team funding, this is most evident in series B and after which went from 32% in 2016 to 22% this year.
Lack of Exit Opportunities
Globally, exit activity is on the rise, nearly doubling year-over-year, from 64 billion in 2024 to 08 billion in 2025. Europe accounts for only 10 percent of that value, currently very short of their target of 30 percent by 2030. Meanwhile, the US makes up more than half of the global exit value. This lack of exit connects to the issue of limited VC funding and one of the main drivers of brain drain, sending European excellence to the United States to have access to exit opportunities.
Moving forward
While Europe still has key hurdles to clear before it can catch up to established tech ecosystems, there is optimism that the continent can rise to the challenge. Half of survey respondents said they felt more optimistic than 12 months ago. Total funding is up from last year and there have been many positive trends, the total GDP of Europe’s tech ecosystem is up 11% from 2016 and shows signs on continued growth.
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