By Michiel Scheffer, Ph.D., President of the Board, European Innovation Council, European Commission
A challenge for innovative startups in Europe is finding the funds to develop their technologies and then scale up. That is especially the case when it takes years to finalise a technology—because of issues in scaling up, necessary accreditation procedures such as clinical tests, finding suppliers/buyers in the value chain or lengthy public procurement procedures. By 2017, the European Union (EU) had identified its need to develop actions to overcome this valley of death. The biggest problem identified at the time was the lack of public and private funding to sustain and overcome this valley.
Europe does not lack entrepreneurial appetite. The European Innovation Council (EIC) receives 20 times more applications than its funding resources. However, very few startups are able to scale up in Europe. A large majority of startups do not reach their fifth anniversary. Those that do turn into engineering companies, and the most successful ones do so by moving to the United States. Different studies have shown that 3-15 percent of tech startups move to the US. The figure is lower for France and the Netherlands, but it is in the high range for Poland and Portugal. So, although local conditions matter, there is also work to be done at the European level.
Unlike the US, Europe lacks a well-developed landscape of private equity and venture capital (VC) funds. Public authorities in Europe have a few instruments, including remnants of the Marshall Aid or more recent funds established after the economic crisis of the 1980s and the financial crisis of 2008-10. Germany inherited the KfW bank from the Marshall Plan. France set up BPI (Banque publique d’investissement) in 2012, while the Netherlands decided to establish an investment agency (Invest-NL) in 2015. Meanwhile, many regions in the Netherlands1The author was politically in charge of the Investment and Development Agency of the East of the Netherlands (Oost NL) between 2015 and 2019 as well as member of the steering committee to establish InvestNL, Italy, Germany and Belgium already had regional development agencies and regional funds with histories dating back to the 1980s.
The European Innovation Council was established in 2017 to fund deep-tech startups from 2019 onwards.
The European Innovation Council was established in 2017 to fund deep-tech startups from 2019 onwards. The concept of direct investments in companies was developed, complementing the fund-in-fund structure that had already been created by the European Investment Fund (EIF). However, the funding, in the form of the EIC Accelerator, was designed to crowd in venture capital. From 2021 onwards, the EIC also incorporated flanking measures, such as programme managers, coaching-service outreaches to public procurers and corporate days (so-called Business Acceleration Services). Scaling up requires funding, but it needs more than funding alone.
In the final quarter of 2025, the EIC, with 740 selected companies, represents one of the largest deep-tech funds in the world, with an expected funding of 10 billion euros for the 2021-27 period. The crowding-in objective has been effective; for each public euro invested, more than three private euros have been attracted. But as the report presented by Mario Draghi, former president of the European Central Bank (ECB), in the summer of 2025 showed, Europe’s gaps with the US and China persist. The level of investment in innovation remains too low to sustain higher productivity growth in Europe, achieve climate-mitigation goals and increase strategic technological autonomy.
What needs to happen? First, the conditions for startups differ across Europe. On the one hand, some countries have well-developed landscapes of business angels, family offices and venture capital but are missing providers of large funding (and have small stock exchanges). But many countries still lack both seed capital and large capital, especially in Central Europe and Eastern Europe. A priority is to create a truly European single market for startups and capital. This suggests a single corporate law, the proposed initiative called the EU-Inc (akin to Delaware Inc), known as the 28th regime to insiders.
While the US has the equivalent of around 900 billion euros in personal savings, the EU scores above 1.4 trillion euros. However, a large share of private savings is invested in real estate, savings products, life insurance and supplementary pension schemes. In addition, Europe, like the US, has substantial life insurance and pension systems. However, unlike the US, this capital is much less mobilised for equity, company bonds and loans and even less so for venture capital. The share of venture capital invested by US pension funds is below 1 percent; in Europe, it is below 0.2 percent (but moving upwards). So, the imperative for Europe is to mobilise that capital to invest more in the real economy and less in real estate. This requires the creation of the proposed European Savings and Investment Union (SIU), along with more incentives for productive investment.
The European capital market is highly fragmented, with more than 20 stock exchanges, most of which lack depth. The VC market is also highly fragmented, with public funds often having a national or regional mandate and private funds focussing on specific industries; overall, few funds mobilise and invest more than one billion euros. Hence, most of them lack a network to invest across borders, and few can invest more than 100 million per ticket. The EIC has worked to reduce this fragmentation by fostering the Trusted Investors Network (TIN). This network now has more than 110 members and is accessible to investors who have a reliable source of capital, are able to lead investments (and are skilled in due diligence and valuation) and have made at least three investments with the EIC Fund.
But closing Europe’s gap with the United States also requires strengthening at least two asset classes.
The first is the creation of an instrument to attract institutional investment into venture capital at a European level. The EIC Fund, as announced recently in the State of the European Union speech by European Commission (EC) President Ursula von der Leyen, aims to establish such a fund with large institutional investors. Typical core investors can contribute at least 200 million euros—not more than 1 percent of their total assets. Several institutional investors have expressed interest, as the EIC Fund provides them with access to European deal flows to companies demanding sizeable tickets. The fund is intended to be operational by mid-2026 and would provide capital to scale up innovative companies with demonstrated technologies.
The second is to boost instruments that enable private savers to invest in startups via bonds in funds or funds of funds. Some examples include Bpifrance and Sweden’s EQT AB, but it is not yet a widely accessible asset class. Here, the tickets are significantly smaller, ranging from 5,000 to 50,000 euros, with the maximum set at 20 percent of personal wealth. The EIC Fund is not yet able to provide this category; the challenge lies with financial services to offer the product, with the EIC investing in funds of funds or larger cross-national funds.
Europe is experiencing an entrepreneurial turn that is urgently needed to give opportunities to the next generation, increase productivity (and digitisation) for its ageing society, bring solutions for the climate crisis and secure Europe’s strategic autonomy—in line with Mario Draghi’s 2025 report that requires a higher mobilisation of public and private capital. It necessitates pooling public procurements, as the European Union has 27 member states and armies, more than 40 railway providers and more than 50 healthcare systems. It also entails a comprehensive set of institutional reforms that should bring about a stronger European single market and a truly European capital market. All this will pave the way for a true EU-Inc.
Michiel Scheffer is the President of the European Innovation Council (EIC) Board. He holds a PhD in geography (1992) A Dutch national, he has three decades of experience in business, academia, and public policy. From 2015 to 2019 he was regional minister for economy, education and Europe in the Province of Gelderland (NL), and member of the European Committee of the regions. He is equipped with a wide network in the world of research and innovation (Utrecht University, Wageningen University, Hochschule Rhein-Waal) and has a remarkable professional experience of more than 20 years in the field of innovation, including on breakthrough technologies, disruptive innovations, and start‐ups impact investment. He was involved in setting up close to ten companies.