Europe faces an existential challenge: how to preserve its technological influence in the face of American dominance and Chinese ascendancy? The technological competition between the United States and China places Europe in a position of making strategic choices, sometimes at the expense of traditional transatlantic ties. European industrial autonomy is becoming a strategic priority in the face of growing dependence on globalized supply chains. Recent health and geopolitical crises have highlighted the vulnerability of European industries to external shocks.
In this context, Europe is launching the Scaleup Europe Fund: currently, no comparably sized fund provides direct equity investments in strategic European technology companies at growth stages, forcing many to seek financing outside Europe. Announced by President Ursula von der Leyen in her 2025 State of the Union address as a flagship initiative, the fund aims to invest massively in high-growth young companies in critical technology sectors, so that “Europe’s best chooses Europe.”
The Hemorrhaging of European Champions Reveals the Urgency
The figures reveal the scale of the challenge: approximately 60% of all fast-growing companies globally are based in North America, compared to only 8% in the EU. The EU’s share of global venture capital raised is just 5%, compared to 52% in the United States and 40% in China.
Between 2008 and 2021, nearly 30% of unicorns founded in Europe relocated their headquarters abroad, with the vast majority to the United States. This brain drain is no minor matter. Four French unicorns—Dataiku, Algolia, Kyriba, and Aircall—moved their headquarters to the United States, not counting Getaround and Jellysmack, which were created directly across the Atlantic. This represents a significant share, considering that France has 23 privately held companies backed by venture capital and valued at more than 1 billion dollars.
The “Delaware flip” phenomenon illustrates this reality. The most common reason for a flip to Delaware is the preference of American investors. American venture capitalists and venture capital funds often require their portfolio companies to be structured as Delaware corporations for long-term governance, intellectual property protection, and ease of investing in foreign-based companies.
The financial gap reveals the scale of the challenge. EU venture capital funds raise only 5% of global venture capital compared to 52% in the United States and 40% in China. More concerning still, between 2013 and 2022, companies based in the EU received 1,400 billion dollars less in venture capital than their American counterparts. Annual venture capital investments in Europe averaged just 0.2% of GDP, compared to 0.7% in the United States.
Europe’s Counter-Attack Strategy
The European Commission is announcing the creation of the “Scaleup Europe” fund, equipped with several billion euros, to stimulate investment in high-potential European technology companies. The Commission has brought together Europe’s leading private investors to create the new multi-year fund intended to invest in Europe’s most promising companies in the strategic sectors of cutting-edge technologies.
The Scaleup Europe Fund aims to begin operations in Q2 2026, with investments starting shortly after. A second round of financing, led by the selected fund manager, is planned for the second half of 2026. Selection of the most suitable candidate is expected in April 2026, allowing for preparation and signing of formal agreements. The fund manager will be appointed by the EIC Fund following an evaluation of expressions of interest according to established criteria.
The fund will target late-stage growth investments in strategic sectors including AI, quantum technologies, semiconductors, robotics, energy, space, biotechnology, and advanced materials. Leading European investors—notably Novo Holdings, EIFO, CriteriaCaixa, Santander/Mouro Capital, Wallenberg Investments—will collaborate with the Commission and the EIB to launch the fund.
This approach marks a break from existing European instruments. The Scaleup Europe Fund aims to provide investments beyond what the EIC currently offers, limited to 30 million euros under the EIC STEP call. The fund will have no formal or binding ties to the EIC portfolio.
The Economic Equation of Catch-Up
The EIC will contribute a total of 1 billion euros to the fund. Of this amount, 600 million is linked to the 2026 Work Programme and an additional 400 million is subject to the EIC Work Programme 2027. This contribution of 1 billion euros aims to attract 4 billion euros from other investors, producing an approximate total capitalization of 5 billion euros.
The Draghi report diagnosis illuminates the urgency of this initiative. In 2024, Mario Draghi noted in an influential report on European competitiveness that “no EU company with a market capitalization exceeding 100 billion euros…has been created from scratch over the last fifty years, while the six American companies valued at more than 1,000 billion euros were created during this period.” The six American companies he was referring to were all originally backed by venture capital investors.
Structural failures are glaring. Very few European venture capital funds exceed 1 billion euros in size, making it difficult to make very large investment tickets. The fragmentation contrasts with the concentration of American financial resources.
The impact on financial performance is measurable. State Street reports that the annual rate of return for European venture capital funds over recent decades was 8.6%, compared to 14.6% for American funds. When we look at the ratio of value created for investors relative to capital invested, a similar picture emerges: European funds show a multiple of 1.66, compared to 1.79 for the United States and 1.83 for developing countries.
The Implementation Challenges
A company developing strategic technologies may require funding rounds in the hundreds of millions range, particularly in fields like semiconductors, quantum, biotechnology, clean energy, and advanced manufacturing. Some European startups in strategically important sectors cannot secure necessary capital when they reach the growth phase.
The scale of financing required defies traditional budgetary capacities. Draghi calls for a new industrial strategy for Europe requiring the EU to increase investments by 800 billion euros per year based on capital market integration and major changes in how capital is raised through new forms of joint financing and shared assets.
Competition with national initiatives complicates coordination. The European Investment Fund is raising a 15 billion euro fund called ETCI 2 that aims to unlock up to 80 billion euros in growth financing across Europe. Germany’s WIN initiative targets 12 billion euros by 2030. France’s Tibi program has promised 7 billion euros in private capital.
Technological Autonomy in Question
The proliferation of initiatives reflects both the ambition and the limitations of the European approach. In some cases, companies can become dependent on non-European sources of financing. This can create economic security concerns, particularly when the technology is strategically sensitive, has dual-use potential, or is central to European technological sovereignty.
The challenge goes beyond the financial dimension alone. Companies benefit from venture capital provided by specialized funds financing their startup and development phases. In 2017, American startups captured more than 84 billion dollars in venture capital (+16% compared to 2016), double that of Asian startups (48 billion dollars) and four times that of European startups (19 billion dollars). The San Francisco Bay Area and Silicon Valley (33 billion dollars invested) remain the nerve center for startups to raise funds.
Companies can benefit from being physically closer to their principal investors, as the latter offer mentoring and specialized networks. Locating in American technology hubs can help companies tap into local talent pools and sell their products in a fully integrated single market. Deep capital markets in the United States also offer better exit opportunities for founders.
The Scaleup Europe Fund is therefore not simply another startup support instrument. It is a political and investment tool designed to strengthen Europe’s capacity to retain value creation, intellectual property, industrial capacity, and high-growth companies within the EU and countries associated with Horizon Europe.
The fund therefore tests a fundamental hypothesis: can Europe create a financing ecosystem attractive enough to retain its technology champions? With the Scaleup Fund, Brussels aims to launch an initiative to reduce the financing gap relative to global competitors, primarily the United States, which has weighed on European growing companies for years, pushing many to relocate abroad. Through an alliance with European private investors, the new instrument will provide direct equity investments in strategic European technology companies, eliminating the need to seek resources elsewhere for their growth.
The first results will come in 2026: Europe will then know whether it is building its technological autonomy or financing sophisticated dependence.