Europe creates world-class innovations but lacks capital to scale them up

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ASML builds the machines that make the world’s most advanced computer chips possible. Novo Nordisk pioneered the drug class, reshaping how medicine treats obesity. Mistral established a strong position in open-source AI. Each is a European champion. Each was built in Europe.

What makes these achievements remarkable is that they emerged despite structural challenges, many of which Europe has to contend with. Europe’s venture capital pool is roughly 75 percent smaller than the US, and large European companies invest around €700 billion less per year in capital expenditure and research than their American peers. In fact, recent McKinsey Global Institute research confirms that investment cases are harder to make work in Europe than elsewhere across sectors—from pharmaceuticals to machinery.

The fact that Europe produces world-leading companies despite this environment speaks to the quality of what is already here. It is proof of what European talent and institutions can produce. The opportunity now is to give companies like these the runway to sustain and extend their leads.

Global capital increasingly sees Europe as a place to build, not simply to consume, frontier technologies.

The momentum is already building. European venture capital volumes have grown roughly four- to five-fold over the past decade. Private equity fundraising reached record levels in 2024. Private credit assets have grown fivefold in a decade to more than €430 billion. Global capital increasingly sees Europe as a place to build, not simply to consume, frontier technologies. The task now is to accelerate what is already working. We see four themes that could help do exactly that.

The first is giving world-class European companies the ecosystem they need to scale at home—backed by concrete public-private investment. When ASML committed to expanding its semiconductor cluster in Eindhoven, the Dutch government and regional partners responded with a €2.5 billion public-private investment covering energy, transport, housing, and talent. This is an inspiring model: targeted partnerships around an anchor company that build a world-class ecosystem faster than broad regulatory reform alone ever could. Europe would benefit from more of these.

Imagine if Europe’s single market were as seamless as it sounds.

The second is unlocking Europe’s internal market as a genuine home advantage. Like so many others before and after Spotify, a Swedish company with a world-class product, had to navigate 27 different licensing regimes before it could operate across Europe as a single business—and ended up scaling through the United States first. Imagine if Europe’s single market were as seamless as it sounds. Estimates suggest remaining barriers are equivalent to a 44 percent tariff on goods and more than 100 percent on services—meaning there is enormous upside simply in completing what has already been started.

The most promising path is a Europe-wide “28th regime” of common, investment-friendly rules that scale-ups and multinationals can opt into. Progress on EU Inc. is encouraging; leaders could extend it into other arenas, for example, incorporation law into labor rules and product-market regulation.

Third, Europe can mobilize more of its own considerable capital—starting with pension allocations to venture and growth funds. European households collectively hold more than €30 trillion in financial assets. Directing even a modest additional share toward growth companies, innovation, and infrastructure would transform the funding landscape. SoftBank’s plan to back what could become Europe’s largest AI facility in France shows the appetite is there. Progress on the Savings and Investment Union is promising; the same momentum can now unlock pension and institutional capital for venture and growth investment, as reforms in Sweden have shown, but at a European scale that matches broader ambition.

The momentum is real and building.

Fourth, Europe can use its public demand more strategically to propel technology leaps. At €2 trillion a year, EU public procurement dwarfs any venture capital or private equity pool—and it can more proactively spur new industries. Defense already demonstrates the power of this approach: since 2021, European defense spending has risen by roughly 75 percent , driving investment, innovation, and industrial expansion across sectors. What began as a security imperative is now strengthening advanced manufacturing, supply chains, skilled jobs, and frontier technologies. The same logic applies in healthcare, energy, digital infrastructure, and emerging technologies—coordinated procurement can create the demand that scales promising companies into global leaders while strengthening both competitiveness and resilience.

Europe’s strengths run far deeper than the three companies we highlighted. Its healthcare systems, infrastructure, industrial base, and talent are easily among the strongest in the world. On almost any measure of quality of life and living standards, Europe holds its own against other regions. The continent already has the ingredients that will matter most in the decades ahead: world-class companies, scientific excellence, industrial depth, engineering talent, and strong institutions. The momentum is real and building.

The question is how quickly Europe can turn more of its breakthroughs into global champions. That will be a function of ambition, speed, and investment scale—and on all three, Europe is certainly well positioned and moving.

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