## EUROPE’S INNOVATORS ARE WAKING UP

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### Overview and context
- Critique summarized as “The US innovates, China replicates, Europe regulates,” with the Artificial Intelligence Act cited as Exhibit A.
- IMF research findings cited:
  - Productivity in US technology firms has surged nearly 40 percent since 2005 while stagnating among European companies.
  - US research and development spending as a share of sales is more than double what it is in Europe.
  - No European company ranks among the 10 largest tech companies by market share.
  - SAP (14th) is worth only 10 percent of number 1 Apple.
  - ASML (15th) has about 10 percent of the market value of Nvidia (2nd), as ranked by CompaniesMarketCap.
- Counterpoint: Europe has notable global tech names (Spotify, Klarna, Revolut) and founders with multinational origins (example: Skype founders).

### Health and biotech strengths
- European prominence in pharmaceuticals:
  - Denmark’s Novo Nordisk (maker of Ozempic and Wegovy) is the fourth largest by market capitalization in the pharma ranking.
  - UK’s AstraZeneca and Switzerland’s Roche and Novartis are also featured.
  - BioNTech (Germany), founded in 2008, gained global recognition for the COVID-19 vaccine developed with Pfizer.
- Fondazione Telethon (Italy):
  - Founded in the 1990s to fund research into rare genetic conditions.
  - Since inception, invested almost €700 million in over 3,000 projects.
  - Operates TV fundraising marathon, does its own evaluation, allocation, and monitoring of funds.
  - “We copied the rigor of the NIH model,” says Francesca Pasinelli.

### Venture capital gap and market fragmentation
- 2024 venture capital investment figures (Italian Tech Alliance):
  - US venture capitalists invested €210 billion in over 15,000 deals.
  - Europe: €57 billion in fewer than 10,000 deals.
- Largest European markets (2024, values and changes):
  - UK: investment dropped from €19 billion to €16.8 billion.
  - France: investment dropped from €9 billion to €7.7 billion.
  - Germany: rebounded slightly to €7.4 billion from €7.1 billion.
- Structural obstacles beyond capital:
  - Fragmentation of the European market due to different national rules and authorization regimes, especially evident in biomedical equipment.
  - IMF research: many nontrade barriers remain within the single market, preventing scale-up and larger-customer-base investments.
  - Research commercialization: among top 20 firms by number of patent applications citing European Research Council funding, more than half were US firms.

### Role of smaller-scale and regional VC
- Value of smaller-scale venture capital:
  - Example: Nicox, cofounded with research from Italy and funded by French and Swedish VC, began with gastric therapy and moved into ophthalmology.
  - Indaco Venture Partners (vice-chair Elizabeth Robinson) focuses on five areas including medical technology and biotech; counts the European Investment Fund among its investors.
- Observed investor behavior:
  - “Capital is mobile and therefore available where there are good opportunities,” — Maurizio Sobrero.
  - Some European universities take early equity stakes but may resist dilution and not join later financing rounds, delaying scale-up.

### Policy, public funding, and strategic initiatives
- Mario Draghi report recommendation:
  - Calls for additional €800 billion spending yearly on green, digital, and defense investments.
- AI commitments and comparisons:
  - February 2025 AI action summit (convened by French President Emmanuel Macron):
    - France promised €109 billion.
    - European Commission president Ursula von der Leyen committed to mobilize EU and private funds to reach a total of €200 billion.
  - US comparator: $500 billion commitment for the Stargate Project, led by OpenAI and others.
- European Investment Bank (EIB) and European Investment Fund (EIF) activity (2024, from EIB annual report):
  - EIB invested a record €19.8 billion in high-risk digital and innovation companies.
  - Of that sum, €14.4 billion came from the EIF, half of it in the form of equity.
  - EIB doubled capital investment in security and defense tech companies.
- National example — Spain:
  - Approved a start-up law at the end of 2023; investment leapt 16 percent to €2 billion.
  - Law provisions: tax incentives to companies, investors, and employees; claims to be the most favorable in Europe on stock options; reduces red tape; introduces new public funding streams including support for women entrepreneurs.
  - Spain’s private sector followed up with about €3 billion of its own funds.
- Defense-related impacts:
  - Massive increase in defense spending announced by Germany and other countries expected to boost defense tech R&D and benefit related companies.

### Universities, spinouts, and regional ecosystems
- University contributions and notable examples:
  - University of Cambridge tops ranking for number of “spinouts” and plans acceleration in tech and life sciences over the next 10 years; ARM cited as a long-standing example (founded 1990).
  - ETH Zurich notable as birthplace of the hollow pods used by Swiss footwear brand “On.”
  - Other prominent institutions: Technical University of Munich, Delft University of Technology, Aalto University.
- Feedzai case:
  - Founded by three University of Coimbra graduates; uses AI and biometrics to fight financial fraud.
  - Platform used to monitor $6 trillion in payments every year.
  - Although financed by US venture capitalists and with offices in Silicon Valley, Feedzai maintains headquarters in Coimbra.
  - One initiative from Feedzai led to the launch of 12 startups and raised $412 million in funding.
- Institutional shifts:
  - “For the first time, the EU Commission has a commissioner dedicated only to start-ups, research, and innovation,” — Francesco Cerruti; call for translating words into action and fast.

### Key statistics and findings (preserved exactly as in source)
- Productivity in US technology firms has surged nearly 40 percent since 2005 while stagnating among European companies.
- US venture capitalists (2024): €210 billion in over 15,000 deals.
- Europe (2024): €57 billion in fewer than 10,000 deals.
- UK investment: dropped from €19 billion to €16.8 billion.
- France investment: dropped from €9 billion to €7.7 billion.
- Germany investment: rebounded to €7.4 billion from €7.1 billion.
- Fondazione Telethon: invested almost €700 million in over 3,000 projects.
- Draghi report asks for additional €800 billion spending yearly on green, digital, and defense investments.
- France AI pledge: €109 billion; EU mobilization target: €200 billion.
- US Stargate Project commitment: $500 billion.
- EIB (2024): invested a record €19.8 billion in high-risk digital and innovation companies; €14.4 billion came from the EIF (half in the form of equity).
- Spain start-up investment: leapt 16 percent to €2 billion; about €3 billion from private sector follow-up.
- Feedzai monitors $6 trillion in payments every year; initiative raised $412 million and launched 12 startups.

*alessandro merli, “EUROPE’S INNOVATORS ARE WAKING UP,” F&D, JUNE 2025.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/06/merli.pdf_