Europe’s Innovators Are Waking Up

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The article challenges the view summarized as “The US innovates, China replicates, Europe regulates,” noting a more nuanced reality where Europe hosts successful tech and biotech companies and has a renewed sense of purpose on innovation.
Examples of European global firms mentioned: Spotify, Klarna, Revolut, Skype (founders from Estonia, Denmark, Sweden), Wise.
Major technology market comparisons and findings from IMF research:
- 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 ranks 14th and is worth 10 percent of number 1 Apple; ASML ranks 15th and has about 10 percent of the market value of Nvidia (2nd), as ranked by CompaniesMarketCap.

Europe’s comparative strength in pharmaceuticals and biotech:
- 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 featured in pharma rankings.
- BioNTech (Germany), founded in 2008, rose to prominence for the COVID-19 vaccine developed with Pfizer.
Role of patient-driven and mission-oriented funding:
- Fondazione Telethon (Italy):
- Since inception, invested almost €700 million in over 3,000 projects.
- Operates its own evaluation, allocation, and monitoring processes and modeled rigor on the NIH.

Venture capital disparities (2024 figures from Italian Tech Alliance):
- US venture capitalists invested €210 billion in over 15,000 deals.
- Europe saw €57 billion in venture capital across fewer than 10,000 deals.
Largest European markets and recent 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 barriers noted:
- Fragmentation of the European market due to different national rules and authorization regimes limits scaling and investment that depends on a larger customer base.
- Analysis of European Research Council–funded research shows that of the top 20 firms by number of patent applications citing Council funding, more than half were US firms—implying greater success in turning research into commercially impactful technology.

Calls for greater investment and strategic priorities:
- Mario Draghi report calls for accelerating innovation and for additional €800 billion spending yearly on green, digital, and defense investments.
- AI funding commitments following an AI action summit in February 2025:
- France pledged €109 billion.
- European Commission president pledged to mobilize EU and private funds to reach a total of €200 billion.
- By contrast, cited US commitment is $500 billion for the Stargate Project led by OpenAI and others.
Increasing role of European public financial institutions:
- 2024 EIB investments:
- 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.
- The EIB has doubled capital investment in security and defense tech companies.
National reforms and private follow-through:
- Spain approved a start-up law at the end of 2023; investment leapt 16 percent to €2 billion.
- Spain’s law provides tax incentives, favorable stock-option rules, reduced red tape, and new public funding streams including support for women entrepreneurs.
- Spain’s private sector contributed about €3 billion of its own funds.

University-linked innovation and spinouts:
- University of Cambridge tops a ranking for number of “spinouts” and plans to accelerate tech and life-sciences development over the next 10 years; ARM is cited as an early success (founded 1990).
- ETH Zurich is noted as birthplace of the hollow pods used in “On” footwear.
- Other institutions highlighted: Technical University of Munich; Delft University of Technology; Aalto University.
University financial practices that can affect scaling:
- Many universities take equity stakes early but may resist dilution and not participate in subsequent financing rounds, potentially delaying scale-up.
High-impact startups maintaining European bases:
- Feedzai (founded by graduates of the University of Coimbra) uses AI and biometrics to fight financial fraud and monitors $6 trillion in payments every year.
- Feedzai has helped launch 12 start-ups and raised $412 million in funding, while maintaining headquarters in Coimbra.

Signs of improving momentum:
- New EU Commission commissioner dedicated to start-ups, research, and innovation.
- Growing involvement of EIB and EIF and increased defense R&D spending present opportunities for scaling domestic tech.
- Practitioners note emerging appetite to translate words into action and the potential for smaller-scale venture capital to thrive where large US firms do not engage.
Policy and institutional priorities implied by the reporting:
- Reduce market fragmentation and harmonize authorization regimes to enable scaling across the single market.
- Expand public and private funding for AI, green, digital, and defense innovation to match strategic ambitions.
- Encourage university participation in follow-on financing to avoid dilution-related scaling bottlenecks.
- Leverage EIB/EIF instruments to channel equity and risk capital into high-potential digital, biotech, and defense firms.
- Support targeted national reforms (tax incentives, stock-option regimes, reduced red tape) exemplified by Spain’s start-up law.

Source: “Europe’s Innovators Are Waking Up,” ALESSANDRO MERLI, F&D Magazine, June 2025.

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