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Date: 07/02/2025
Author: Francisco Massó Mora

EUROPE LEAVES ITS INVESTMENT IN TECH INNOVATION STARTUPS IN PUBLIC HANDS.

Europe faces a private funding deficit for startups compared to the investment landscape seen in the United States.

A report published by the European Patent Office (EPO), which measures the percentage of companies in an investor’s portfolio that have filed patent applications, highlights one of the biggest structural weaknesses of Europe’s tech investment ecosystem: its excessive reliance on public funding and the lack of private capital in the later stages of startup development. While venture capital (VC) plays a key role in scaling and consolidating innovative companies in the U.S., Europe’s fragmented market and limited private funds restrict the competitiveness of startups, forcing them to seek opportunities abroad.

The lack of private funding in advanced stages means that many high-potential startups in Europe end up being acquired by foreign companies or investment funds before reaching the maturity needed to compete globally from within Europe. This represents not only a loss of strategic value but also a brain drain, as tech companies generate not just financial returns but also innovation ecosystems around them.

Although Spain holds a significant position in the European rankings, our country is not exempt from this trend. The fact that the main investors in technology are public entities demonstrates that the private sector has yet to develop a strong enough appetite for investing in tech startups. While over €44 billion has been mobilized in investments, the real challenge lies in ensuring that these investments translate into scalable and sustainable startups in the long term.

To address this structural deficiency, we need regulatory and financial changes that encourage greater private capital participation in critical growth phases. This could be achieved through tax incentives for tech investment funds, reducing bureaucratic barriers for startups, and creating a more integrated European capital market. Without these reforms, we will continue to lose competitiveness to the U.S. and Asia, allowing foreign investors to capitalize on European technological innovation.

Our excessive reliance on public investment is not sustainable in the long term if the goal is to develop a robust and competitive tech ecosystem. The key is to attract more private capital in later stages, ensuring that the most promising startups do not have to seek funding outside our borders to scale. Without this transformation, European innovation will keep missing strategic opportunities, negatively impacting its growth and global technological leadership.

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