By Maria Gabriela de Orleans e Bragança
The fastest way to dismiss European tech is to put it next to American tech and read the price tags. By that measure Europe loses. European startups raised about $44 billion in 2025, while the US poured roughly $177 billion into tech in the first nine months of the year alone. In AI the gap is starker: $14 billion raised in Europe against $146 billion in the US. Europe creates 17% of new global enterprise value but captures only 10% of exit value. Lower rounds, lower exits, lower headline numbers.
But a valuation is a price, not a fundamental. Price tells you what the last buyer paid in a given mood. It says far less about what compounds over a decade, and the things that compound line up better for Europe than the gap suggests. Two stand out: policy and talent. This is the case for looking past the multiple.
The valuation gap hides the return
Start with the number that should bother anyone who treats low European valuations as a verdict on quality. Over the past ten years, European venture capital returned about 17.2% net, ahead of US venture capital at 13.1%, US public equities at 13.7%, and European public equities at 7.8%. Europe built a tech ecosystem now worth close to $4 trillion, around 15% of EU GDP and up from under $1 trillion in 2016, and it did so with a fraction of the capital the US deployed. An asset class built on hard mode.
Lower entry prices plus comparable or better returns is not a weakness. It is the definition of an opportunity. We made this case from the angle of portfolio concentration in Diversification: Why European Venture Capital Earned a Place in Our Portfolio. Here we go one layer down, into the two engines behind those returns.
Pillar one: policy as patient, non-dilutive capital
Europe’s reputation for regulation is the part everyone repeats. The part that gets missed is that Europe runs the largest non-dilutive funding system in the world for innovative companies, and it is being rebuilt to move faster.
Start with the grants. Horizon Europe is the EU’s €95.5 billion research and innovation programme for 2021 to 2027. Inside it sits the EIC Accelerator, which a deep-tech company can tap for a grant of up to €2.5 million plus equity of up to €15 million, a blended package reaching €17.5 million, with the EIC STEP Scale-Up scheme stretching equity to €30 million. The grant portion is non-dilutive, so a founder validates hard technology with the cap table intact, then raises private capital at a higher, de-risked valuation. National layers stack on top: in Portugal, SIFIDE recovers up to 82.5% of qualifying R&D spend, a structural cost advantage an American competitor does not have.
The direction of travel matters more than any single programme. Mario Draghi’s 2024 competitiveness report put a number on the ambition: roughly €800 billion in additional annual investment, close to 5% of EU GDP, to close the innovation gap with the US and China. The response is already legislative. On 28 May 2025 the Commission adopted the EU Startup and Scaleup Strategy, whose centrepiece is the optional “28th regime,” informally “EU Inc”: a single EU-wide corporate framework meant to let founders incorporate online in 48 hours and operate across all member states under one rulebook, with a proposal expected in early 2026. The target is the fragmentation that pushed nearly 30% of European unicorns to relocate outside the EU between 2008 and 2021.
The money is being redrawn too. The Commission’s proposed 2028 to 2034 budget creates a €409 billion European Competitiveness Fund and lifts the Horizon Europe successor to €175 billion, nearly double today’s envelope, while collapsing 50 overlapping programmes into 16. The parallel Savings and Investments Union targets the real bottleneck behind low valuations: European capital sits trapped in banks (bank assets run around 300% of EU GDP against 85% in the US) and in conservative pensions. Atomico estimates that matching US pension commitment rates would unlock about $210 billion for European tech over the next decade. The valuation gap is partly a financing-plumbing problem, and the plumbing is being replaced.
Pillar two: talent that is deep, technical, and growing faster than the US
Capital can be raised. A talent base takes thirty years to build, and Europe’s is one of its most underpriced assets. The EU is home to 1.89 million researchers and more than 17 million scientists and engineers, and it graduates STEM students at a rising rate of 22.4 per 1,000 people aged 20 to 29. The most important finding in Atomico’s 2025 report is not a funding number: Europe’s technical talent pool is expanding faster than the US pool, and continues to outpace it in growth and quality, at materially lower cost.
The honest counterpoint: Europe does not lead in everything. The US and India each field close to a million AI specialists, and the US still dominates at the level of advanced AI engineers while Europe sits as a strong, fast-rising third. The leak is real too: 30% of European startups at Series C and beyond still relocate their headquarters outside Europe, chasing late-stage capital and exit liquidity. The point is the trajectory, and the trajectory just turned.
For the first time in a generation, talent is flowing toward Europe. On 5 May 2025 at the Sorbonne, the Commission and France launched Choose Europe for Science, a €500 million programme to make Europe “a magnet for researchers”. The European Research Council is adding a seven-year “super grant” and has doubled relocation grants from €1 million to €2 million. France’s Choose France for Science platform drew 30,000 visitors from 157 countries, a third of them from the US, within weeks. As US federal research funding is cut, the reverse brain drain has stopped being a slogan.
What this means for investors and founders
Put the two pillars together and the logic is clean. Valuations are cyclical and reflect today’s sentiment. Structural strengths are slow, compounding, and reflect the next decade. Europe’s position in policy and talent is stronger than its valuations imply, and both are improving at the exact moment the US is making itself a harder place to fund science and hire globally.
| Europe | United States | |
| 10-year VC net return | ~17.2% | ~13.1% |
| Non-dilutive public funding | Large (Horizon Europe, EIC Accelerator, SIFIDE) | Limited for startups |
| Technical talent growth | Faster than US | Slower, higher cost |
| Late-stage capital depth | Thinner (the real gap) | Deep |
The edge is not simply “buy Europe.” It is access and support: sourcing strong technical teams early, helping them turn non-dilutive grants and corporate validation into traction, and bridging them to global markets before the rerating. That is the model Ventures.eu runs on, combining non-dilutive EU capital with a 1,200-plus investor network and corporate pilots through Dealflow.eu.
Portugal sharpens the point, concentrating the policy advantage in one place: SIFIDE on the R&D side, plus the Golden Visa and the IFICI tax regime for investors who want European residency and a favourable tax framework alongside the investment itself. Strong returns, deep talent, patient public capital, and a residency pathway is a rare combination to find in one market.
The valuation gap is the headline. The structural strengths are the story.
Talk to Fernando Ferreira
