Can Europe Create Its Own Deep-Tech Giants?
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Not so long ago, the technology startup landscape in Europe was sparsely populated, especially when compared with other tech-rich regions of the world. But in recent years, European universities and research centers have become more proficient at spinning out young companies, and various national and Europe-level initiatives have ensured that there is plenty of innovation built into the spinoffs. Between 2015 and 2020, the number of European startups soared from about 1,850 to almost 6,600, according to Statista. Likewise, European deep-tech investment has been growing at a rate of about 50% a year. Our analysis shows that in 2016, European deep-tech startups raised one-eighth as much venture capital equity as their North American counterparts; by 2020, the difference had dropped by half.
Today, Europe’s deep-tech startups—which are taking breakthrough technologies like synthetic biology, quantum computing, and advanced materials from laboratory to market and using them to address large-scale fundamental problems—face a different and daunting challenge: scaling up as they begin to demonstrate technology and market success. Companies moving out of the startup phase encounter a Herculean set of tests, from finding funding and building management and marketing capabilities to putting in place a productive board of directors. Many of these challenges are intertwined. Attracting talent, for example, depends on having a strong management team, offering an appealing employee value proposition, and securing the funds to compensate employees competitively.
Many of these young companies are quick to speak of their “pride” in their European origins and their hopes of becoming flagship success stories with European investors. They would prefer to remain Europe-backed, and they and others like them are Europe's best chance of competing successfully with the US and China, which have been steadily moving ahead in the advanced-technology pack. Europe has powerful fundamental research and talent at its disposal. With the right levels of commitment and support, it can catch up.
Four Main Challenges
Recognizing the importance of a vibrant deep-tech startup ecosystem for Europe’s economy and global competitiveness, the European Commission established the European Innovation Council (EIC) with the mandate to “target emerging technologies that have the potential to become strategically important” and help Europe achieve “technological sovereignty” in key technologies and technology-based economic segments, especially relative to the US and China. In 2021, the council commissioned a consortium of partners for the EIC ScalingUp project (which aims to create a model for European deep-tech companies to scale beyond series B financing), including BCG, Deepwave Ventures, Bpifrance, and Tech Tour, to study the challenges of scaling and to design a blueprint for addressing them.