Contrary to common belief, Europe doesn't lack funds. Collectively, European families have saved $1.4 trillion a year, which is considerably more than the $800 billion held by U.S. Families. Data from the platform Dealroom indicates that in 2025, European investors possessed $31 billion in uncommitted capital, ready for investment.
While American capital is a significant asset for the U.S. Economy, renowned for speeding up business expansion, European capital doesn't function comparably.
Startups encounter difficulties in securing capital, with U.S. Venture capitalists supplying 35% of the continent's expansion financing, according to Atomico’s State of European Tech 2024 report. Concurrently, reduced liquidity within Europe's fragmented public markets forces growth-stage firms into a difficult decision: opt for a listing at lower valuations relative to the U.S., or pursue an initial public offering in New York.
Even though Europe possesses leading talent pools and R&D strengths, essential components for a thriving innovation economy, funding is lacking. A substantial portion, 25% of Europe’s vast savings capital, is allocated to global markets, and a meager amount of the remaining capital is invested in equity.
The role of policy
Many in Europe feel that the continent's industrial resurgence depends on policy changes to close this financial shortfall, enabling European companies to more effectively leverage their economic strength.
In aggregate, European households save $1.4 trillion a year—substantially higher than the $800 billion figure for U.S. Households…
Synthesia's head of corporate affairs and policy, Alexandru Voica, informed Coins2Day that this process starts by creating a more unified legal and financial framework.
He points to the 28th Regime, a proposed directive by the European Commission which would “bring regulatory harmonization across the EU and help startups operate as a single legal entity.”
This program intends to streamline how companies conduct business internationally, easing the bureaucratic hurdles involved in establishing operations in a foreign nation, thereby enhancing their appeal as investment opportunities.
Concurrently, figures such as former European Central Bank head Mario Draghi have reiterated demands for a more robust European Capital Markets Union—a policy goal established in 2015 that has since faltered. Should this initiative succeed, it would theoretically enhance funding opportunities for high-potential businesses by consolidating numerous smaller capital sources into a single, significantly larger one.
The significance of scale—across both tangible and financial arenas—cannot be overstated, and Europe's most promising high-growth companies typically function on a continental basis. To illustrate, the UK-based AI infrastructure firm Nscale, which recently secured $1.1 billion Series B, is targeting an expansion of its data center projects across the European continent.
To stay competitive, “and to win”, Europe needs to “think big and act as one,”, according to Nscale's chief business officer, Phillip Sachs. “Alone, no European nation can rival the continental economies of the U.S. Or China. It must wield the scale, capital, and conviction of the entire continent.”
Integrating pension funds and bank savings
Regarding European industrial competitiveness, the most promising capital markets policy focuses on behavioral shifts: motivating continental institutional investors and savers to allocate their funds toward investments in Europe that carry greater risk but also offer higher returns.
The suggested Savings and Investments Union (SIU) intends to access a portion of the estimated $10 trillion in household savings across the EU currently in low-yield accounts, redirecting them to capital markets. This is supported by a report from Oliver Wyman, a consulting firm, which states that “Households in the EU hold only about 17% of wealth in financial securities, compared to about 43% in the U.S.”
The SIU would allow financial institutions to direct these savings toward more productive investments by implementing measures such as standardizing and simplifying securitization, alongside providing Europe-wide tax incentives for equity-linked savings accounts.
Voica says that, in theory, the SIU would help governments to encourage savers to “stop rushing to cash and embrace stocks and shares investments.”
He points out that the responsibility doesn't solely rest with the government; the industry must also actively communicate the advantages for consumers and the nation when pursuing growth-focused investments, according to Voica. “It’s a very similar parallel to institutional investors. They hoard cash in these ‘safe’ investments, such as real estate—so we need to discourage everyday consumers from solely making these safe investments,”
“Alone, no European nation can rival the continental economies of the U.S. Or China. It must wield the scale, capital, and conviction of the entire continent.”Nscale’s chief business officer, Phillip Sachs
Beyond gentle encouragement, European financial firms require more to embrace calculated risks. Nathan Benaich, a general partner at Air Street Capital, contends that these institutions are significantly behind schedule for modernization, highlighting crucial structural disparities that must be addressed.
For example, Europe lacks the infrastructure of endowments and foundations that have long formed pillars of the U.S. Venture financing market, he says.
In the past, European pension funds operated under more stringent regulations that emphasized immediate solvency, leading them to adopt more cautious investment approaches compared to those in the U.S.
According to Kinga Stanisławska, co-founder of European Women in VC, this situation creates a strong incentive for them to favor more secure investments, like government bonds with minimal risk.
Consequently, by 2025, a mere 0.1% of European pension fund investments were directed toward VC funds. In comparison, U.S. Public pension funds in 2024 committed approximately 10.4% to private equity, a category encompassing VC funds, as reported by a report by European Women in VC.
The U.K. Has initiated efforts to advance this agenda, exemplified by the Mansion House reforms, a program where 17 of the country’s largest workplace pension providers pledged to allocate a minimum of 10% of their default defined contribution funds to private markets by the year 2030.
Regulatory reform is a key governmental lever here, while other efforts involve using public capital to derisk and catalyze investment by private institutions.
Tamara Savic, investment director at Norway’s state-owned fund EIFO, highlights the recently revealed Scale Up Europe Fund, a venture uniting public and private entities, such as the European Commission and EIFO, alongside various pension funds, to invest billions of euros in established growth firms.
She states that while it might appear unfamiliar, European institutional investors stand to benefit significantly by allocating more capital to growth funds, whether through direct or indirect means. Ultimately, enhancing companies' access to capital is expected to bolster the economy, leading to improved fund returns and enabling pension savers to “benefit directly from the wealth and job creation emerging out of Europe’s innovation ecosystem,” Savic further notes.
Increased structural change fosters a greater willingness to take risks.
Reforms could also benefit Europe’s public markets, where growing companies often struggle to tap into large-scale equity funding.
This is where governments can swoop in, says Christophe Williams, cofounder and CEO of solar technology startup Naked Energy. “The U.K. Government has made a great start in addressing this problem by introducing guidelines for the National Wealth Fund to act as a guarantor for renewable energy projects,” Williams says. It reduces the risk for investors looking at these projects, and so encourages more investment into these scaleups, he adds.
“What the space really needs is for financial institutions to start investing in smaller ‘first of a kind’ projects worth tens of millions,” he adds.
Matthew Blain, an investor at the climate fund Voyager Ventures, shares this view. “Europe probably wouldn’t have funded Starlink,” he commented, expressing a desire for greater risk tolerance to enable the continent's most unconventional concepts to secure funding initially and subsequently achieve market dominance.
This is partly due to cultural factors, but the expectation is that, over time, structural changes will foster a culture where savers, investors, and institutions more actively back growth.
“There’s a tendency in Europe to sit on the sidelines and complain about bureaucracy, but the continent has so much going for it,” Blain says. “How can Europe do its job better? I’d like more VCs to push their companies from day one to build globally dominant companies, rather than regional or even national champions that get acquired.”
That, in turn, would provide the ultimate incentive for European capital to back European businesses.