To some prominent investors, Europe’s technology strategy is a cautionary tale. “Just do the opposite of the EU,” says Marc Andreessen, co-founder of U.S. venture capital firm Andreessen Horowitz, who argued in a recent podcast that Europe favors regulation to the detriment of innovation. In the same conversation, David Sacks, a fellow U.S. investor and the White House’s AI and crypto czar, added that when European leaders talk about “AI leadership,” they often mean “defining the regulations.”

Their criticisms point to a real problem: Europe produces world-class research and engineering talent, yet struggles to turn innovation into global companies of the scale seen in the U.S. Deep-tech ventures need patient capital and a strong domestic customer base, which are both in short supply in Europe. Those gaps are what EQT, Europe’s largest private equity manager, is trying to close.

Founded in Stockholm in 1994, EQT built its reputation by taking family businesses and industrial groups public, then expanding into infrastructure, real estate and technology. Over three decades, it has backed hundreds of companies across sectors from healthcare to renewable energy, often helping them scale internationally. That same approach underpins its push into deep tech, where the challenge is often not innovation but scale. Andreessen isn’t wrong that regulation can create friction, but Europe’s barriers are also financial and cultural.

“Europe doesn’t have a startup problem, it has a scaleup problem,” says Victor Englesson, EQT’s head of early stage technology. “To support its many entrepreneurs, the EU must establish a region-wide framework that simplifies and harmonizes rules for companies operating across borders.”

Einride’s journey

Europe’s financial fragmentation holds back many promising startups, agrees Roozbeh Charli, CEO of Einride, a company developing autonomous trucks for freight that’s backed by EQT Ventures.

“The capital markets in Europe are still fragmented between the different countries,” he says. That breeds caution among European investors. “There’s this perception of lower risk appetite among European investors for big bets,” he says.

For Mike Butcher, a former editor at TechCrunch and founder of Pathfounders, a related concern is the lack of institutional money behind the continent’s venture capital. “In the U.S., you get vast pension funds and endowments that invest in venture capital… and a population that routinely trades in stocks and shares. Europeans don’t do that,” he says. European governments have not encouraged this wealth-creation structure, leaving smaller funds and shallower pools of capital. “Venture capital in the U.S. can raise billions and billions, far more than European venture funds,” he says.

Europe’s demand dilemma

Even well-funded European innovators, such as Einride, face a demand problem. “Heineken in Holland is not the same as Heineken in Austria,” says Charli, noting that selling across Europe means navigating 27 different markets with different rules, and that doing a commercial deal with one subdivision of a European company doesn’t necessarily open the door to a deal with the wider organization. In the U.S., one corporate deal can more easily lead to a national rollout.

Large European corporations spend less on innovation and acquire fewer early-stage businesses. McKinsey says that from 2015 to 2022, Europe’s largest companies spent roughly half as much on R&D as their U.S. counterparts as a share of revenue, and American firms also buy startups about four times more often than European ones, according to Mind the Bridge, a research group in San Francisco. “There’s very little, almost no culture in Europe among the corporate giants like SAP or France Telecom to buy tech companies,” says Butcher. That scarcity depresses valuations and pushes founders towards U.S. buyers.