Victor Englesson: Europe Doesn’t Have a Startup Problem, It Has a Scale-Up Problem
Victor Englesson, EQT’s head of early stage technology, argues that Europe faces a key opportunity to ramp up support for the region’s technology companies.
- Download EQT's full report on The AI Opportunity
Anyone who read last year’s report on European Union competitiveness from Mario Draghi, the former president of the European Central Bank, will have a good understanding of the challenges facing Europe – and the opportunities to be grasped if the region can implement key reforms.
While Europe has fallen behind the U.S. on many metrics, including investment in deep tech and AI, it still possesses many of the ingredients for long-term success.
First, the EU has deep technical talent, leading research institutions and increasingly vibrant startup hubs. Secondly, Europe is already world-class in many sectors, including healthcare, pharmaceuticals and renewable energy. Third on the list is the opportunity opening up in emerging industries such as AI, defense technology and digital consumer apps.
The application-layer opportunities are particularly notable in the field of AI. It’s in this layer that Europe has world-class design, product and vertical expertise. While foundational models require huge amounts of compute and capital, the application layer is where those capabilities are turned into real products people use.
The EU stands at a unique moment in its history, when its impediments to innovation and growth are finally being acknowledged and addressed. The Draghi report has created a shared understanding of the competitiveness crisis. This momentum presents a rare opportunity to modernize capital markets, align policy with innovation, and finally compete at scale.
Doubling investment
Across EQT, we have invested €120bn ($138bn) in Europe over the past five years. Over the coming five years, we aim to double that – to around €250bn. And we’re not alone in seeing positive signs in the region. A survey of about 1,200 early- and mid-stage investors by the European Investment Fund (EIF) published in October found that 58 percent have increased – or plan to increase – their exposure to the EU. The number one sector attracting this investment is AI.
From EQT’s vantage point, looking across venture, growth and buyout, we see two truths:
- AI-native companies will innovate and bring the value of this technology to the world at an unprecedented velocity.
- Established leaders will have to innovate, disrupt existing revenue streams and invest for the future to stay relevant.
Europe doesn’t have a startup problem; it has a scale-up problem. To support its many entrepreneurs, the EU must establish a region-wide framework that simplifies and harmonizes rules for companies operating across borders – what the European Commission refers to as the “28th regime”. That is why we support EU-INC. and their call for an ambitious version of this initiative, a pan-European legal entity that gives startups and scale-ups the best possible foundation for global success.
Combining the private sector’s experience in scaling companies with the public sector’s convening power will give Europe’s technology businesses a leg up by easing the supply side. But there’s also more that can be done to help demand. Governments and large corporations must act as early customers to Europe’s startups and scale-ups through innovation-friendly procurement, helping earlier-stage companies bridge the “valley of death” as they scale.
Europe doesn’t need to copy the U.S. to succeed. EQT’s own journey shows that Nordic roots and a European mindset are sources of strength. The challenge ahead is to sharpen Europe’s competitive edge while fixing what slows us down.
Victor Englesson is a Partner, Head of Early Stage Technology, and Head of Global Technology Sector Team, based in Stockholm. Victor joined EQT Partners in 2010 and was based in the firm's New York office from 2015-2016. Victor holds a M.Sc. degree in Industrial Engineering and Management from The Royal Institute of Technology, Stockholm. Prior to joining EQT Partners, Victor worked at Tele2 AB in Stockholm as Executive Trainee. Victor is a member of EQT Growth Partners Investment Committee. Directorships Current: Epidemic Sound, Ardoq, CYE Previous: Coromatic Group, IP-Only, Musti Group, TIA Technology, Freepik, RIMES Technologies, Adamo, Parcel 2 Go
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