At Jet Investment, we identified a critical gap in European venture capital support for industrial innovation. To help bridge this gap, we launched Jet Ventures, a tech-industry-focused venture fund designed to fuel the innovation needed to secure Europe’s leadership in industrial transformation and future global markets.
With over 25 years of experience investing in mature industrial companies, we have developed a deep understanding of Central Europe—encompassing the Czechia, Slovakia, Poland, Germany, and Austria—a region that stands as an industrial powerhouse. These countries collectively generate over 40% of Europe’s industrial output, making them essential to the continent’s global competitiveness. However, despite this solid industrial foundation, the region and Europe lack the necessary venture capital to drive technological advancements and foster innovation in traditional industries, particularly when compared to the U.S.
The Venture Capital Shortfall in Europe
Europe’s venture capital sector is growing but lacks the focus for industrial innovation. Without dedicated funds, Europe struggles to connect startups with traditional industries, limiting its ability to lead in manufacturing and technology.
In contrast, U.S. venture capital firms actively back high-tech industrial projects. The U.S. ecosystem—driven by corporate venture capital (CVC), risk-taking pension funds, and wealthy university endowments—fuels rapid industrial transformation. Europe’s more conservative approach, especially among pension funds and corporate investors, restricts growth and stifles innovation.
Pension Funds: Europe’s Risk-Averse Mindset
With its $400 billion in assets, U.S. pension funds like CalPERS aren’t afraid to invest in high-risk, high-reward ventures. By contrast, European pension funds prefer to protect existing wealth rather than take a chance on the unknown. This risk aversion widens the funding gap between Europe and the U.S., preventing European startups from securing the support they need.
Corporate Venture Capital: Cautious in Europe, Bold in the U.S.
The same pattern emerges in corporate venture capital. U.S. CVCs show a strong appetite for innovation, favouring early-stage startups with potentially game-changing ideas. This preference for taking risks has led U.S. CVCs to invest a whopping $79 billion into new ventures. At the same time, European CVCs remain focused on later-stage companies, limiting their potential to drive industrial innovation.
University Endowments: US Universities as VC Powerhouses
The story of venture capital in the academic world is much the same. U.S. universities with massive endowments have a financial advantage over European counterparts. With funding from Harvard, Yale, Stanford, and Princeton (having about over $50 billion each to invest), the U.S. VC sector thrives. Meanwhile, Europe's top universities, like Cambridge, have significantly lower endowments.
Bridging the Innovation Gap: The Case for Industrial-Focused VC
Europe’s industrial sector desperately needs venture capital dedicated to innovation. Traditional industries struggle to keep pace with new technologies like AI, robotics, and advanced manufacturing. Without this connection between startups and industry, Europe’s potential for industrial leadership is severely restricted.
An industrial-focused venture capital ecosystem could change this. These funds would not only provide financial backing but also strategic guidance to help startups integrate groundbreaking technologies into traditional sectors.
Fragmented Policies and Regulatory Challenges
One of Europe’s biggest hurdles is its fragmented regulatory environment. Each country has different policies and priorities, creating barriers to cross-border investments and stalling the flow of capital. For example, Sweden and Austria spend over 3% of their GDP on R&D, while other countries spend less than 1%. This disparity creates an uneven playing field for startups and capital firms.
A unified regulatory approach across the EU is essential for a smoother, more integrated venture capital landscape. Talks of a European Sovereign Fund and major industrial projects offer a promising path forward, but Europe needs to move faster to close the gap.
The Need for a Cultural Shift: Embracing Risk and Innovation
Europe’s cautious approach to risk is another critical factor holding back its venture capital scene. While U.S. investors are known for taking bold risks, Europe tends to play it safe. This mindset needs to change for Europe to realise its full industrial and technological innovation potential.
Despite European entrepreneurs changing their ways and aiming higher, many new companies still face barriers like differing rules, too much paperwork, and not enough shared markets. Supporting a culture encouraging entrepreneurship and risk-taking will unlock more opportunities for startups and venture capital investments, leading to a more robust innovation ecosystem.
Scaling Up: Public and Private Investment Partnerships
The European Union is putting forward bold plans to fill the gap in venture capital and innovation funding, and public finance has played a critical role in Europe’s venture capital growth. Initiatives like the European Fund for Strategic Investments (EFSI) and InnovFin have reduced the risks of investing in startups, encouraging more private capital to flow into the market. Programs such as Horizon Europe and InvestEU are committed to supporting research, development, and innovation with substantial funds. For example, the InvestEU program will back this up with a €38 billion fund. These EU efforts show a solid push to support venture capital and innovation. But there is room to do more to compete on a global scale. To sustain this momentum, Europe must increase its efforts to foster public-private partnerships, making it easier for private investors to engage in high-risk, high-reward ventures.
National Policymaking: Unifying Standards and Reducing Red Tape
The EU aims to harmonise regulations and minimise differences within the single market, but it’s up to individual countries to implement these changes. In 2012, when the EU sought feedback on this initiative, 176 organisations from 20 countries and 67 EU-wide groups shared their perspectives—highlighting the widespread interest in shaping these policies.
Aligning regulations and simplifying procedures across member states is crucial for promoting digital growth. Streamlined rules facilitate investment, allow businesses to expand more easily across borders, and support innovation, keeping Europe competitive on the global stage.
The feedback received spanned a wide range of industries. Most came from the manufacturing sector (47.7%), followed by construction (15.9%) and energy (6.2%). However, responses were not limited to large corporations. Small businesses, entrepreneurs, and individual citizens also voiced their concerns, reflecting the diverse interests involved in shaping these policies.
Key areas of concern included increased support for small businesses and startups, easier access to financing and new technologies, and stronger environmental protections. There were also concerns about the potential negative impact of new financial regulations on access to capital.
To address these challenges, the EU is working to standardise regulations and improve online and financial markets to combat market fragmentation. Public initiatives like the European Fund for Strategic Investments (EFSI) are designed to attract private investment, with particular success in countries like Bulgaria, the Baltic states, and Greece, which have seen increased venture capital inflows. These countries, particularly, are fighting stagnation by pushing for more venture capital in once-quiet areas. Their example shows how public efforts are making a difference and how strategic policies can push change and boost new ideas.
Europe’s Strengths: Academic Excellence and a Skilled Workforce
Despite these challenges, Europe has significant strengths to build on. Top universities and research institutions like Cambridge and ETH Zurich produce world-class talent and cutting-edge research. Connecting these resources with industrial-focused venture capital can transform ideas into commercially viable products, driving growth and innovation across sectors.
Europe also benefits from a highly skilled workforce, which is critical to staying competitive in the global market. By retaining and utilising this talent, Europe can foster an innovation-driven economy.
Conclusion: Europe’s Opportunity to Lead
Europe must take decisive action to bridge the venture capital gap and foster industrial innovation. Policymakers must push for unified regulations, reduce red tape, and promote a culture of risk-taking and entrepreneurship. Public-private partnerships should be strengthened, and industrial-focused venture funds must be prioritised.
With the right strategies, Europe can harness its strengths—academic excellence, a skilled workforce, and its central role in the global industry—to become a leader in industrial-focused venture capital and technological innovation.
The time to act is now. Europe has the potential to lead, but it must make bold moves to unleash its full innovation capabilities.