Europe stands at a pivotal moment in reshaping how it funds innovation. The newly released report, Untapped Opportunities for European Venture Capital: Pension Funds and Sovereign Wealth Funds, developed under the StepUp StartUps project, explores how institutional investors can unlock fresh growth for Europe’s scale-up economy. It identifies the EU’s enduring scale-up financing gap—and how mobilizing underused domestic capital could change the trajectory of Europe’s tech competitiveness.
DEEP Ecosystems is proud to be a key partner in the StepUp StartUps project, a European Commission-funded initiative aimed at reshaping Europe’s startup ecosystem. Together with Barrabes, Leibniz IRS, Startup Europe Regions Network (SERN), and EU Startups, DEEP is spearheading a two-year journey to develop data-driven insights, conduct research, and organize events to inform policy transformation.
The primary objective of StepUp StartUps is to provide a comprehensive understanding of the functioning of national and local startup and scaleup ecosystems across the EU-27 and EFTA countries. This knowledge will inform the development of data-driven policy reports on key issues and challenges facing Europe’s startup ecosystem.
Europe’s Scale-Up Challenge
Europe’s share of global market capitalization has halved since the 2000s, falling to just above 10%. Despite progress in venture capital activity, the EU still represents only 12% of global VC investments—nearly four times smaller than the US share. This underperformance reflects structural fragmentation, smaller fund sizes, and risk-averse financial cultures that limit the ability of startups to scale.
The Untapped Power of Pension Funds
European pension funds hold €2.7 trillion in assets—yet only a fraction flows into venture capital. Pension funds contribute just 5% of capital raised by EU VC funds (this equates to 0.01% of their total assets), compared to over 50% in the US. Regulatory fragmentation, cautious investment mandates, and limited VC expertise have constrained their role. However, reforms in Sweden and the Netherlands demonstrate that targeted changes—such as lifting investment limits and fostering public-private partnerships—can drive participation.
Sovereign Wealth Funds: A Strategic Partner
Sovereign wealth funds (SWFs), managing over $12 trillion globally, are increasingly active investors in innovation—but Europe captures only a small share. Between 2019 and 2023, SWF commitments to European VC funds tripled, yet still represented just 1% of total capital raised. Strengthening ties with leading SWFs and creating pan-European investment vehicles could significantly expand funding capacity and global collaboration.
The report calls for financial integration, regulatory harmonization, and the creation of shared liquidity pools to deepen Europe’s capital markets. Policy initiatives such as the forthcoming Savings and Investments Union and the Scaleup Europe Fund mark important steps in aligning EU investment frameworks with global best practices.
Join DEEP Network
We invite you to participate in discussions that will shape the future of EU innovation. By joining our network, you can contribute to the development of supportive policies and initiatives for startups and innovators across Europe. DEEP is a group of industry leaders who inspire us to explore new trends and policy needs. Join our network to collaborate on data, exchange insights, connect with key players, and share your own perspectives.
The project is funded by the tender of the European Commission on “European Start-ups 2.0 – Taking Europe’s start-up economy to the next level through data-driven insights, research and events” with number CNECT/2022/OP/0133. Views and opinions expressed are however those of the authors only and do not necessarily reflect those of the European Union, European Commission or the Council of Europe. Neither the European Union nor the granting authority can be held responsible for them.