5 Funding Initiatives European Tech Founders Should Know About

News

While the vast majority of tech startups are bootstrapped, there’s no denying that venture capital can be crucial to the growth of businesses which require significant R&D expenditure or seek to rapidly scale in highly competitive markets. Companies specialising in AI, biotech, quantum computing, defencetech and spacetech fall into the former category, while enterprise SaaS platforms and fintech companies are in the latter.

But a long-running pain point for Europe’s tech landscape has been the restrained level of venture capital relative to other regions. Take the VC gap with the United States, with firms based in the EU receiving USD 1.4tn less VC funding than US counterparts between 2013 and 2022. The problem is particularly marked when it comes to later stage funding rounds, incentivising scale-ups to seek US investors and/or relocate their headquarters.

The fragmented nature of the European market is one reason for the funding gap. As the IMF puts it, “national laws, regulations, and taxes hamper cross-border consolidation, capital raising and risk-sharing”. There’s also a cultural aspect at play, with Europe having traditionally taken a more conservative approach to investments compared to the US.

Margrethe Vestager, then Executive Vice President of the European Commission, put things in stark terms in 2024: “If we don't address this funding gap, Europe risks falling further behind in critical areas like artificial intelligence, quantum computing, and clean energy technologies. This isn't just about creating the next Google or Facebook – it's about securing Europe's economic future and strategic autonomy.”

The good news is there are positive, proactive steps being taken to reduce the reliance of European companies on outside VC funding. Let’s run through some of the major programmes which entrepreneurs, founders and senior startup and scale-up execs should be aware of.

European Tech Champions Initiative

Concerns around the relative paucity of scale-up funding have led to the inception of the European Tech Champions Initiative (ETCI). Comprising capital provided by the European Investment Bank Group and six EU member states (France, Germany, Spain, Italy, Belgium, and the Netherlands), the ETCI’s mission is to enable promising European startups to receive late-stage growth capital.

While businesses can’t apply directly to the ETCI for money – this is a fund-of-funds, meaning it invests in other funds across Europe – its creation is a sign of how seriously Europe’s VC ecosystem is taking the challenge of nurturing and keeping hold of homegrown startups. As of December last year, the ETCI had invested EUR 2.5bn in various VC funds, indirectly backing dozens of companies in sectors such as AI, fintech and foodtech.

Scaleup Europe Fund

An initiative of the European Innovation Council, the Scaleup Europe Fund is a multi-billion euro pot of late-stage growth capital for companies innovating in sectors including AI, quantum computing, robotics and biotech. The European Commission has contributed EUR 1bn, with significant backing also expected from an array of prominent private investors.

At the time of writing, the EIC board is seeking an experienced portfolio manager to run the fund, with the first investments expected to be made in spring.

STEP Scale Up

The European Innovation Council’s STEP Scale Up scheme is investing between EUR 10 to 30m per successful applicant, with funding particularly likely to go to European businesses making strides in deeptech fields like quantum computing, biotech and cleantech.

One major stipulation is that a company seeking funding must submit proof of pre-commitment from a qualified investor. Their contribution must cover at least 20% of the total target funding round, which must range between EUR 50 to 150m, and be at least three to five times the EIC investment.

Horizon Europe

Overseen by the European Commission and running until next year, Horizon Europe is the world’s biggest research and innovation funding initiative, providing a total of EUR 95.5bn in funding to address the critical challenges of our time and boost Europe’s “scientific and technological bases”.

It provides backing for a wide spectrum of organisations from businesses to universities to charities, providing they fit into one of several innovation categories, including healthtech, cybersecurity and smart mobility. As a major aim of the fund is to foster collaboration, most proposals will need to be submitted by a consortium of at least three partner businesses or organisations, each established in a different EU member state or associated country. Directories of potential partners can be found on the EU Funding & Tenders Portal.

EIC Accelerator

A distinct funding programme under the auspices of Horizon Europe, the EIC Accelerator provides investment for startups, SMEs and entrepreneurs with “an innovative, game-changing product, service or business model that could create new markets or disrupt existing ones in Europe”, but whose solutions may be too high-risk or experimental to attract private investors.

Organisations stand to receive a grand of up to EUR 2.5m and equity investments of up to EUR 10m, alongside coaching, mentoring and networking opportunities.