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A new EU research report led by Andreas Kuebart at the Leibniz Institute for Research on Society and Space (IRS) recommends more actively attracting pension funds and international sovereign wealth funds as investors for European venture capital. The aim is to improve start-up financing in the EU and strengthen Europe's technological sovereignty.
The latest research report by the ‘StepUp Startups’ consortium, in which the IRS is involved, recommends regulating investments uniformly across the EU, attracting pension funds as investors, and making it easier for sovereign wealth funds from outside the EU to enter the market.
Despite positive developments, the report states that there is currently much less capital available in the EU for start-ups, particularly for growth, than in the US and China. Around 10 percent of global venture capital is invested in the EU, compared to 50 percent in the US. Furthermore, Europe has no venture capital-financed technology companies comparable to Google, Amazon or Alibaba. European start-ups currently depend heavily on American investors, particularly for large financing rounds of over €50 million.
This is partly due to the inconsistently regulated market for corporate financing in the EU. Furthermore, there is too little capital available to flow into venture capital funds. Specialised venture capital (VC) providers raise money from large investors such as insurance companies and private pension funds, pool it in funds and make it available to selected start-ups during their founding and growth phases. Venture capital is considered indispensable for a competitive technology sector.
The report highlights two potential sources of new investment capital: Firstly, pension funds manage large sums of money. In the USA and some EU countries, such as the Netherlands, it is already common practice for pension funds to invest in venture capital. ‘Venture capital is profitable in the long term, and pension funds have the necessary staying power to invest successfully,’ says IRS researcher Andreas Kuebart, who led the report's preparation.
Secondly, the report states that the EU should target international sovereign wealth funds more effectively and make it easier for them to invest in European venture capital. Countries with oil revenues, such as Saudi Arabia, particularly, have large sovereign wealth funds that invest globally. 'It is good for Europe's technological sovereignty if international investors participate in European venture capital funds,' says Andreas Kuebart. ‘The alternative is for investors to invest directly in European technology companies, which gives them more control.'
The research report ‘Untapped Opportunities for European Venture Capital. Pension funds and Sovereign Wealth funds’ was jointly prepared by twelve authors from five European research and consulting institutions. It was commissioned by the EU Directorate-General for Communications Networks, Content and Technology as part of the ‘StepUp Startups’ project.
The report is accessible here: https://ec.europa.eu/newsroom/dae/redirection/document/121531
Dr Andreas Kuebart is a financial geographer who conducts research on start-up ecosystems and other topics at the Leibniz Institute for Research on Society and Space (IRS). The IRS investigates the relationship between societal change and the transformation of spaces. It advises stakeholders from politics and civil society to promote the sustainable development of villages, towns and regions and to alleviate socio-spatial inequality.
Dr Andreas Kuebart
anfdreas.kuebart@leibniz-irs.de
StepUp Start-ups (2025): Untapped Opportunities for European Venture Capital. Pension funds and Sovereign Wealth funds
https://digital-strategy.ec.europa.eu/en/library/unlocking-europes-scale-potenti...
Untapped Opportunities for European Venture Capital
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