Europe‘s Tech Scene at a Critical Juncture: Can it Compete?
Europe’s technology sector finds itself facing a pivotal moment, brimming with potential but hampered by systemic challenges, according to a recent report by venture capital firm Atomico. While ambition and innovation are flourishing, the necessary legislative framework to support sustained growth remains uncertain.
A growing number of European entrepreneurs are voting with their feet,seeking opportunities elsewhere. Currently, around 8% choose to base their headquarters in the US, a rise from 6% in 2016. This trend is particularly pronounced in the AI sector,where 10% of founders opt for an American base. More broadly, 30% of European companies relocate their headquarters outside of Europe after reaching Series C funding, driven by the allure of more flexible ecosystems and greater access to capital.
This outward migration is reflected in a stark statistic: Europe captured only 10% of the $608 billion in value generated by global tech exits in 2025. The United States dominates, absorbing 81% of that value – a figure that’s rapidly increasing from 62% in 2024, when europe held 16%.Addressing this “bleeding” is crucial for Europe to regain its competitive footing.
The report highlights a notable untapped resource: European pension funds. Atomico identifies their underinvestment in the tech sector as a “missed opportunity” for bolstering the European tech financing chain.Moreover, open innovation lags behind the US, with only 20% of large European companies actively collaborating with startups, compared to 50% in the United States. Europe also dedicates a smaller proportion of its public markets to innovation - 9% versus 20% in the US - creating a less conducive surroundings for successful exits.
despite these challenges, there are glimmers of hope. Europe has seen a resurgence in IPOs, with 2025 marking its best year since 2021, including the Wall Street listing of Klarna. Atomico anticipates further IPO activity in the coming year. Though, a significant portion of activity still involves European companies being acquired by American giants, such as the recent €3.4 billion acquisition of Deliveroo by Doordash.
Atomico concludes that Europe possesses the talent, ambition, and ideas necessary to compete globally with the US and China. However, realizing this potential requires “simplified regulation, more patient capital and public commitment.” As Sarah Guemouri, partner at Atomico and co-author of the report, poses: “Will Europe be at the forefront of the next technological era or will it let others define it?” The answer, she suggests, will become clearer next year.
