Unlocking Europe's Deep Tech Sovereignty

The investment climate of 2025 was defined by a bifurcation in the venture capital markets. While traditional SaaS and consumer tech funding continued to face headwinds, deep tech emerged as a stabilising force, attracting €18 billion in 2025 and capturing a record 32% of all European venture capital, more than double its share a decade ago.¹ The divergence is stark: deep tech closed the year just 4% below its 2021 peak, while the broader European tech market remained 54% below.¹ This is a structural shift, indicating that investors are increasingly prioritising tangible, IP-rich assets over quick-flip digital models.

The cumulative effect is an asset class of real scale. Europe's venture-backed deep tech companies are now worth €610 billion, up from €65 billion a decade ago,¹ within a broader European tech ecosystem valued at nearly €3.5 trillion, representing 15% of Europe's GDP and a workforce of 3.5 million.⁴ This growth is not accidental; it is the result of a decade of deliberate policy and ecosystem building. However, the "growth gap" remains Europe's most persistent structural weakness. While early-stage funding (Seed and Series A) is robust, the scaling phase remains constrained: roughly 70% of late-stage capital now originates from outside the continent.¹ The exit environment compounds the problem, with more than 80% of exits driven by M&A and much of the value captured by US acquirers.¹ This dependency on foreign capital poses a risk to strategic autonomy, as promising European companies may be forced to relocate or exit prematurely to secure necessary liquidity.

The Atomico State of European Tech 2025 report highlights a "confidence crisis" as a major challenge, despite the objective strengths of the ecosystem.⁵ There is a lingering perception gap between the reality of Europe's technological prowess and the narrative often dominated by the US and China. The data, however, tells a different story. For example, Europe is leading in Quantum hardware and Physical AI, the embedding of intelligence into robotics, materials and energy systems, rather than merely competing in the crowded Large Language Model space.⁵ This aligns with our thesis, which prioritises hardware-enabled innovation over purely digital plays.

Bars scaled within each panel. Europe converts Series A rounds into Series B at 42% of the North American rate — the single clearest expression of the growth gap.

Industrial sovereignty has been the stated ambition since the Chips Act of 2022. What distinguished 2025 was the shift from ambition to funding instrument: six Commission decisions in seven months that together redraw the funding landscape our clients will navigate through to 2034.

The through-line matters more than any single measure. Across all six, the Commission has accepted the diagnosis that Europe's weakness is not invention but scaling, and has begun building funding instruments sized accordingly. The companies positioned to benefit are those already inside the EIC pipeline when the larger instruments arrive.

1. 29 January

   Competitiveness Compass

   The Commission's answer to the Draghi report named the innovation gap as Europe's central weakness. "Strategic technologies" became a budget line.⁶

2. 28 May

   Startup and Scaleup Strategy

   26 measures: an expanded, ARPA-style EIC and a proposed "28th regime" letting a company incorporate once and trade across the Single Market.⁷

3. 17 June

   Defence Readiness Omnibus

   €800Bn over four years. Ten instruments amended, and the clarification that sustainable finance rules do not restrict defence — opening dual-use to EIC funding.⁸

4. 2 July

   Quantum Europe Strategy

   Global quantum leadership by 2030 across research, infrastructure, industrialisation and skills, with a European Quantum Act to follow.⁹

5. 2 July

   Life Sciences Strategy

   More than €10Bn a year across Horizon Europe, EU4Health and Digital Europe, plus a Biotech Act to harmonise approval timelines.¹⁰

6. 16 July

   Horizon Europe, doubled

   €95.5Bn to €175Bn for 2028–2034, with a €234Bn Competitiveness Fund alongside — €409Bn together, 21% of the proposed budget. Still a proposal.¹¹

The 2025 cohort of deep tech unicorns differs qualitatively from the general tech cohort: research indicates that 100% of deep tech startups reaching unicorn status are value-generating, against 89% for general tech.² The evidence from the EIC portfolio points the same way. Three EIC-backed companies crossed unicorn valuations during the year, nine more sit above €500 million, and nearly 120 above €100 million.¹² These are not momentum valuations; they are companies with order books, factories and regulatory approvals.

Successful deep tech champions are defined by visionary leadership, robust IP, clear technical roadmaps, and strong market alignment. Because they require years of R&D and significant capital expenditure, they rely on resilient fundraising strategies to build durable competitive moats. Leaders like Skeleton and IQM illustrate this perfectly: by building gigafactories and quantum production lines, they have created the hard-to-replicate physical assets that define deep tech's core strength today, and attract investors. Across 2025, European deep tech finished just 4% below its 2021 peak while the broader tech market remained 54% below.¹