Europe vs US VC trends: A Guide for Founders

The 2024 edition of the State of European Tech Report 2024 finally landed last week.

This year's analysis features the remarkable transformation of the European Tech ecosystem over the past decade. As a retrospective piece there is much to celebrate: a 10x increase in investment, a rapidly growing world class talent pool, and the coming of age of entrepreneurship as a career path.

But despite the many positive changes, the current market - and the mood - is flat. The look-ahead remains uncertain. In particular, there’s much scepticism about Europe’s ability to support breakthrough companies as they grow.

In this context, comparisons with the vibrant US VC market are impossible to avoid. They are dotted throughout this 266-page analysis. We have combed through every section to find the key comparators, and some are striking. It all starts with the talent pool analysis.

Across Europe the talent pool has risen at a compound annual growth rate of 24% since 2015. The European tech sector now employs as many people today as the US did in 2020. In fact, since 2016, the continent has been a net beneficiary of talent, attracting more people on balance than it has lost.

But since 2022, this trend has gone into reverse. Europe has lost more talent to the US, Australia, and Canada than it has gained from those countries. The most eye-catching data points that follow are:

• 11% of US tech companies now have a European founder. On average each year, this talent leakage leads to at least 800 companies starting in the US instead of Europe.
  
  
• 23% of European founders would start their company in the US instead today. Even though 51% of founders said they would start their company in the same country they are in now, and 17% say they would change countries but stay in Europe, almost 1 in 4 said they would now choose the US.
  

Aside from the obvious difference in scale (Apple alone is worth more than the entire European tech ecosystem!), what is it about the US market that creates such a draw?

And short of relocating there, what can European founders do to tap into the US investment scene?

Europe vs US VC market - our 10 key comparators

After sifting through 266 pages of data and analyses in the report, here are our key findings:

1. Capital Deployed in 2024

• Europe: Expected to reach $45B in VC investments this year.
• USA: Projected $139B in VC investments.
• Analysis: Europe’s annual VC funding is about one-third of the U.S., reflecting its smaller market size and fewer high-growth opportunities. However, Europe’s investment growth trajectory suggests a closing gap, though achieving parity in absolute terms remains unlikely without significant structural changes in capital deployment.
  
  

2. Total Venture Capital Growth by Decade (2005–2024)

• Europe: VC investment grew 10x from $43B (2005–2014) to $426B (2015–2024).
• USA: VC investment grew 2.8x from $249B to $1.2T in the same period.
• Analysis: While Europe’s growth is impressive, it’s starting from a lower baseline. Bridging this gap requires sustained momentum and policies that encourage the deployment of significantly more institutional capital.
  
  

3. Recent Growth in Venture Capital (2015–2024 CAGR)

• Europe: Achieved a 13% CAGR over the past decade, outpacing other global regions.
• USA: Managed 8% CAGR, slower but from a much larger base.
• Analysis: 2 big points here:
  
  Europe’s rapid growth highlights a maturing ecosystem and increasing global investor interest. However, the U.S. still benefits from a much larger historical base, where even slower growth translates into significantly higher dollar amounts invested.
  
  Even so, recent growth trends show an increasing divergence between Europe and the US (primarily due to the impact of 'Mega Rounds'):
  2024 vs 2020, Europe CAGR +20% (US +21%) - i.e. similar growth
  2024 vs 2023, Europe CAGR -5% (US +16%) - i.e. the US is surging ahead of Europe in 2024
  
  

4. Investment Round Sizes and Valuations

• Seed - Europe: Median Round Size: €1.8 million. Median Valuation: €5.4 million
• Seed - USA: Median Round Size: €2.8 million. Median Valuation: €8.2 million
  
  
• Series A - Europe: Median Round Size: €10.6 million. Median Valuation: €25.4 million
• Series A - USA: Median Round Size: €15.2 million. Median Valuation: €40.0 million
  
  
• Analysis: The disparity in round sizes and valuations demonstrates the significant advantage U.S. startups hold in early-stage funding. U.S. investors typically have access to larger pools of capital, enabling them to offer startups higher valuations and larger funding rounds. European startups face challenges in attracting comparable investment levels, which limits their growth potential. However, Europe’s ecosystem is steadily growing, and narrowing this gap will require addressing structural issues like the growth-stage funding gap (point 5) and fragmented capital markets (points 8,9).
  
  

5. Growth-Stage Funding Gap

• Europe: A $375B 'funding gap' has developed in growth-stage investments over the past decade.
• USA: Benefits from a robust funding environment with far more $15M+ rounds.
• Analysis: Since 2015, the lower conversion rates to growth stage rounds has meant that $300B worth of potential funding was never raised in Europe. Europe’s lack of large-scale funding at critical growth stages forces many startups to seek U.S. investors ($75B sourced here since 2015) or relocate entirely. Addressing this issue could unlock significant potential for European scale-ups.
  
  

6. Mega Rounds ($250M+)

• Europe: Rare occurrences; account for a small fraction of total VC funding.
• USA: 44% of funding in 2024 comes from such rounds.
• Analysis: The U.S.’s ability to support mega rounds reflects its deeper capital pools and willingness to fund high-risk, high-reward opportunities. Europe’s VC market remains fragmented (point 8 below), limiting such large-scale investments.
  
  

7. Capital Invested Relative to GDP (2015–2024)

• Europe: Estonia leads globally with 1.17% of GDP in VC investments but all other European economies lag the US. The UK invests 0.48% of GDP.
• USA: Allocated 0.53% of GDP to VC over the same period.
• Analysis: Estonia exemplifies Europe’s potential when policy and investment align. However, large European economies need to prioritise VC investments to compete with U.S. levels of funding relative to GDP. The biggest opportunity is tapping into Pension Funds (point 9 below).
  
  

8. Distribution of Pan-European Investments

• Europe: Less than 18% of early-stage funding is pan-European, with most startups raising capital within their home country or region.
• USA: Early-stage funding is geographically integrated, with startups accessing coast-to-coast funding across state lines with little restriction.
• Analysis: The fragmented nature of Europe’s venture funding ecosystem contrasts sharply with the more unified and expansive U.S. market. This siloed approach limits European startups' ability to scale beyond their immediate borders and compete on a global stage. Addressing this requires harmonising regulatory frameworks and fostering stronger cross-border investment networks.
  
  

9. Public-Private Investment Dynamics

• Europe: Limited pension fund involvement (0.01% of assets in VC).
• USA: Pension funds allocate 0.029% of assets to VC.
• Analysis: Europe’s untapped institutional capital represents a significant opportunity for future VC growth. Encouraging pension fund participation could provide stability and scale for Europe’s growth-stage startups. This is now an increasing area of focus, especially in the UK.
  
  

10. Trend in the Number and Type of Active Investors

• Europe: The number of unique investors participating in venture rounds in Europe has more than doubled from 2,100 in 2015 to over 4,000 in 2024. The share of very active investors (five or more investments annually) increased by 54% since 2015.
• USA: Continues to outpace Europe, with the number of local investors in 2015 already exceeding the current European investor base in 2024.
• Analysis: Europe’s venture ecosystem has significantly matured, with a growing and diverse investor base. However, the U.S. maintains a clear lead, providing a larger and more dynamic pool of investors. This disparity highlights Europe’s continued reliance on international capital.
  

Tapping into US investors

Short of relocating to the US, what can European founders do to tap into the US investment scene?

The first point is that international investors are already a significant driver of European investment activity, according to the report.

• They account for 30% of the unique European investor pool in 2024, up from 24% in 2015.
  
  
• Four times as many North American investors are backing European startups in 2024 compared to 2015.
  

When building target investor lists, founders keen to attract US investors, should consider the following:

• The later stage the company (and the larger the round) the more likely that international investors will be interested. The risk profile is lower, and they can use existing (local) investors as part of their due diligence process.
  
  
• Target US investors that have a mandate to invest in Europe/UK. Many US funds are precluded from doing so. If they have already invested in Europe multiple times, then this is a strong indicator that their current fund can invest here too.
  
  
• Target local investors that have strong links to the US and have previously syndicated rounds incorporating US investors. This is how an increasing number of Seed stage investors are setting out their stall, promising founders access to their Series A network in the US for the next round.
  

Finally, we have to keep in mind that the mindset of US investors can be very different from their European counterparts. In exchange for larger round sizes and valuations, growth expectations are also typically higher. But if those investors can also foster access to big US customers, this could quickly accelerate the growth potential and provide a real win-win outcome for all.

Let's talk.