Europe is being told to wake up. French president Emmanuel Macron’s recent warning that the continent faces a “geopolitical and geo-economic state of emergency” has landed with a familiar thud: invest faster and remove barriers to growth or be swept aside by American technology and Chinese manufacturing.
It is a serious warning and a necessary one. But it risks reinforcing a narrative that is both lazy and dangerous: that Europe’s best days are behind it, that it is a heritage vista of cathedrals and cobblestones, a wonderful place to visit but a frustrating place to build. That story is wrong, but if Europe’s entrepreneurs and innovators and its political leaders keep repeating it, it may yet become a self-fulfilling prophecy.
I have spent much of my academic life at London Business School studying how new ventures are born and scaled, often under far more constrained conditions than those facing most of today’s European founders. I have a ring-side seat from which I can observe what the possibilities hold — and what stands in the way — for Europe today.
Europe’s key strengths
Europe is not short of assets. It is dense with world-class universities, deep scientific capability, sophisticated customers and advanced infrastructure built over centuries.
Research and recognition from major European institutions show how academic ecosystems contribute directly to venture formation and scaling. London Business School’s Institute of Entrepreneurship and Private Capital (IEPC) was honoured for its “exceptional contributions in entrepreneurship research” at the 2023 Global Consortium of Entrepreneurship Centers awards.
Oxford Saïd’s Entrepreneurship Centre supports venture creation through initiatives such as the Entrepreneurship Project and the Oxford Seed Fund, which have helped student-led ventures launch and secure funding, illustrating how academic support tangibly feeds into real-world enterprise outcomes.
These are not relics. They are platforms. The industrial revolution that reshaped the world in the 18th and 19th centuries did not spring from thin air. It was ignited by institutions, skills and capital that already existed, recombined in new ways by people who refused to accept the limits of their age. That same opportunity exists now.
Design constraints
Yes, Europe’s markets are fragmented, and regulation can be heavy. Risk capital is scarcer than in Silicon Valley. In 2023, European tech companies raised roughly half the venture capital that US peers did, despite comparable population and economic scale, with the funding gap particularly pronounced at growth and late stages.
European pension funds, among the continent’s largest institutional investors, typically allocate only low single-digit percentages of assets to venture capital and private equity, compared with double-digit allocations among major US pension funds, limiting capital availability to drive companies toward scale.
But these are not excuses for pessimism; they are design constraints to be resolved. In my book The New Business Road Test, I argued that the best ventures are built not on hype, but on a cold-eyed understanding of markets, industries and entrepreneurial teams.
Europe, with its demanding customers and complex environments, remains an unusually good laboratory for building businesses that are robust rather than brittle. European scale-ups such as Spotify and Adyen built globally competitive businesses by prioritising disciplined expansion and revenue traction before tapping deeper capital markets.
A London Business School 2013 research report on organisational ambidexterity and adaptive strategy also supports this framing. The report found that firms with disciplined practices and customer-centric innovation outperform peers in complex markets.
The next sparks?
Defence is an obvious spark for the next wave of European innovation. The uncomfortable truth is that geopolitical pressure concentrates minds and loosens purse strings. Dual-use technologies, advanced materials, cyber resilience and autonomous systems will all benefit.
But defence is not the whole story, nor should it be. Europe has long been world-class in aerospace, pharmaceuticals, industrial engineering and robotics. These sectors sit precisely at the intersection of deep science, patient capital and with the long time horizons where Europe has a comparative advantage.
Consider healthcare and life sciences. Europe’s ageing population is often framed as a fiscal burden. It also underpins some of the largest unmet customer needs on the planet. The same applies to energy systems, climate technologies and advanced manufacturing. These are not frivolous consumer apps chasing attention; they are mission-driven markets crying out for serious innovation.
What will it take?
Revisiting the cri de cœur that Europe is doomed if it fails to confront its sclerosis, it is worth noting that unchecked growth also carries risks. WeWork’s $47bn private valuation imploded after its failed 2019 IPO exposed unsustainable cash burn and fragile unit economics, a cautionary tale of scale without substance. Europe’s caution may therefore reflect foresight rather than weakness.
