What European VC Gets Wrong (And Right)

The "Europe vs US" debate in venture capital is almost always lazy. You get two versions. The defeatist take: Europe will never compete, the best founders leave, we're permanently behind. And the booster take: Europe is having a moment, the ecosystem has matured, we're finally catching up.

Both miss the point.

Personally? Both miss the point.

Europe is not a worse version of Silicon Valley. It is a different system, shaped by different constraints. Understanding where those constraints help or hurt matters – especially if you're trying to build or back durable companies here.

The Nordic Miracle Was a Timing Play, Not a Cultural Phenomenon

Everyone points to Sweden as proof that Europe can compete. Spotify. Klarna. King. iZettle. Stockholm produces more unicorns per capita than anywhere outside Silicon Valley.

The standard explanation is culture. Flat hierarchies. Design sensibility. Long winters that keep people coding. A welfare state that de-risks entrepreneurship. I have been guilty of using this argument, so I did some more reading.

The real story is much more specific.

In 1998, the Swedish government launched Hem-PC-reformen – the Home PC Reform. It subsidised households to buy personal computers. Within three years, 850,000 computers went into Swedish homes, reaching nearly a quarter of households who couldn't otherwise afford them.

Klarna's founder Sebastian Siemiatkowski has been explicit about this: "Computers were inaccessible for low-income families such as mine, but when the reform came into play, my mother bought us a computer the very next day." He started coding at 16. By 2005, he'd founded Klarna.

By 2005, Sweden had 28 broadband subscriptions per 100 people. The US had 17. Dial-up was still common in America. Sweden had a decade-long head start on digital-native founders.

The flywheel followed. Spotify alumni have now launched over 120 VC-backed startups. Klarna and King produced similar founder networks. A third of all European fintech exit value has come from Sweden alone.

Here's the uncomfortable question: is this replicable, or was it a one-time cohort effect?

The founders who built Spotify and Klarna came of age during a unique infrastructure moment. No equivalent intervention has created the next wave. The "Swedish miracle" was timing arbitrage. The question is whether the flywheel has enough momentum to sustain itself – or whether we're watching the tail end of a generational advantage.

The Series B Gap Isn't Closing – It's Transforming

The Series B gap isn't closing because European capital stepped up. It's closing because US growth tourists left.

Tiger Global backed 34 European companies in 2021. By 2024, that number had dropped to single digits – almost all follow-ons in existing portfolio companies. Coatue closed their London office in early 2024, two years after opening it.

The compression in European growth rounds isn't maturity. It's the absence of competition. When Tiger was deploying, any company with traction could raise. Now, US capital exists for Europe – but only for the top 5% of companies.

That's not a closing gap. It's the disappearance of the mediocre European growth round. For most founders, that's worse, not better.

The smart money sees this. Evantic Capital launched in late 2025 with over $400M specifically to fill this gap – built by a partner who spent twelve years at Sequoia and concluded that European founders at Series B need US-calibre support without having to become American companies to get it. General Catalyst expanded its London operation. The capital is arriving, but it's conviction-led and concentrated, not spray-and-pray. The tourist era is over. What replaces it will be smaller, sharper, and more opinionated.

The Real Gap Is Compensation, Not Capital

The relocation conversation always focuses on capital access. That's part of it. But the more structural driver is talent.

Index Ventures found that employees at late-stage European startups own around 10% of the companies they work for. In the US, it's 20%. Double. When your best engineers can get 2x the equity across the Atlantic, you can't compete by offering mission and work-life balance.

The talent war isn't about salaries. It's about ownership. And no amount of venture capital fixes that.

The Sovereignty Thesis Is Dying

Taavet Hinrikus, the Wise co-founder, has made the sovereignty argument forcefully: Europe needs the ability to build and fund companies without relying on US capital or US acquirers. True ecosystem maturity means European giants that stay European.

The evidence is moving in the opposite direction.

Klarna – one of Europe's flagship fintech companies – ultimately chose to list in the US, citing talent and compensation constraints as key risks, with its largest market now stateside. The company considered listing in Europe. It chose NYSE.

Between 2008 and 2021, close to 30% of European-founded unicorns relocated their headquarters abroad. The vast majority moved to the US. In Central and Eastern Europe, nearly half of scaleups have relocated.

The companies that "make it" become American by necessity. Everyone knows this. Nobody wants to say it out loud.

What European VC Gets Right

To be clear – none of this means European VC is a lost cause. It means the opportunity is narrower than the boosters claim.

Capital efficiency as a forcing function. Europe's relative capital scarcity has created stronger early discipline. Founders here build with fewer resources. That leads to clearer prioritisation, earlier revenue focus, and sharper unit economics. In an environment where capital is no longer free, this becomes an advantage.

Strength in regulated and complex markets. Look at the companies that stay European and win. Mistral AI raised over €1 billion and is staying in Paris. Helsing raised €600 million for defense tech and is staying in Munich. IQM raised one of the largest Series B rounds in Nordic history for quantum computing and is staying in Finland.

The pattern: deep tech, defense, and infrastructure plays with European industrial customers or government contracts. Regulated sectors where domain expertise creates moats US competitors can't cross. This isn't coincidence. It's a sector filter.

And it extends further down the stack than most people realise. Veterinary care, dental, legal — industries that run on legacy software and operate under heavy compliance requirements. These aren't glamorous markets. But they share the same structural logic as Mistral and Helsing: domain expertise matters more than model capability, regulatory knowledge compounds over time, and US generalist competitors can't just parachute in. I've spent the past year researching companies building in exactly these verticals. The pattern holds.

The "stay European" playbook isn't about pride or sovereignty. It's about building in categories where European headquarters is an advantage. Where regulatory complexity is a barrier to entry. Where the customer base is inherently regional. Where the technical talent pipeline flows from European research institutions.

What This Means in Practice

The winning thesis isn't "Europe can compete across the board." It's "Europe is the best place to build specific kinds of companies."

Consumer? Horizontal SaaS? Fintech that needs US scale? Those founders will likely keep moving to San Francisco. And they probably should.

But deep tech with European research advantages? Infrastructure plays with government customers? Vertical AI in regulated industries where compliance knowledge compounds and US competitors can't just show up? That's where Europe doesn't just compete. It wins.

I visited a veterinary AI company in Wandsworth last year, before their Series A. Two founders, a small team, building software for an industry that still runs on paper records and fax machines. They'd raised a seed round. The product worked. The vets loved it.

Six months later they closed a $20M Series A off 50x revenue growth. They're still in London. They're not moving. They don't need to; their moat is understanding UK veterinary regulations, NHS referral pathways, and RCVS compliance requirements better than any Silicon Valley entrant ever will.

That's the European advantage when it's real. Not subsidies. Not ecosystem cheerleading. A structural reason to be here that compounds with time.

The debate isn't Europe versus America. It never was. The real question is narrower and more honest: what categories have structural European advantages, and are we backing the founders who understand that?