Falling Behind in the Race for Innovation

Have you ever been to Silicone Valley? It's like a glimpse of the future.

Everything moves at lightning speed, with ideas transforming into billion-dollar businesses seemingly overnight. The ambition and drive are palpable — no dream is too big, and failure is simply a step toward success. In contrast, Europe, particularly Germany, seems stuck in slow motion, focusing on precision and caution rather than bold risk-taking.

While Europe's tech talent and innovation are undeniable, the critical missing ingredient is investment. And this gap is only widening.

The Boldness of Silicon Valley vs. Europe’s Caution

In Silicon Valley, the culture thrives on rapid experimentation and daring risks. The mantra is to push the boundaries of what’s possible, fail fast, and scale quickly. Back in Europe, we tend to play it safe. The hesitation to embrace the same boldness and urgency in our tech sector holds us back from keeping pace with the US and China.

The energy sector is a prime example. Ann Mettler, from Bill Gates' Breakthrough Energy, recently emphasized that Europe is at a "Scale or Fail" moment during the WIRED Energy Tech Summit. The war in Ukraine and the subsequent energy crisis presented a unique opportunity to accelerate the clean energy transition. Yet, aside from deploying China-made solar panels, Europe has seen little progress in scaling other critical clean technologies like EVs, batteries, and heat pumps.

Mettler’s call for "patient risk-tolerant capital" is more relevant than ever. Europe’s lack of investment in emerging clean tech is sobering. We have the technology — what we don’t have is the capital to bring it to scale.

Investment Challenges: A Tale of Missed Opportunities

What’s happening in clean tech mirrors the broader tech industry. Europe’s startups and innovators are working tirelessly to build solutions that could shape the future, but without sufficient investment, they remain in limbo.

Venture capital and private equity in Europe remain underdeveloped, particularly when compared to the US and China. When European companies do receive significant capital injections, it’s often from outside investors. It’s no surprise, then, that the US and China are leading the race — they’re the ones funding the future.

Take Octopus Energy, a shining example of how digital services and innovation can revolutionize the energy market. Founded in the UK in 2015, Octopus Energy has become the largest electricity supplier to domestic consumers in the UK and is expanding into countries across Europe, the US, and Asia. But for every Octopus Energy success story, there are countless European startups struggling to secure the funding they need to scale.

Octopus Energy has secured significant funding from a variety of sources, particularly from institutional investors and strategic partners. Key sources of funding include:

1. Generation Investment Management – A major investor led by former U.S. Vice President Al Gore, this sustainable investment firm has been a significant backer of Octopus Energy. In 2021, they led a $600 million funding round, boosting Octopus Energy’s valuation to over $4.6 billion. Generation focuses on long-term sustainability, making it a natural fit for Octopus' renewable energy mission.

2. Tokyo Gas – In 2020, Tokyo Gas, one of Japan's largest utility companies, invested $200 million in Octopus Energy. This partnership also helped Octopus expand into the Japanese energy market, creating a joint venture for renewable energy.

3. CPP Investments – The Canada Pension Plan Investment Board (CPP Investments) has also played a key role in funding Octopus Energy. In 2021, CPP invested $300 million into Octopus to help further its global expansion and innovation efforts.

4. Origin Energy – An Australian utility company, Origin Energy, made a significant investment in Octopus Energy in 2020. The partnership also allowed Origin to adopt Octopus’s technology platform, Kraken, in its operations.

These investments have fueled Octopus Energy's rapid global expansion and allowed the company to develop its cutting-edge technology for managing energy distribution. The company has leveraged both private and institutional capital to scale quickly and make clean energy accessible to consumers in multiple regions across the world.

Question remains, do you see here a significant investment from Europe???

Where is Europe and it's bold investors?

One of the biggest challenges facing European tech companies is the lack of blended finance. While subsidies can help jump-start innovation, they are not enough to sustain growth. Europe needs more involvement from institutional investors and private finance to truly scale innovation. As Mettler pointed out, private sector funding brings more than just capital — it brings market expertise, global networks, and tech know-how.

Europe’s regulatory-heavy approach has also contributed to the investment crisis. The sheer volume of regulations and the absence of functioning markets stifles innovation. We’re making the transition to clean energy harder than it needs to be by relying on sticks rather than carrots. Subsidies without a clear path to commercialization won’t work.

The Way Forward: Scale or Fail

Europe must decide whether to continue playing catch-up or to start playing to win. If we don’t move quickly to create more investment opportunities, particularly in critical sectors like clean tech, we risk falling further behind.

The world’s future is being built at a rapid pace, and Europe needs to step up. We have the technology, the talent, and the ambition. What we need now is the bold investment to match. It’s time to stop playing small and embrace the scale and urgency required to lead in the global tech landscape.

As Mettler put it, "The energy transition has to be made workable, more affordable, and much easier." The same holds true for the entire European tech sector. The world won’t wait for us to catch up — it’s time to act, or we risk missing out on the future altogether.

European countries collectively spent around €600 billion to import energy, particularly from regions like the Middle East, North Africa, and the U.S. This was mostly in the form of liquefied natural gas (LNG) and other fossil fuels, as European countries sought to replace the natural gas supplies cut off by Russia. While this helped to mitigate the short-term energy crisis, it represented an enormous transfer of wealth outside the EU, which could have been used to fund domestic energy solutions.

Had Europe funneled at least a portion of this €600 billion into scaling green technology, it could have drastically changed its energy landscape. Instead of investing reactively in fossil fuel imports, Europe could have focused on:

1. Renewable Energy Expansion: Investing heavily in solar, wind, and hydro energy to increase self-sufficiency. The money spent on importing gas could have funded large-scale renewable projects that would make Europe less dependent on external suppliers but for some reason the same mistakes are arising again and again.
2. Energy Storage: Europe’s green transition has long been hampered by the lack of effective energy storage solutions. Investments in batteries and other storage technologies would allow renewable energy to become more reliable, balancing supply and demand.
3. Grid Modernization and Electrification: With better infrastructure, the integration of renewable energy could have been faster and more efficient. Improved grids, coupled with investments in electrifying industries, homes, and transport, would have further reduced dependence on fossil fuels.
4. Green Hydrogen and Other Emerging Tech: Instead of sending money abroad, Europe could have poured capital into green hydrogen and other innovative energy solutions that promise carbon neutrality and a more sustainable future.

By spending these vast sums on external energy imports, Europe delayed its green transition and missed the opportunity to become a global leader in clean tech innovation. Instead of fostering local industry and creating jobs within the EU, the funds supported fossil fuel industries abroad. Now, Europe finds itself playing catch-up in the global race for clean energy dominance, trailing behind nations like the U.S. and China, both of which have made more significant strides in green tech investment.

So, when I approach investors for just a few million and get labeled as crazy, the real craziness is evident in everything I’ve just outlined. I'm looking for patient, risk-tolerant capital from investors who are bold enough to be called crazy together with me.