It's time for Europe's fintech's to seek bolder capital solutions

In the last decade, Europe’s tech ecosystem has undergone a transformation. Once overshadowed by Silicon Valley, it now boasts a thriving landscape of over 35,000 startups, a tenfold increase in venture capital, and a talent pool growing at a remarkable 24% annually.

But amid this progress, an invisible bottleneck threatens to stall momentum: a $375 billion growth-stage funding gap.

This shortfall, published in the State of European Tech, isn’t just a number.

This funding issue is a challenge for Europe’s next wave of innovation, especially for fintech—a sector that embodies the continent’s strengths and vulnerabilities. If Europe is to cement itself as a global tech superpower, solving this funding conundrum must become a collective priority.

The Growth-Stage Gap

Early-stage funding in Europe has flourished. Angel investors, accelerators, and government initiatives have fueled a surge in startups, creating a vibrant ecosystem. Yet, when these startups reach the critical growth stage—seeking $15 million or more to scale their operations—they find themselves in murky waters.

Compared to their US counterparts, European companies are half as likely to secure these transformative rounds of funding. Over the past decade, this disparity has left promising companies either underfunded or reliant on American investors, pulling talent and innovation away from Europe’s borders.

In fintech, the consequences are stark. While Europe has produced global leaders like Revolut Business and Klarna , many potential disruptors never make it past the growth stage. This isn’t due to a lack of ambition or innovation; the problem lies in the ecosystem’s inability to match its early-stage successes with robust growth-stage support.

"European tech startups are half as likely than their US counterparts to secure a $15M+ venture funding round, creating a growth-stage funding gap of $375 billion over the past decade."

Fintech’s Role in the Bottleneck

The fintech sector illustrates the paradox of Europe’s progress. It is both a jewel in the crown and a casualty of the funding gap. Europe leads globally in payments innovation, embedded finance, and sustainability-focused fintech, and 17% of seed-stage fintechs launched in 2015 have reached advanced funding rounds—a testament to the ecosystem’s potential.

But these successes are the exceptions. For every Klarna or Adyen, there are dozens of fintechs that fail to scale due to funding limitations. Europe’s fragmented regulatory environment compounds the issue, making it harder for start-ups to expand seamlessly across borders and attract the capital needed to compete globally.

17% of European fintech startups that raised seed funding in 2015 have advanced to sixth-round funding or later—higher than any other sector.

Without addressing these systemic challenges, Europe risks falling behind in a sector it has long dominated. Fintech, which thrives on bold innovation and cross-border scalability, cannot flourish in a piecemeal funding landscape.

Unlocking Bold Capital Solutions

One solution to Europe’s funding bottleneck lies in bold, systemic change. It starts with unlocking local capital. European pension funds and insurers, which collectively manage $9 trillion in assets, currently allocate just 0.01% to venture capital.

Matching U.S. levels of pension fund investment would inject billions into Europe’s scale-ups, creating a foundation for long-term growth.

Policy initiatives like the UK’s Mansion House reforms and France’s Tibi initiative are promising steps, but broader adoption across Europe is essential. Harmonised regulatory frameworks, such as the proposed “28th Regime,” could simplify cross-border operations and make Europe a more attractive market for growth-stage investment.

Finally, the ecosystem needs a mindset shift. Growth-stage funding should be treated as economic infrastructure—a public and private responsibility to future-proof Europe’s tech leadership. Policymakers and investors must act with urgency and ambition, recognizing that without this support, the brightest ideas may migrate elsewhere.

A Cautionary Tale—and a Call to Action

The risks of inaction are very clear.

Without sufficient late-stage funding, Europe’s most promising companies may continue to relocate to Silicon Valley, where the capital and infrastructure for scale-ups are abundant. This would not only drain talent but also undermine Europe’s leadership in key sectors like fintech, AI, and sustainability tech.

Yet, there is room for optimism. Europe’s tech ecosystem has achieved what once seemed impossible: a burgeoning landscape of unicorns, global leaders in fintech, and a reputation for tackling society’s hardest problems, from carbon removal to financial inclusion. The next step is to ensure these successes don’t remain isolated.

If Europe can close its growth-stage funding gap, it has the potential to create its first trillion-dollar company, generate 15 million new jobs, and add $5 trillion to its GDP by 2034. The flywheel of innovation is already in motion - now it needs the fuel to sustain it.