Mario Draghi’s recent European Competitiveness report painted a gloomy picture of European investment, stating that the gap in private sector growth between the bloc and competitors like the US and China is quickly growing. The report argued that Europe risks being left citing the decisions of 30% of their companies with unicorn valuations to leave the bloc since 2008. 

Europe’s Venture Capital industry has long attracted criticism from within and across the Atlantic, citing an unfavourable environment for startup and high growth companies, with stifling regulation and low risk tolerance among investors. We know European VC objectively lacks the scale that the US possesses, between 2013-2023 US VCs raised $924bn. Europe’s VCs raised $130bn creating a pronounced gap. One of the major points of the report is the need to make it easier for bigger funds and institutional investors to support startups, something that both the UK and EU have struggled with and a popular solution that many have advocated for years.

These criticisms are well known, but too often are accompanied by the sort of metrics that don’t stand up to scrutiny. Simply pointing to the size of your respective VC markets, whether it’s the count of funds, dealmaking or assets under management, shouldn’t be your starting point for discerning the performance of these ecosystems. Ultimately, a VCs’ primary objective is targeting exceptional founder teams and accelerating the growth of these startups into global success stories. Factors like the eventual location of startup HQs and eventual IPOs are little more than vanity metrics that risk distracting from properly evaluating Europe’s VC ecosystem. More relevant are metrics like IRR, where we can see that despite Europe’s more modest backing their VCs have consistently managed to produce outsized results, over 10 and 15 year horizons….