Europe’s innovation sector continues to expand rapidly, with hubs like London, Paris, and Berlin ranking among the world’s top cities for startups. However, while company creation is accelerating, the continent still trails behind the US, not only in overall deal value but also in share of exit value generated in the market. Many European companies seek buyers in the US when going public, as investors there are more frequently able to lead large-scale transactions.
Early-stage funding in Europe – Seed and Series A rounds – continues to steadily rise year-on-year. However, industry experts often highlight a ‘valley of death’ at the scale-up stage. Median Series B and C rounds reached USD30 million and USD50 million, respectively, as of 30 September 2025, but far fewer companies manage to secure this late-stage capital. While Europe is recognised as a stable environment for founders, many still head to the US. Attracting investors and entrepreneurs remains a challenge for the continent, but the European Union is stepping up efforts to close this gap.
At a recent gathering among innovative companies in the ecosystem hosted by BNP Paribas, special guest speaker Mike Hayes, Managing Director at global software investor, Insight Partners, shared his views on the current landscape and discussed market developments with Marie-Gwenhaelle Geffroy, Head of Growth Capital & Solutions (GC&S), and Ygal El Harrar, Head of VC Coverage at BNP Paribas CIB. Drawing on Insight Partners’ hands-on operating engagement with portfolio companies and its global enterprise network, Mike Hayes touches on how European founders can navigate the critical transition from rapid early growth to building durable, category-defining businesses.
Evolving investment trends in Europe’s innovation ecosystem
Total capital invested in European innovative companies has significantly increased over the past decade and Atomico’s State of European Tech 2025 report expected that it would reach approximately USD44 billion by the end of 2025.
Investments are shifting from B2C and retail to B2B and, notably, deep tech – which alone accounted for about one-third of venture capital (VC) activity in 2025. While Europe has produced several multi-billion-dollar AI companies and raised billions in AI funding rounds, the gap compared to the US is particularly visible in this area. Industry experts note that Europe’s strong industrial capabilities and engineering talent could benefit from AI-driven automation.
According to Mike Hayes, investor interest often follows enterprise demand. He observes that across Insight Partners’ enterprise network, buyers are moving beyond experimentation, looking for B2B solutions that use AI to tackle manual, time-intensive work at the heart of their business model. Large enterprises, he adds, must get off the side-lines and make bets in the data, infrastructure, and application layers to deliver clear business impact or to fail, learn and quickly try another tech-forward solution.
A developing VC ecosystem to support European innovative companies
Companies are looking for innovative ways to raise capital through diversification, seeking both equity and credit, and increasingly combining public and private capital.
Venture debt is now recognised by founders as an effective funding option to maintain liquidity and flexibility without diluting ownership. With founders increasingly turning to this alternative means of funding between equity rounds, European banks and official institutions are expanding their support, resulting in a rise in venture debt volumes over the past decade. Venture debt was expected to reach record levels by the end of 2025. As Marie-Gwenhaelle Geffroy, Head of GC&S at BNP Paribas CIB, explains: “Through our venture debt solution, we are able to partner with official institutions such as the European Investment Fund (EIF) and share risk when financing growth companies, enabling us to unlock greater capital for these companies than we could do alone. These types of partnerships are key to channelling both private and public investment into the economy.”
Official institutions also play a role in scaling European innovation. For example, the European Investment Bank (EIB), through the EIF, supports nearly half of European VC-backed startups each year and has channelled billions into major VC funds.
Over the past decade, Europe’s VC ecosystem has expanded significantly, both in terms of number of funds and available capital. Mike Hayes explains that Insight Partners invests across growth stages, with a particular focus on gross retention and net retention as indicators of long-term business quality. This discipline, combined with direct engagement with management teams, reflects a broader shift toward supporting companies as they scale more complex, outcome-focused business models.
Reflecting on today’s dynamic VC landscape, Ygal El Harrar, Head of VC Coverage within the GC&S team at BNP Paribas CIB, highlights: “Banks like BNP Paribas play a crucial role in connecting venture capital firms with the capital and support needed to help innovative companies scale. By fostering strategic partnerships and leveraging our networks, we help ensure founders have access to the right resources for growth.”
Mobilising institutional capital to boost innovation in Europe
Another source of capital is pension funds. In Europe, despite their large assets, these investors only play a minimal role in venture capital investments, allocating a much smaller share to private equity and venture capital than their US counterparts. Industry experts believe that increasing pension fund investment in Europe could help close the funding gap in the ecosystem, although regulatory adaptation and effective incentives would be needed.
Marie-Gwenhaelle Geffroy emphasises that unlocking greater pension fund investment will depend on strong partnerships and effective capital deployment strategies. She explains: “Pension funds need to work with the right partners. Experienced asset managers and trusted banking partners can help deploy capital efficiently and support the development of this capital ecosystem. Our expertise enables us to deploy savings effectively and mitigate the risks around venture capital, while focusing on the right players and the right companies.”
Breaking through red tape and fragmentation to foster the scaling-up of Europe’s innovative companies
Scaling across 27 different national frameworks is fraught with challenges, and both industry experts and the Draghi report advocate for a unified single capital market in Europe. Proposals such as the 28th Regime, or EU Inc., a single digital company registration system for all European countries, are being advanced, and suggestions of a single European listing exchange are drawing both support and opposition among leaders. These initiatives could simplify regulations and reduce bureaucracy, thereby making Europe more attractive for business, lowering costs, and fostering a dynamic innovation ecosystem.
When supporting companies during the go-to-market phase, particularly those outside major hubs or without established strategic/enterprise relationships, Mike Hayes stresses the importance of better-connected ecosystems. He explains: “Fragmentation can be one of the biggest challenges for founders scaling beyond their home markets.”
❝ Making markets work better means reducing friction between countries, customers, and capital. ❞
Such shifts could be particularly beneficial for the deep tech space, which depends on substantial early-stage investment and a more risk-tolerant approach.
❝ We are at a global turning point for tech, and Europe has the opportunity to become a true leader in innovation, but we need to make it easier to build great businesses and for them to succeed. ❞
Catalysing innovative growth companies in Europe
As scale-ups enter the critical and challenging growth phase, they can also benefit from the support offered by European banks. BNP Paribas CIB’s Growth Capital & Solutions (GC&S) team plays a pivotal role in empowering European growth companies, combining expertise in equity advisory, structured financing, and local coverage. Working hand in hand with BNP Paribas Commercial Banking (CPBS) bankers dedicated to innovative companies, GC&S experts are on the ground across all key European countries, delivering BNP Paribas’ one-stop-shop model.
From fintech and insurtech specialists, former founders and financing experts to data scientists and business developers, their diverse perspectives and skills enable teams to provide innovative companies and investors with a tailored approach and a comprehensive range of services, from technological assessment and analysis to data-driven growth capital solutions. By connecting scale-ups with investors and providing solutions like venture debt and dynamic RCF products, GC&S helps founders and investors navigate every stage of the growth cycle, from commercialisation and offering expansion to risk management and international development.
Ygal El Harrar understands that success is about more than just capital: “It’s about strategic partnerships, access to networks, and creating the right environment for innovation to thrive.”
❝ Our focus is on connecting the right people, expertise, and solutions to help innovative companies scale across borders. ❞
Marie-Gwenhaelle Geffroy explains: “By leveraging our deep market knowledge and network, we help ensure that innovative European companies can access the right opportunities and achieve successful outcomes on a global stage.”
Growth Capital & Solutions at BNP Paribas CIB
The Growth Capital & Solutions team’s dedicated experts are engaged in delivering the full breadth and depth of CIB solutions and expertise to scale-ups, such as fast-growing fintech, tech and climate tech companies, and their investors. From day to day banking support, venture debt, access to private capital, IPOs, and beyond, BNP Paribas is committed to supporting the innovation ecosystem.
