Europe's Venture Capitalists Must Seize Risk to Save EU AI Dominance

Europe's Venture Capitalists Must Embrace Risk or Resign the AI Era to US Control In a stark reminder of Europe's dwindling influence in the global AI landscape, only 5% of venture capital is raised in the EU, according to the European Commission. This meager share contrasts sharply with the United States, which attracts more than half of global VC funding, while China takes a significant 40%. Despite having households that save nearly twice as much as Americans each year – a staggering €1.4 trillion – Europe's startups continue to struggle for capital. "We're not capital-poor; we're risk-averse," said Dr. Maria Rodriguez, an expert in AI and venture capital at the University of Cambridge. "Our investors are hesitant to take on risks, which is holding back our innovation ecosystem." The European Commission has introduced various incentives, such as the UK's Enterprise Investment Scheme (EIS) tax relief for business angels, but these efforts have had limited success. Even when funding is available, Europe's venture capital firms tend to be slow and cautious, spending weeks on due diligence and hesitating once valuations rise above €10-15 million. Regulation is often cited as a hindrance, but American funds backing European startups operate under the same regulatory frameworks, yet their capital continues to flow freely. The drag isn't the law itself; it's investors who interpret rules conservatively instead of moving decisively. "Conservatism over conviction has been a hallmark of European venture capital for too long," said Tomasz Chmielewski, managing partner at Polish VC firm, Inovo Venture Partners. "We need to take more calculated risks and trust our entrepreneurs to drive innovation." This risk-averse approach is rooted in Europe's history of bank-dominated markets, where capital preservation has been the primary focus. The Mittelstand mindset – a focus on steady, long-term growth rather than rapid expansion – also contributes to this caution. However, as AI continues to reshape industries and economies worldwide, Europe cannot afford to lag behind. "The AI era is not just about technology; it's about economic power," said Dr. Rodriguez. "If we don't take control of our own innovation ecosystem, we risk ceding influence to the US and China." To reverse this trend, European venture capitalists must adopt a more dynamic approach, embracing calculated risks and trusting their entrepreneurs to drive growth. As Chmielewski noted, "We need to be bold, not just in our investments but also in our vision for Europe's future." The European Commission has acknowledged the need for change, launching initiatives such as the AI4EU program to support AI research and development across the continent. However, more needs to be done to address the root causes of Europe's VC drought. As the global AI landscape continues to evolve, one thing is clear: Europe's venture capitalists must adapt or risk being left behind in the AI era. *Reporting by Thenextweb.*