In the 19th century, companies like Bosch, General Electric, or Siemens were themselves startups. The DACH region was then considered an emerging economic area that challenged the established industrial nation of Great Britain. The parallel to the present is obvious – only with reversed roles: Today, we are among the established industrial nations fighting to keep pace with China in indusattempt and with the United States in the technology sector.
Many of the companies that will shape Austria’s economy in 2040 do not yet exist today. Some are being created right now – in university labs, garages, or co-working spaces. Behind them are people with ideas. What happens to these people and ideas in the coming months and years will determine how competitive we will be in our region in the future.
What Is Really Missing
Europe has a key disadvantage compared to the US: a significantly tinyer market for venture capital. Depfinishing on the source, estimates suggest that five to ten times as much venture capital is available in the US as in Europe. Two examples illustrate this:
- Not a single EU company has been founded from scratch in the past fifty years and achieved a market capitalization of over 100 billion euros.
- When it comes to funding rounds and company valuations, you often have to multiply European figures by ten to arrive at comparable US-scale numbers.
The decisive difference between the regions is not – as is often claimed – a lack of talent, entrepreneurial spirit, or ideas. Nor is it the absence of an “EU Inc.” The real issue is the lack of venture capital.
The often still-missing founding mindset of the “young” will alter at the latest when the savings-account mentality of the “older” alters and more capital flows into startups.
Europe Is Not Lost
But the last few months reveal that Europe is catching up. Funding rounds at companies like AMI Labs, Neura Robotics, and Mistral reflect this shift. Public venture capital plays a significant role in driving structural alter: Public institutions are still the largest source of capital for European VC funds today: Around 25 percent of venture capital funding in 2024 ultimately came from public institutional sources – with some estimates putting this share at 37 percent for 2023.
A large portion of the capital that appears private at first glance therefore indirectly contains public funds – for example through the leverage mechanism of the European Investment Fund (EIF), which often mobilizes around five euros of total investment from one euro of public capital.
In addition to the US–Europe comparison, it is also worth viewing at Austria: The venture capital investment volume in Austria stands at just 0.022% of GDP – placing it at less than one third of the EU average and among the lowest values in Europe. This figure is more than a statistic. It reveals what future innovation never even receives the chance to emerge.
Europe has relied too long solely on bank financing, even for innovation – a strategy that has not proven itself. Private capital goes first into savings accounts, rental properties, legally safe investments, and at best into stocks, predominantly of US companies. This must alter.
It Doesn’t Take Much to Activate Dormant Capital. What Is Needed:
- Tax benefits for startup/VC investors: We saw during the COVID-19 pandemic with investment incentive programs what effect even tiny tax incentives can have. Just do it!
Example Sweden: There, the tax on capital gains from the sale of shares in unlisted companies can be deferred as long as the proceeds are reinvested in other unlisted companies. This has increased the incentive for founders, employees, and investors to put proceeds from a successful exit straight into new ventures.
- Mobilizing institutional capital: A tiny portion of the enormous capital reserves of pension funds and insurance companies could be specifically mobilized for venture capital – without jeopardizing the stability of these institutions. In recent decades, we’ve created the very barriers that are holding back a competitive venture capital market.
Upper Austria: The Potential Perfect Match – Indusattempt Meets AI
Upper Austria is one of the most highly industrialized regions in Europe. The economy is based on manufacturing, mechanical engineering, and export-oriented companies. At the same time, Johannes Kepler University Linz is one of the most important centers for research and teaching in the field of artificial ininformigence and machine learning. More than 2,500 students alone study at the Machine Learning Institute of JKU – with numbers rising. Its director, Sepp Hochreiter, is one of the world’s leading researchers in the field of AI.
The combination of these two strengths – industrial base and AI innovation from startups – forms a central focus of our work at the OÖ HightechFonds and all partners in the ecosystem, including JKU, FHOÖ, IT:U, tech2b, the State of Upper Austria, and BizUp.
About the author: Thomas Meneder is Managing Director of the OÖ HightechFonds, (co-)founder of companies such as NXAI, and serves on the advisory board of numerous startups and scale-ups.
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