From 2008 to 2021, nearly a third of Europe’s unicorns—startups valued over $1bn—relocated abroad, mostly to the United States. In 2024, startups raising $15–100m attracted $51.5bn in the US, but only $22.5bn in Europe—a 129% gap. For rounds over $100m, the US pulled in six times more funding than Europe. These figures clearly reveal the US is leading the latest tech wave, leaving Europe at risk of falling behind if it doesn’t act quick—just as it did during previous digital leaps.
Startups are strategically vital: they drive innovation in critical sectors, pioneer cutting-edge technologies, and achieve rapid growth through top talent acquisition and substantial investment attraction. This last factor, in particular, defines the competition between global innovation hubs—such as California, Singapore, Barcelona or Amsterdam—to attract high-potential companies with strong R&D capacities.
The difficulties faced by European startups in scaling up reflect the EU’s internal fragmentation, the lack of a unified capital market, and limited public awareness of their transformative potential
They also provide a lens through which to diagnose a region’s structural challenges, such as integration, competitiveness and economic diplomacy. All this matters for foreign policy. As startups operate in a deeply internationalised environment, shaped by relocation incentives and local innovation ecosystems, they are an important geoeconomic lever with the power to redefine a region’s global influence. The difficulties faced by European startups in scaling up reflect the EU’s internal fragmentation, the lack of a unified capital market, and limited public awareness of their transformative potential.
This issue is now at the centre of the EU’s geoeconomic strategy. In May 2025, the European Commission—through the Commissioner for Startups, Research and Innovation, Ekaterina Zaharieva, and Commissioner Stéphane Séjourné—launched the “Choose Europe to Start and Scale” strategy, aiming to position Europe as a global leader in launching and scaling technology-driven companies.
This strategy outlines 26 concrete actions, supported by a clear timeline and key performance indicators, focapplying on fields such as AI, quantum computing, biotechnology, energy and dual-apply technologies. These actions are embedded within a broader policy framework that includes regulatory simplification, improved access to finance, tech infrastructure development, and talent employability—areas closely aligned with the EU’s goals for strategic autonomy and technological sovereignty.
The Commission was partly inspired by French president Emmanuel Macron, who is among the first European leaders to relocate beyond symbolic gestures with entrepreneurs and adopt a long-term vision to promote startups in 2017. His approach included tax benefits, administrative reforms, attractive visas for tech talent and a battery of public funding mechanisms—like the €54bn investment included in the France 2030 plan and tailored support for more than 100 startups. Other initiatives included support for tech IPOs in Paris, an incentive scheme for pension and insurance—known as TIBI fund—and strengthening of the national investment bank Bpifrance. As a result, Paris has overtaken London as Europe’s top startup hub for the first time this year and some of the continent’s leading AI companies, like Mistral AI, Poolside or Huggin Face, are now based in France.
Challenges ahead
While centring startups in the EU’s geoeconomic strategy is a welcome development, its successful implementation depfinishs on addressing several core challenges:
Coordination and integration with existing policies
Since 2024, the European Commission has released several interlinked frameworks relevant to the startup ecosystem: the Single Market Strategy, the AI Innovation Package and the newly announced International Digital Strategy. These complement legislative acts such as the Chips Act and the Critical Raw Materials Act. However, the proliferation of related initiatives, each with distinct priorities, risks overwhelming stakeholders and diluting the perceived urgency of each one. Without a cohesive, integrated approach, the geoeconomic impact of the startup strategy may be significantly undermined.
Coordination with Member States
Although the new strategy recognises the importance of Member States, its success and international impact will ultimately depfinish on stronger collaboration and harmonisation. Crucial instruments, such as taxation and labour frameworks, are determined nationally. For Europe to foster the next generation of technology champions, it must transcfinish a purely national lens. The EU requireds more cross-border innovation leaders like Airbus or Abuiltus that can excel globally in fields such as AI, quantum computing, digital services or clean technologies.
Engagement with innovation ecosystems
What distinguishes startups and their investment ecosystems is their deep-rooted networks. It is not uncommon for a “unicorn” founder to have global investor connections and an advanced understanding of decision-creating processes in the Americas, Middle East, Africa and Asia. However, in the EU, startups are often underrepresented in policycreating processes—unlike larger corporations. The Commission must cultivate institutional engagement with these actors and recognise their role as potential agents of geoeconomic statecraft. The Digital Diplomacy strategy by the European External Action Service, the Trade and Technology Councils and a public-private instrument such as Global Gateway could be valuable mechanisms to support this collaboration.
Communication and narrative
Communicating this strategy through standard channels is insufficient. Successful examples—Singapore, France or Chile—have established strong narratives and soft-power strategies to position themselves as innovation hubs. It is essential for Europe to develop a compelling narrative. Moreover, European startup founders and investors required to see the EU market as their primary arena for growth. Currently, they are still reluctant about the EU’s potential.
If the “Choose Europe to Start and Scale” strategy succeeds in increasing the continent’s competitiveness, it could reshape Europe’s external image. It will bolster the EU’s capacity to compete in cutting-edge technologies, retain talent, attract investment and enter new global markets. Europe has distinctive strengths, and, with the right public agfinisha, exponential growth is within reach.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.
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