The State of Deeptech Funding in Europe in 2025: The Good, the Bad and the Ugly
The Good: Increasing Investment and Resilience
European deeptech has shown remarkable resilience despite broader market challenges. In 2024, approximately €15 billion was invested in European deeptech startups, representing only a 28% decline from the 2021 peak, while overall tech VC funding plummeted by around 60% during the same period. This demonstrates deeptech's staying power even during market downturns.
The European Innovation Council (EIC) has significantly increased its support, committing €1.4 billion for deeptech research and high-potential startups in 2025—an increase of nearly €200 million compared to 2024. This funding includes:
- €634 million for the EIC Accelerator program supporting startups and SMEs
- €300 million for the new EIC Strategic Technologies for Europe Platform (STEP) Scale-up scheme
- Additional targeted funding for emerging technologies and earlier-stage companies
Deeptech has become the single largest category in European venture capital, accounting for roughly one-third of all VC investment on the continent. The UK (€4.2 billion), France (€3 billion), and Germany (€2.7 billion) lead in deeptech funding, with London, Paris, and Munich serving as primary innovation hubs.
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The Bad: The Scaling Gap
Despite strong early-stage funding, Europe continues to struggle with scaling deeptech companies. The region faces a significant gap in growth and late-stage investments compared to the United States. Over the past five years, European deeptech firms secured just €58 billion in funding, compared to €215 billion in the U.S.
The funding landscape has shifted toward fewer but larger funding rounds. While growth-stage deeptech funding remained relatively stable in 2024, early-stage and late-stage funding dropped by 30% and 50%, respectively. This consolidation means investors are prioritizing proven startups with clear commercial potential, potentially leaving emerging innovations without adequate support.
Half of the late-stage funding for European deeptech comes from non-European investors, highlighting a dependency on foreign capital for scaling. This reflects Europe's risk-averse investment culture and insufficient involvement from domestic institutional investors.
The Ugly: Structural and Cultural Barriers
Europe's deeptech ecosystem faces several entrenched challenges:
Risk Aversion and Fear of Failure: The European entrepreneurial ecosystem is hampered by a deep-seated fear of failure and policies that punish failed founders. A 2022 survey revealed 62% of European investors are reluctant to back entrepreneurs with prior failures, compared to just 23% in the US. Strict bankruptcy laws in countries like Germany (six-year period of personal liability) and France (three-year waiting period) prevent failed entrepreneurs from starting fresh.
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Bureaucratic Hurdles: Europe's fragmented landscape with over 50 national and EU-level support programs creates excessive complexity. Startups must navigate a maze of paperwork and regulatory requirements that delay funding and slow commercialization. For example, many EIC funding recipients had to wait 12-18 months to access awarded funds—a crippling timeframe for early-stage ventures.
Market Fragmentation: Unlike the United States, European startups must navigate numerous individual countries, government models, currencies, and regulations, making it challenging to scale across the continent.
Key Sectors and Opportunities
Despite the challenges, several deeptech sectors show promising growth in Europe:
- Novel AI: Significant investments in autonomous driving, foundational models, and large language models (LLMs)
- Future of Compute: Advancements in quantum computing, AI inference, and photonics with companies like Quantinuum and Axelera AI
- Novel Energy: Growing interest in hydrogen, nuclear fission, and fusion technologies
- Space Tech: Increasing investments in launch vehicles and earth observation technologies
- Robotics: Advances in humanoids, quadrupeds, and warehouse robotics transforming industries
The Path Forward
To strengthen Europe's deeptech ecosystem, experts recommend:
- Normalizing failure and risk-taking: Changing investor attitudes to see failure as experience rather than something to be penalized
- Streamlining bureaucracy: Simplifying application processes and reducing wait times for funding
- Developing domestic growth capital: Encouraging more European institutional investors to back deeptech at scale
- Supporting underrepresented founders: Extending support to startups outside major hubs and to women founders
- Leveraging Europe's strengths: Building on the continent's world-class research institutions and talent—six of the world's top 20 universities and nine of the top 25 research institutes are European
With these changes, Europe can capitalize on its strong foundation in deeptech and close the gap with global competitors.
How does the EIC's increased budget impact deep tech startups
The European Innovation Council's (EIC) increased budget for 2025 significantly impacts deep tech startups in several ways:
Expanded Funding Opportunities
The EIC Work Programme 2025 allocates €1.4 billion to support deep tech research and high-potential startups, representing a nearly €200 million increase from 2024. This substantial boost provides more resources for innovative companies across various stages of development:
- EIC Pathfinder: €262 million for early-stage technological research
- EIC Transition: €98 million for turning research results into innovation opportunities
- EIC Accelerator: €634 million for startups and SMEs with market-disrupting potential
New Scale-up Support
A major addition is the EIC Strategic Technologies for Europe Platform (STEP) Scale-up scheme, with a €300 million budget for 2025. This new initiative offers:
- Investments between €10 million and €30 million per company
- Focus on strategic technologies like digital, clean tech, and biotechnology
- Potential to catalyze funding rounds of €50 million to €150 million
Enhanced Business Acceleration Services
In addition to financial support, the EIC provides access to:
- Expert mentorship
- Corporate partnerships
- Investor connections
- Ecosystem networking opportunities
Targeted Support for Strategic Technologies
The program emphasizes funding for areas crucial to European technological autonomy, including:
- Quantum technology
- Semiconductors
- Net-zero emission technologies
- Autonomous robots
- Generative AI
- Future mobility solutions
Streamlined Evaluation Process
Improvements to the application and evaluation procedures include:
- Monthly grouping of short application evaluations
- Results provided within 4-6 weeks of submission
- More applicants invited to interview stages for EIC Transition
Seal of Excellence
Proposals meeting evaluation thresholds but not receiving funding will be awarded the Seal of Excellence, facilitating access to alternative funding sources and EIC business acceleration services.
By providing this comprehensive support package, the EIC's increased budget aims to strengthen Europe's deep tech ecosystem, accelerate innovation, and enhance the global competitiveness of European startups in strategic technology sectors.
FAQ: European Deeptech Funding Landscape
What is the total budget of the European Innovation Council (EIC) for 2025?
The EIC Work Programme 2025 will provide €1.4 billion to support deep tech research and high-potential start-ups in Europe, representing an increase of nearly €200 million compared to 2024. Learn more about EIC's strategic investment priorities.
How does the EIC Fund support deeptech startups?
The EIC Fund bridges the critical financing gap faced by deep-tech companies by providing long-term capital in the form of equity or quasi-equity. It aims to crowd in other investors, with each euro of direct investment leveraging over 3.5 euros of additional investment. Discover more about EIC's investment strategy.
What is the maximum grant available through the EIC Accelerator?
The EIC Accelerator offers flexible grant funding of up to €2.5 million (non-dilutive) and equity investment of up to €15 million (typically 10-25% minority shareholding from pre-seed to early rounds). Check out the full range of EIC funding opportunities.
What is the new STEP Scale-up scheme?
The EIC Strategic Technologies for Europe Platform (STEP) Scale-up scheme has a budget of €300 million in 2025 to help bring strategic technologies to the EU market and reduce dependencies. It targets investments between €10 million and €30 million per company in deep tech areas like digital technologies and clean technologies. Learn about STEP's strategic focus.
How successful has the EIC been in scaling European deeptech companies?
The EIC has helped create over 150 "centaurs" (companies valued above €100 million), 15 of which have a valuation above €500 million, including 8 unicorns (valued over €1 billion). Explore the EIC's impact on the European innovation ecosystem.
What growth metrics do EIC-supported companies achieve?
EIC companies average 35% employment growth and 68% revenue growth in the first 2 years following EIC support. They have collectively attracted over €12 billion in follow-on investments, primarily from venture capital, corporates, and national promotional banks. See more performance metrics of EIC portfolio companies.
What is the Deep Tech Talent Initiative?
The Deep Tech Talent Initiative is the first European educational platform offering courses in deep tech areas at all levels, with the aim to train 1 million people in deep tech skills by 2025. Discover how to join the Deep Tech Talent Initiative.
What additional services do EIC-supported startups receive?
Beyond funding, EIC-supported startups receive access to Business Acceleration Services including expert mentorship, corporate partnerships, investor connections, and ecosystem networking opportunities. EIC ACCESS+ even provides co-funding of up to 50% for startups to access essential business services. Learn more about EIC's comprehensive support package.
What are the focus areas for EIC funding in 2025?
The EIC is prioritizing strategic technologies including quantum technology, semiconductors, net-zero emission technologies, autonomous robots, generative AI, and future mobility solutions. Find out about EIC's technology priorities.
How does the EIC support intellectual property development?
The EIC Board is focusing on securing a cohesive innovation system with effective deployment and protection of intellectual property. EIC ACCESS+ provides co-funding for intellectual property and legal assistance services. Explore IP support for deeptech startups.
