Is there potential for DeepTech in Europe to become a dominant sector globally?

The DeepTech ecosystem within Europe has reached a critical point, with leading universities and research organisations producing top level scientific discoveries, with Europe's pool of technical expertise being amongst the largest in the world. Therefore, much of what a founder can use to develop a DeepTech company is already available in Europe.

Japan's recent announcement to invest over €33 billion in European DeepTechs and AI exhibits that there is an opportunity for Europe to be the leading hub for DeepTech on a global scale. Japan's investment is a sign that Europe has the ability to create the future of industry because of its scientific achievements; however, it will still need to overcome major obstacles in making research turn into scalable businesses. Whether Europe can maintain true technological independence will be contingent upon the ability of Founders, Investors, and Institutions to adapt to the lengthy and complicated processes involved with DeepTech innovation.

The paradox confronting European DeepTech
According to projections, European DeepTech is likely to account for nearly $1 trillion in Enterprise Value by 2030. However, although DeepTech is receiving the highest total proportion of European Venture Capital (VC) funding ever, early-stage investment has declined markedly with early stage (seed) rounds approximately 30% lower than their peak in 2021.

This is the exact point where founders face some of their most significant obstacles. Development cycles on a long time scale, milestones requiring technical expertise and minimal early-stage success can often inhibit traditional VC's from investing. Although most venture capitalists recognize the strategic significance of DeepTech, many of those who invest in these types of businesses are still measuring (evaluating) DeepTech companies in ways that are more appropriate for investing in software-based companies.

Japan’s current investment strategy highlights this mismatch. Its funding vehicles tap into Europe’s scientific strengths while providing industrial scale, manufacturing expertise, and long-term capital. With the right investment structures, Europe could better combine its research excellence with clear pathways for supporting long-cycle technologies.

Europe’s structural advantages
Europe enters this transition with several meaningful advantages. One is technical education. Across the EU, roughly a quarter of all master’s degrees are awarded in STEM disciplines. In countries such as Germany, more than one-third of tertiary graduates hold a STEM qualification, reflecting a strong and sustained talent pipeline.

Another strength lies in public funding. Europe offers substantial grant support for early-stage DeepTech development. For instance, the European Innovation Council offers grants that range up to €2.5 million, plus the opportunity for equity financing from the EIC as well. The EIC Pre-Accelerator helps support smaller DeepTech organizations through grants of €300,000 to €500,000. Both grant resources are available at scale, however, the real challenge for founders is incorporating these resources into a coherent investment plan.

How founders can create more opportunities to be funded:

There are many things a founder can do to improve the likelihood of being funded at the early stage.

1. Teams must be able to communicate technically and commercially. Investors have difficulty identifying market opportunities when there is no direct linkage between product development milestones and research milestones.

2. Grants should be regarded as a portion of core capital and not merely as supplementary capital. Securing non-competitive, non-dilutive grants demonstrates the technical credibility of an idea, creates longer company operating periods, and provides investors with additional reasons to invest in early-stage companies because of the reduced risk associated with grant-funded technology.

3. Founders should develop intermediate milestones that appeal to a broader audience than just specialists. These might include paid pilots, environmental testing results, regulatory-aligned prototypes, or limited deployments with industry partners. Even if they are not final products, they demonstrate tangible progress.

Early commercial relationships also matter. Many European corporates support pilots or co-development initiatives, and companies such as Atos and Siemens already run innovation programs focused on early technical validation. These partnerships provide concrete proof points for investors.

Additionally, the founders must convert the scientific timeframes into business timeframes, i.e. while the research environment is one of open-ended exploration, the commercial marketplace requires clarity in communication as well as defined timelines for development.

As European VCs build out their ecosystems, they have the ability to further enhance it.

Europe's VC industry should develop alongside the scientific innovations in Europe. Generalist (type of VC) funds are very important in the seed stage (i.e. the beginning stages) of development, but the true value of specialist DeepTech VCs lies in their knowledge of the industry, their ability to contact other industries, and their sector-focused insight. Strengthening these capabilities early in the funding cycle for founders will provide them the ability to effectively navigate their extended development cycles.

Patient capital is also essential. Many DeepTech companies progress through stages similar to life sciences, where longer horizons and milestone-based evaluation are standard. European funds are increasingly adopting elements of this approach as hard technology becomes more central to economic growth. The experience of U.S. life sciences investors offers a useful reference as European DeepTech venture capital develops its own frameworks.

Technological Sovereignty is One of Europe's Great Opportunities
Europe’s role in the DeepTech world is linked with the development of its technological sovereignty. The Japanese government has announced a major investment programme; this provides evidence that multinational companies perceive the high level of European research as a valuable asset for industrial-scale innovation. Therefore, this level of outside confidence should encourage European organisations to create stronger early-stage ecosystem(s) for DeepTech, rather than relying solely on the presumed success of research or excellence in science to result in commercial success.

The basic building blocks needed to build a strong early-stage ecosystem for DeepTech exist: well-established higher education institutions, large numbers of STEM graduates and government grant support with substantial capital.  What remains missing is alignment between founders building long-cycle technologies and investors equipped to support them with expertise, patient capital, and structured routes to market validation.

Final thoughts
Europe’s DeepTech momentum depends on parallel shifts from both founders and investors. The founders of businesses that develop high-tech products based on basic research can improve their chances of success by forming strategic partnerships to facilitate market access. Furthermore, by developing, expanding and utilising their existing research grants more effectively they will be able to synthesise scientific progress with commercial viability.

At the same time, investors can support this transition by building a greater understanding of the technologies within their portfolios, investing over longer time periods, and adopting different models for evaluating company success in the developing technologies.

If all three of these elements occur in parallel, Europe has an opportunity to take advantage of its strengths in basic research and develop scalable businesses that are well-positioned to influence the future direction of global technology.