How the EIF Is Redrawing the Contours of Global Tech Power
Tags: Venture Capital, Scaleups, Tech Sovereignty
Why scale-up capital, reverse brain drain, and defence tech are turning Europe from a feeder system into a fortress of innovation
As geopolitical winds shift and global tech ecosystems recalibrate, one message from the heart of Luxembourg rings clear: Europe will no longer play second fiddle to Silicon Valley. That’s the conviction driving the European Investment Fund (EIF), the continent’s largest public tech investor, as it transforms from a passive fund-of-funds into a bold architect of industrial sovereignty.
With over €143.7 billion in assets under management, the EIF has moved beyond seeding early-stage VC funds. It is now targeting the full lifecycle of startup growth — from product-market fit to pan-European M&A — with a new arsenal of instruments. At the core of this strategy is a belief that Europe deserves more than just a payout when its startups exit to the US. It deserves to retain value, talent, and control.
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The Second Valley of Death: A European Bottleneck
Europe’s startup scene has matured. In 2023 alone, European tech raised €88 billion, down from the 2021 peak but still more than 3x the 2015 figure. Yet scaling — not starting — remains the existential challenge.
Startups that find product-market fit often enter what EIF Deputy CEO Merete Clausen calls the “second valley of death”: the capital gap that hits just as they aim to scale beyond national borders. That’s where EIF’s new strategy takes root.
Following the 2023 launch of the European Tech Champions Initiative (ECTI), a €3.75 billion fund targeting billion-euro growth-stage vehicles, the EIF is now increasing individual tickets for scale-up funds to €100–150 million, and venture debt cheques to €75 million — up from the historical €25 million. These numbers are no accident. They mirror what’s needed to compete globally and give startups the chance to acquire others, not be acquired.
Reverse Brain Drain Is Real — and Strategic
“The brain drain we’ve seen for decades is finally reversing,” says Uli Grabenwarter, EIF’s Head of Equity Investments. As US tech workers face political instability, visa uncertainty, and waning public trust, Europe is quietly attracting seasoned talent. EIF portfolio companies are seeing growing interest from engineers and founders formerly locked into the West Coast loop.
This isn’t just anecdotal. According to Atomico’s 2024 State of European Tech report, inbound tech migration into Europe increased by 22% year-over-year. Countries like Portugal, Estonia, and Poland are seeing disproportionate inflows thanks to lower costs of living, high quality of life, and robust digital infrastructure.
VC Mergers, Secondary Markets, and Liquidity Evolution
The EIF’s new strategy doesn’t stop at primary fundraising. It’s now actively greasing the “exit wheels” to keep companies — and returns — in Europe. With more secondary market activity and LP-to-LP transfers, EIF is smoothing out liquidity pathways, allowing funds to reset, recycle, and reinvest faster.
Interestingly, VC consolidation is picking up. EIF reports that fund managers are merging not only out of necessity but also as a strategic pivot — combining sectoral expertise (e.g., fintech + climate tech) or bridging gaps between venture capital and private equity. In the first half of 2025 alone, six significant mergers between European funds were publicly disclosed — a record for the region.
Defence Tech: No Longer Taboo
Perhaps the boldest signal of Europe’s new industrial resolve is EIF’s pivot into defence tech. What was once banned in 90% of LP mandates is now emerging as a strategic imperative.
In 2024, EIF launched its Defence Equity Facility, a €175 million pilot fund to support VC vehicles investing in dual-use technologies like spacetech, AI, quantum, autonomous drones, and cyber defence. Its first €40 million commitment went to Amsterdam-based Keen Ventures, focusing on NATO-aligned emerging tech.
Europe’s evolving defence posture is driving this shift. With Russia’s aggression and US political volatility, the continent is being forced to rethink technological sovereignty. EIF’s logic? If civil startups are building general-purpose AI or autonomous logistics platforms, they might as well power both humanitarian and defence solutions.
Tech Sovereignty and EU Inc: Still a Dream?
A pan-European legal structure — dubbed EU Inc — has long been floated as a solution to cross-border bureaucracy. But EIF leaders remain skeptical. “As long as tax regimes remain national, EU Inc will be symbolic at best,” says Grabenwarter. Simplification, not harmonization, is the current ethos.
Still, the EIF is working to simplify procedures. Clausen claims that 90% of funding applications now receive feedback within six months, and repeat fund managers are being fast-tracked. Meanwhile, less mature proposals are redirected to technical assistance programs, ensuring they improve without wasting public capital.
What’s at Stake
The US venture model is built on rapid scale, loss-leading disruption, and global acquisition. Europe is crafting a different narrative: one of resilience, longevity, and value retention. It’s not just about competing on valuations or exits — it’s about protecting strategic industries, building technological sovereignty, and becoming a net importer of talent and innovation.
The EIF’s approach could become the blueprint for this new model. If successful, it might be remembered not just as a fund, but as the institutional fulcrum that allowed Europe to finally move beyond its startup adolescence — and become the world’s second tech superpower, not its incubator.
