A study by the European Patent Office maps investors for European tech startups using the Technology Investor Score as a measure for investment trends.
Europe’s ability to translate its technological and research capabilities into scalable businesses is hindered by significant challenges, including fragmented capital markets and a lack of late-stage private investment. Despite Europe’s strong scientific foundations, this has impeded the EU’s global competitiveness. Reports by both Draghi and Letta have highlighted this issue and advocate for deepening the single market (see SwissCore article). To address this, the European Patent Office (EPO) is engaged in initiatives which aim to foster innovation, competitiveness and economic growth through the patent system.
As part of their mission, the EPO has published a study mapping investors for European innovators. The study explains how patents help startups overcome financial obstacles through patent protection grants, which allow market exclusivity and reduce uncertainty as they can be used as collateral for debt finance. Investor characteristics also play a crucial role for investment in innovation markets. Venture Capitalists (VC) who actively engage in monitoring, governance and expert advice positively impact the technological performance of their portfolio firms. Based on that, the authors have developed the Technology Investor Score (TIS), a new measure for identifying investors specialising in technology-driven companies based on the percentage of patenting companies within their portfolios. The TIS ranges from zero to one, with higher values denoting greater specialisation in funding innovative companies.
Using the TIS, the study provides insights into Europe’s innovation funding ecosystem, showing that 88% of European investors have a positive TIS, though their degree of engagement varies widely. Around 8% of investors in Europe have TIS values above 0.5, indicating significant involvement with patenting startups. Comparatively, the U.S. exhibits a similar distribution of high-TIS investors but surpasses Europe in late-stage private investment. This difference is illustrated by the fact that 86% of U.S. transactions are dominated by private funds, whereas in Europe, public investors account for 35% of transactions. This reliance on public funding highlights a critical structural difference between the two regions.
The study further finds a correlation between higher total investment levels and greater involvement in patenting activity, underscoring the role of intellectual property as a key indicator of economic dynamism. One of the countries with highly engaged investors is Switzerland, with an average TIS of 0.37. This indicates that Switzerland has well-developed risk capital markets and a strong focus on tech ventures. Regarding number of transactions by investors, classified by their TIS, Switzerland is high on the list, with the largest number of transactions coming from Venture Kick, a private investor that supports Swiss startups.
The study further examines the role of high-TIS investors in driving startup success, particularly in achieving Initial Public Offerings (IPOs) and acquisitions. However, it highlights a significant funding gap in late-stage investment across Europe, which limits the ability of startups to scale globally. While early-stage funding is well-supported, private sector follow-up investment remains insufficient compared to the U.S., where investors provide more sustained financing throughout the startup lifecycle. High-tech industries such as semiconductors, artificial intelligence, and biotechnology are especially affected, as they rely more on high-TIS investors but struggle to secure the necessary funding for expansion.
Overall, the study concludes that despite the importance of private investors, public players remain instrumental in supporting technology companies. Among public investors, there is a significant presence of pan-European institutions such as the European Innovation Council (EIC) and the European Investment Bank (EIB), national innovation agencies from the Taftie network such as Bpifrance, Innovate UK and Innosuisse, and regional innovation agencies.
To address the lack of private market funding and the need for later-stage private investors, the study recommends more public programmes to be implemented like the European Tech Champions initiative by the EIB and EIC STEP Scale up scheme, both of which aim to bridge to European scale-up gap. Collaboration between public and private investors are also vital in combining the technology expertise of public investors with the budget and profit-driven approach of private investors such as the EIC Fund or the Trusted Investors Network. Overall, these recommendations encourage more private co-investment and align with the recommendations from the Commission’s evaluation
The EPO’s study underscores the urgent need for systemic changes to Europe’s innovation financing landscape. By addressing funding bottlenecks, enhancing cross-border investment collaboration, and fostering a stronger late-stage funding ecosystem, European policymakers can help bridge the gap to the U.S. and enable startups to thrive in an increasingly competitive global market.