Innovation capital
We invited 500+ European GPs to discuss what risk capital has delivered and what’s holding it back.
Executive summary
This Playbook speaks with the voice of over 550 General Partners — the investors on the front line of Europe’s innovation economy. Collected at the 2024 Ugly Duck gathering, their insights form the most comprehensive and practitioner-led view of what Europe must do to turn its innovation strength into economic strength.
Over the past decade, Europe’s private markets have evolved rapidly. EIF’s analysis shows that the region now benefits from a deeper, more diverse and increasingly successful pool of fund managers. Both established firms and emerging managers are generating top-tier returns, and when investors apply even modest selectivity, the incidence of capital loss becomes extremely low. Europe is producing globally relevant companies in fields as varied as mRNA therapeutics, financial technology, xxxxxx
Yet despite this progress, Europe still invests far less in innovation than its global peers. Private markets remain a fraction of the size of those in the United States, and the lack of scale is reflected in company outcomes: too many European breakthroughs reach maturity elsewhere. The challenge is not invention — Europe excels at that — but conviction. Policymakers, regulators and long-term asset owners have not yet mobilised behind the asset class at the scale required to support Europe’s ambitions.
The Playbook argues that Europe must move beyond the outdated notion of risk capital. What private markets provide is innovation capital — capital that turns ideas into industries, research into resilience, and breakthroughs into long-term economic strength. For Europe to compete, we need a reframing of the asset class and a shared understanding of its strategic importance.
Across six chapters, the Playbook sets out:
- where innovation capital is already delivering technological leadership;
- how it is driving sustainability and competitiveness;
- why it is critical to Europe’s security and sovereignty;
- how it contributes to social and economic progress across regions; and
- what structural reforms are needed to deepen capital flows and support scale-up.
Our conclusion is clear. Europe has the talent, the research base and the entrepreneurial capacity to lead in the technologies that matter. What it needs now is alignment: policy that enables scale, regulation that rewards ambition, and long-term capital prepared to back Europe’s future with confidence.
This is the view of Europe’s GP community. Innovation capital is already shaping the Europe we live in. With the right support, it can shape the Europe we aspire to build.
Challenging the old narrative
We came together to author the Innovation Capital Playbook because Europe stands at a decisive moment. More than 550 GPs gathered under the Ugly Duck banner to share a clear message: if Europe wants to compete globally, it must back what matters — and it must do so with conviction.
A first step is to challenge a persistent misconception: that private markets in Europe are defined primarily as risk capital — volatile, uncertain and exposed. EIF’s analysis tells a very different story. Across the ecosystem, established and emerging managers alike are delivering strong performance. Loss ratios fall sharply with even modest selectivity, and European funds are increasingly represented among top-quartile performers. In other words, these asset classes are not only maturing — they are performing.
Hard to lose money: TVPI all investments 2005 - 2025
The conviction gap
And yet, despite performing, investment is not flowing at the scale Europe needs. The asset class remains underweighted by long-term investors, and Europe continues to invest far less in innovation than its global peers — especially the United States. The gap is not one of capability, but of conviction.