According to EU-Startups, Jillian Manus, Managing Partner of Structure Capital and US Venture Advisor for the European Innovation Council, reveals that Europe faces a critical innovation exodus as startups scale abroad due to lack of late-stage capital. She recently spoke at the Ventures.eu Forum 2025, highlighting that Europe has €15 trillion locked in pension funds, and allocating just 2% – €300 billion – could transform the continent’s competitive innovation landscape. US VCs currently invest 7x more and 100x faster than European counterparts, while US pension funds have achieved median annualized returns of 13.5-15.2% from private equity investments. The interview identifies artificial intelligence, biotech, climate tech, and defense technology as key sectors poised for growth through 2030.
Sponsored content — provided for informational and promotional purposes.
The €15 Trillion Conundrum
Europe’s pension fund dilemma represents one of the most significant structural challenges in global innovation finance. While the European Green Deal and other regulatory frameworks create favorable conditions for sustainable investment, the continent’s risk-averse culture continues to stifle growth. The fundamental issue isn’t capital availability – it’s allocation psychology. European institutional investors have historically prioritized capital preservation over aggressive growth, creating a systemic funding gap that forces promising companies to seek American capital and ultimately relocate.
Why Risk Mitigation Culture Kills Innovation
Manus touches on a critical cultural divide that goes deeper than most policymakers acknowledge. The European investment approach of “risk mitigation first” fundamentally conflicts with venture capital’s inherent nature. While US investors embrace the power law distribution – where a few massive winners compensate for many failures – European institutions struggle with the mathematical reality that most venture investments will fail. This cultural gap explains why despite having comparable startup pipelines to the US, Europe consistently underperforms in scaling global technology leaders.
Defense Tech: Europe’s Unexpected Opportunity
The mention of defense and dual-use technology as an emerging investment category reveals a strategic shift that could reshape EU-US innovation dynamics. As geopolitical tensions rise and European defense spending increases, this sector offers a unique convergence of government funding, strategic importance, and technological innovation. However, European defense tech investing faces its own challenges, including fragmented national security interests and complex export controls that could limit market access and scaling potential.
The Pension Fund Allocation Fantasy
While the 2% pension fund allocation sounds straightforward, the implementation challenges are monumental. European pension funds operate under stricter regulatory constraints and face greater public scrutiny than their US counterparts. The SFDR regulations, while well-intentioned, add compliance complexity that may actually discourage venture allocations. Furthermore, most European pension funds lack the internal expertise to evaluate venture opportunities, creating a dependency on external managers that introduces additional fees and alignment challenges.
Questioning the US Pension Success Story
The cited 13.5-15.2% returns from US pension fund venture investments deserve scrutiny. These numbers often represent top-quartile performers and may not reflect the median experience. Many US public pension funds have struggled with venture capital allocations, particularly those that entered the asset class during peak valuation periods. The illiquidity, long time horizons, and J-curve effects of venture investing create political and operational challenges that European pension trustees may find unacceptable, regardless of potential returns.
Beyond Capital: The Structural Reform Imperative
Solving Europe’s innovation funding gap requires more than just capital reallocation. The continent needs structural reforms in stock option regulations, cross-border talent mobility, and public market exits. The success stories of Ireland, Italy, and Luxembourg in attracting pension capital highlight that policy innovation matters as much as financial innovation. However, these are small markets – replicating their success across Germany, France, and other major economies requires confronting deeply entrenched financial traditions and regulatory frameworks.
Realistic Pathways Forward
The most viable solution may lie in hybrid approaches that blend European capital with US expertise. Co-investment vehicles, fund-of-funds structures, and strategic partnerships could help bridge the cultural and expertise gaps. The proposed forum connecting US and EU pension leaders represents a practical first step, but meaningful change will require demonstrating concrete success stories that European institutions can emulate. Until then, the innovation exodus will continue, and Europe will keep exporting its most valuable assets: intellectual property and talent.
