Biotech start-ups in Europe: Why does the EU lag behind competitors and what can policymakers do about it?

Biotechnology has the potential to drive economic growth and high-value job creation, deliver life-saving treatments, and offer sustainable alternatives in manufacturing. The European Commission’s publication of the EU Biotech Act Part I (with a Part II focused on non-health biotechnologies and the broader bioeconomy expected in late 2026) reflects the scale of that ambition.

New OECD research suggests that the bloc has significant ground to make up: across indicators including start-up creation, patenting activity, and venture capital investment, the EU trails other major research economies.

The European Union is a recognised world leader in foundational biotechnology research. In 2022, it held 21% of the global share of the top 10 most cited publications in biology, biomedical research and clinical medicine, close to the United States’ 22% and China’s 24%. Yet this strength is not translating into commercial activity. Data from the OECD Start-ups Database shows the EU has consistently produced around half as many biotechnology start-ups as the US over the past two decades. Whilst this gap has narrowed in recent years, this appears to be driven by a contraction in the US rather than growth in Europe. 

This points to weaknesses in the EU biotechnology innovation ecosystem, ones that become clearer when examining two key enablers of start-up creation: intellectual property and funding. 

Patenting reflects an ecosystem’s ability to turn R&D into commercially viable intellectual property and is critical for start-ups seeking to protect innovations and secure financing. Yet, between 2000 and 2022, EU biotechnology start-ups fell steadily behind their US counterparts in patent filing. The gap peaked in 2022 with US start-ups filing almost four times as many patents. While this partly reflects the larger number of US start-ups, it still points to a comparative weakness in European biotechnology innovation. 

Venture capital is particularly important to biotech start-ups, which face long development cycles, high upfront R&D costs and complex regulatory processes, making early-stage funding critical for survival and growth. Here too, the EU lags significantly. OECD analysis shows the US has consistently outpaced the EU in biotech venture capital investment over the past decade, peaking in 2021 when US funding was up to 10 times greater.

These gaps reflect many interconnected factors, from entrepreneurship culture to international competition. But regulation deserves particular attention, given its direct influence on investment patterns and start-up development.

OECD research has found that EU biotechnology regulation is both complex and fragmented, with overlapping rules at both the European and Member State level creating uncertainty for innovators. In some cases, existing legislation even works actively against biotechnology adoption. The Fertilizing Products Regulation, for example, only permits microbial strains in fertilizer products if they are not genetically modified, effectively blocking novel biotech alternatives to traditional chemical fertilisers.

Beyond complexity, the EU regulatory approval process is notably slow. Strict data requirements and limited scope for derogation and pre-submission consultations between innovators and regulators all contribute to lengthy and costly timelines. In contrast, jurisdictions like the US and Singapore routinely offer pre-submission consultations, helping innovators clarify expectations and avoid delays. The difference in outcomes is notable. Industry studies suggest that approving genetically modified crops for food and feed, for example, can take up to 6 years in the EU, compared to 1.8 years in the United States, 1 year in Australia, and 5 months in Canada.

OECD research points to agile regulation as a way to make approval processes more adaptable. In practice, this means tools like regulatory sandboxes and innovation testbeds that allow for controlled real-world experimentation, and early structured engagement between regulators and innovators to streamline complex approval pathways.

Strategic foresight approaches and participatory technology assessments can also help by identifying where these tools are most needed across the policy cycle (see diagram below).

The United Kingdom’s Engineering Biology Sandbox Fund offers a concrete example. In 2024, it provided £1.6 million to the Food Standards Agency Cell-Cultivated Product (CCP) Sandbox Programme, which allowed regulators to build familiarity with novel technologies while helping participating companies reduce approval timelines and attract scale-up investment.

Smarter financing can also help close the gap. De-risking tools – such as risk transfer mechanisms, blended finance structures, and public co-investment and guarantees – can support biotech start-ups at the costly stages of demonstration and scale-up, where private capital is the hardest to attract. Demand-side measures can work alongside these efforts. The United States Department of Agriculture’s BioPreferred Program, for example, requires federal buyers to prefer bio-based products across 139 categories (e.g. paints, lubricants), backed by a database of almost 10 000 products. This kind of demand gives investors confidence that markets exist for biotechnology innovations, a signal that European policymakers could replicate.

The EU Biotech Act Part I appears to address several of the barriers and solutions outlined above. For example, it introduces regulatory sandboxes to allow controlled experimentation with novel technologies, expands pre-submission consultations to help innovators navigate regulatory submission processes, creates a strategic project designation to fast-track funding and regulatory clearance, and establishes a €10 billion Health Biotechnology Investment Pilot with the European Investment Bank to mobilise private capital through risk-sharing instruments.

These are substantive measures. But their long-term impact will depend on whether regulation becomes more agile in practice, and whether financing instruments reach biotech start-ups at the costly stages of demonstration and scale-up. Closing the gap in biotechnology start-up creation, venture capital investment and patenting will require measures designed with start-ups explicitly in mind: faster, simpler and more accessible pathways that turn Europe’s research excellence into commercial activity.