Europe regularly produces world-class entrepreneurs, scientists and innovative start-ups. Yet far fewer European firms become global technology leaders than their counterparts in the United States. The United States has more than four times as many billion-dollar start-ups as the European Union: 1 586 compared with 358. Why?
New OECD evidence, based on a dataset of around 62 000 EU and 129 000 US innovative start-ups founded between 2000 and 2025, suggests the gap is less about inventive capacity. Europe’s challenges come later. While many firms successfully launch and develop new technologies, fewer make the transition from promising start-up to global scale-up.
The findings point to thinner late-stage finance, slower commercialisation of innovation, and less dense and connected local entrepreneurial ecosystems, while also highlighting the role of experienced founders and managers.
Europe does not struggle to create innovative start-ups. It struggles to help the very best ones become global leaders.
Scaling is rare, but economically important
Most start-ups never achieve substantial scale. Among the innovative start-ups analysed, only around 3% in the EU and 7% in the US become “growth-oriented firms”: start-ups that have raised at least USD 50 million without reaching a USD 1 billion valuation. An even smaller group, 0.6% in the EU and 1.2% in the US, become “rising superstars,” valued at USD 1 billion or more. This category is broader than unicorns, as it covers both firms that crossed the threshold while private (unicorns) and those that did so at their initial public offering (IPO).
Yet these firms matter disproportionately. Together, they represent 3.5% of innovative start-ups in the EU and 8.5% in the US, but attract 87% and 90% of the funding these start-ups raise, respectively. They play an outsize role in innovation, productivity growth and job creation.
Understanding why some firms make this transition while others do not is therefore central to understanding Europe's scale-up gap.
The scale-up gap emerges at late funding stages
Access to finance is essential for scaling, particularly in sectors where firms must grow rapidly to establish market leadership. Yet the evidence suggests that the EU-US financing gap does not originate at the beginning of a firm’s journey. It emerges later.
Future EU and US rising superstars raise broadly similar amounts of funding during their early years. The divergence appears as firms approach scale. US rising superstars experience a sharp acceleration in funding at this stage, while their European counterparts follow a more gradual trajectory. Much of the difference is driven by a relatively small number of US firms that secure exceptionally large funding rounds.
Europe's challenge is therefore not primarily financing start-up creation or early experimentation. The challenge emerges when a small number of high-potential firms need access to very large pools of capital to become global leaders.
Investor networks help explain part of this difference. The figure below shows around 80% of investors in the funding rounds of US scale-ups are domestic, compared with 26% in the EU, or around 39% when all intra-EU investment is treated as domestic. This is consistent with the greater depth and integration of US capital markets, while European scale-ups rely more heavily on international investors to fill financing gaps.
Those investors bring more than capital. They provide expertise, credibility and access to global markets. EU firms backed by internationally connected investors early on, particularly from the United States, are more likely to scale and tend to do so more quickly.
The financing gap is therefore both quantitative and qualitative. Europe is broadly effective at supporting early experimentation. What it still lacks are sufficiently deep capital markets and investor networks needed to help more high-potential firms make the transition from promising start-up to global scale-up.
Europe innovates, but commercialises more slowly
A common explanation for Europe's scale-up gap is that it produces fewer innovative firms than the United States. The evidence suggests a more nuanced picture.
Patenting is less common among EU scale-ups: only 18% of EU rising superstars hold a patent, against 52% in the United States. But those that do patent invent at least as intensively, accumulating a slightly larger stock of patented inventions before scaling than their US counterparts (11.3 against 10.4 on average). The same pattern holds, more strongly, among growth-oriented firms: 27% of EU firms patent against 45% in the US, but those that do accumulate 11.1 inventions on average against 7.2.
The difference lies not in the volume of invention, but in the speed with which innovation translates into growth. EU rising superstars tend to file their first patent earlier than US ones, yet EU scale-ups take around 1.5 years longer to progress from that first patent to scale, even after accounting for patent quality, sector, and cohort effects.
These findings are consistent with frictions in commercialisation rather than weakness in innovation. Protecting and enforcing a patent across multiple jurisdictions can be slower and more costly than doing the same in one large market is one possible explanation, potentially delaying the transition from invention to scale.
Experienced founders and professional management go hand in hand with scaling
Access to finance and innovative technologies are important, but they are not enough on their own. Successful scale-ups also differ from other start-ups in the experience of their founders and the professionalisation of their management teams.
More than half of US rising superstars and over 40% of EU rising superstars have at least one serial founder. Among other innovative start-ups, those shares fall to 20% in the US and 16% in the EU. Professionalisation also plays an important role. Firms that appoint an external Chief Financial Officer (CFO) are associated with reaching scale more than one year sooner than otherwise comparable firms. Scaling requires more than a strong idea: it takes managerial capacity to sustain rapid growth.
Acquisitions are part of many scaling strategies
Scaling firms do not rely exclusively on organic growth. Acquisitions are a common part of successful scaling strategies, particularly among rising superstars. Around 28% of EU and 29% of US rising superstars have acquired at least one company, roughly twice the rate among growth-oriented firms (13% in the EU and 12% in the US).
However, the geography of these acquisitions differs. Among ICT scale-ups, roughly three-quarters of acquisitions by US rising superstars target domestic firms. For their European counterparts, domestic and intra-EU targets together account for around 60%, while about 20% of acquisitions target US firms.
These patterns likely reflect differences in the markets in which firms scale. US firms can consolidate within a large domestic market. EU scale-ups may rely more systematically on cross-border expansion strategies, potentially to access larger markets, capabilities and networks, consistent with the EU’s multi-jurisdiction environment.
Successful scale-ups are followed by more local activity
Scale-ups do not only benefit their founders and investors. They can also influence the entrepreneurial ecosystems around them.
The effects vary across entrepreneurial ecosystems and types of firms. In Europe, the scaling of a growth-oriented start-up is associated with increased local start-up formation. In the US, the scaling of a rising superstar is associated with greater entry by other innovative start-ups.
In both regions, local venture capital activity increases after a scaling event, with stronger effects observed in Europe. A successful scale-up can act as a signal that attracts investment, talent and new entrepreneurial activity, although the effects differ between the EU and the US in ways consistent with differences in ecosystem depth.
What can policymakers do?
Europe's challenge is not producing innovative firms. The challenge is helping more of them reach the final stages of growth, where access to finance, managerial talent, market integration and ecosystem support become decisive.
The evidence suggests that no single bottleneck explains Europe's scale-up gap. Scaling depends on the interaction of several factors, and policy efforts are likely to be most effective when they address these constraints together rather than in isolation.
- Accelerate commercialisation, not just invention. EU firms do not appear to lack innovative capacity, but they take longer than comparable US firms to translate innovation into scale. Simplifying intellectual property (IP) procedures, reducing the costs of protecting and enforcing IP across jurisdictions and improving regulatory predictability could help firms move more quickly from invention to growth. The EU’s Unitary Patent system, operational since June 2023, may help reduce some of these costs.
- Target late-stage financing gaps, not just early-stage support. Early-stage funding in the EU is broadly comparable to that in the US, but funding trajectories diverge as firms approach scale. Deepening late-stage venture and growth-equity markets, facilitating cross-border syndication and reducing regulatory barriers to large follow-on rounds can help high-potential firms access the capital needed to compete at the frontier.
- Deepen market integration. Scaling firms benefit from access to large and integrated markets. Reducing operational and regulatory barriers to expansion can support growth through both organic expansion and acquisitions. The evidence suggests this is particularly relevant in Europe, where firms more frequently rely on cross-border acquisitions to overcome market fragmentation.
- Facilitate the circulation of entrepreneurial and managerial talent. Scaling depends on firms’ ability to professionalise management and bring in experienced CFOs and CEOs at critical growth stages. Ease cross-border mobility for talent, including experienced founders and senior executives, address the barriers faced by underrepresented founders, and invest in executive education, mentoring, and specialised graduate programmes that expand the pool of professionals with scale-up expertise.
- Align entrepreneurial, industrial and competition policies around ecosystem complementarities. Scaling events are followed by more local entrepreneurship and venture capital, but the extent of these spillovers depends on the depth and connectivity of the ecosystem. Co-ordinate place-based, innovation, and competition policies so that individual scaling successes translate into durable, system-wide entrepreneurial dynamism.
Europe's challenge is not producing innovative firms. The challenge is helping more of them reach the final stages of growth, where access to finance, managerial talent, market integration and ecosystem support become decisive. The goal should not simply be to create more start-ups, but to build an environment in which Europe’s most promising firms can reach global scale.