Oct 13, 2025

When Reshma Sohoni launched the VC firm Seedcamp 18 years ago, she identified three challenges in the European tech sector: a supply problem, a capital problem and a demand problem. Fast forward to today and the first two have been solved. All over the continent, Europe is buzzing with startups with 163 cities having created a tech unicorn. The capital challenge has also been met at the early stage - even if Europe still relies mostly on “our American friends coming over for the later stages”. But what has not been solved is the demand problem. “Demand was horrible 20 years ago, demand is horrible today,” Sohoni told the Sifted Summit last week. The strength of Europe's supply side was on display on a deeptech panel I moderated, with founders from Proxima Fusion, Nu Quantum and PhysicsX, all determined to build world-leading companies. After spending seven years in the Bay Area, Martin Kubie returned to Europe to become Proxima's chief engineer and co-founder. Although he said the US was still the best place generally to build a startup, Kubie was convinced that Europe could lead the world in nuclear fusion. “For fusion, Europe is the best place, which is incredible,” he said. “The world's fusion ecosystem is in Europe.” It could be a similar story with quantum. Carmen Palacios-Berraquero, Nu Quantum's founder and CEO, said Europe was well placed to capitalise on its deep historical knowledge and scientific talent in quantum. European governments had been consistently backing the sector on a comparable scale to China. “Europe has been investing, has been strategic. The UK was actually the trailblazer in that,” she said. There were other sectors where Europe had a technological lead, said Carina Namih, partner at the investment firm Plural. These included photonics for next generation computing, robotic automation and clean lithium-sulphur batteries. “It's an incredibly exciting time in frontier tech,” she said. “The question is: can we capitalise on that advantage and keep it in the continent?” That takes us back to Sohoni's concern about the lack of demand. Quantum and nuclear fusion may be the exception because of the strong government support they have received. But in general, European governments and big companies have been terrible customers for local startups, unlike the US Pentagon and Fortune 500 companies. If European demand is so poor, it is no surprise that so many European startups look for better customers in the US or Asia, and move abroad. “We're underwriting American R&D right now,” Alex Depledge, the first entrepreneurship adviser to the British government, told the summit. Of those UK startups that had taken US VC money, half of them had left the country over the past 10 years, she said. The most worrying aspect of the demand problem is that there is little that the tech sector itself can do about it. That largely depends on a reset at the government and institutional level. That point was forcibly rammed home by Eric Schmidt, Google's former CEO and chairman. Schmidt said that he had hired 10,000 people in Europe when he was running Google. “They are the best in the world. You do not have a people problem,” he said. “The problem is you don't have a way for them to organise in a way that is capitalistic at the scale that we're talking about.” In order to win at tech, Europe needed to eliminate barriers between different countries, boost university graduate programmes and deepen financial markets. Challenging the audience, he asked: who would a young European equivalent of an Elon Musk call “for $50bn of capital for a product that doesn't work”? “If I can be completely honest, I think that Europe is not going to play in the big battles,” Schmidt said, when it came to tech. “Europe may wish to, you're not going to.” Europe had better move fast if it wants to prove him wrong. Sifted Daily newsletter