The European Union announced that it is joining forces with 71 investors who will co-invest in innovative technology projects in the region. Together, venture capital funds, public investment banks, foundations and venture capital funds represent more than €90 billion in assets.

The so-called “Trusted Investors Network” was launched on Monday to help finance “high-risk deep tech companies that have great potential, but often struggle to find the right investors in the European market.”

The EU investment comes from the European Innovation Council Fund, which was created to support start-ups with the potential to become “unicorns”, i.e. companies whose valuation exceeds billion euros. So far, it has invested almost 1 billion euros in 251 companies and attracted more than 4 billion euros in co-investments.

SEE: European investments show rise in data startups

Members of the Trusted Investor Network will strengthen EIC co-investments so that companies specializing in critical technologies can access the capital they need to compete globally. They have all signed the Trusted Investors Network Charter, which presents the group’s values ​​and good investment practices.

The launch took place at the EIC Scaling Summit in Athens, where 72 new tech startups also joined the EIC Scaling Club. The EU aims to turn 20% of Scaling Club members into unicorns, and so far they have collectively raised over €73 million.

Then, on Tuesday, the Commission announced new plans to strengthen the European Research Area, a policy framework that promotes unified research collaboration in the region. The communication focuses on increasing investments, improving the quality of research and translating scientific progress into economic benefits.

Ultimately, the EU is trying to demonstrate its determination to close the financing gap needed to develop its technology sector to compete with the United States and China. A Google report published in October reveals that Europe spends only 2% of its GDP on technological research. By comparison, the United States spends 3% and South Korea and Israel more than 5%.

Additionally, in July, venture capital funding reached a two-year high in the United States, largely driven by AI companies CoreWeave and xAI.

EU criticized for lagging behind in developing cutting-edge technologies

Just this week, Wolfgang Ischinger, Germany’s former ambassador to the United States, said the technology gap between the EU and other global superpowers posed “the biggest long-term challenge” to the continent’s security, according to Politico.

Additionally, earlier this month, former European Central Bank President and economist Mario Draghi said in a report that the bloc’s lack of innovation had led U.S. GDP to eclipse that of the EU by 9 000 billion dollars in 2023.

Although the top three R&I investors in Europe are in technology, “we fail to translate innovation into commercialization,” he said, pushing entrepreneurs toward the United States. Currently, only four of the world’s 50 largest technology companies are European.

“By joining forces with venture capital, we are responding to the urgent challenges set out in the Draghi report, which call for bold action to ensure Europe’s competitiveness in critical technologies,” said Iliana Ivanova, European Commissioner for innovation, research, culture, education and Youth, in a press release.

Europe is particularly lagging behind in AI innovation. The region filed just 2% of global AI patents in 2022, while China and the United States, the two largest producers, filed 61% and 21%, respectively. Google researchers also found that Europe performs poorly in talent, research, development and commercial adoption of AI.

SEE: UK government cuts £1.3bn earmarked for AI and tech innovation

“Current gaps indicate that the EU risks falling behind the next wave of AI and needs to step up its efforts to remain competitive,” they write. Among other recommendations, the report suggests that Europe invest in AI research to make it more accessible.

Regulations could hold back the EU

The Google and Draghi reports blame European legislation largely for the region’s difficulties in innovating in advanced technologies.

“Innovative companies that want to expand in Europe are hampered at every step by inconsistent and restrictive regulations,” Draghi wrote.

He added that inconsistent regulations between EU member states limit cross-border operations and hinder innovation by preventing businesses from growing.

“Since 2019, the EU has introduced more than 100 pieces of legislation that impact the digital economy and society. It’s not just the number of regulations that is the challenge, it’s also their complexity,” said Matt Brittin, president of Google EMEA, in a blog post.

But legislation, like the EU’s AI law and the Digital Markets Act, can hamper big tech companies like Google as well as start-ups, leading them to be outspoken in their criticism. Indeed, the bloc represents a huge market, with 448 million inhabitants, but regulations have dissuaded tech giants from launching their latest AI products in the region.

For example, Google’s Bard chatbot launched in Europe four months after its launch in the US and UK, following privacy concerns raised by the Irish Data Protection Commission. Similar regulatory setbacks would have delayed the arrival of its second iteration, Gemini, in the region.