It may be called venture capital, but if you believe the statistics from the investment industry, start-up investments are not so often overly risky. This is particularly true in Europe, where investors are said to have achieved a better return performance with start-ups over the past ten years than in the USA.

According to the European private capital association Invest Europe, the asset class also performs better in some cases compared to public equity markets in the long term.

However, the scene in Europe has been so far ignored by institutional investors such as pension funds or insurers. Start-up investments have so far played a very minor role for them. For example, European pension funds, which most recently had assets under management totalling 9 trillion dollars, currently invest just 0.01% of their capital in European venture capital, according to the new „State of European Tech“ report by London-based venture capital firm Atomico.

In the DACH region, pension funds are particularly reluctant to invest in this asset class. According to the German Private Equity and Venture Capital Association, the situation is no different for insurance companies. In the US, on the other hand, institutional investors are allocating a larger proportion of their portfolios to venture capital. According to figures from Invest Europe, US pension funds recently invested a considerable 11% of their assets under management in private companies, start-ups and infrastructure investments. By contrast, European pension funds are expected to have invested only 4.3% in these three classes in 2022.

European tech companies would certainly have nothing against some catching up here. The industry, which has been gaining in importance as an employer for years, has been complaining about a funding gap for start-ups in the growth phase for some time. The probability of receiving more than 15 million dollars in funding is twice as high for US start-ups as it is for a European one, according to Atomico.

The current difficult exit environment does not make things any easier. It is, therefore, not surprising that a large proportion of European start-ups are turning to the USA, where investors are also generally willing to dig deeper into their pockets. According to the VC platform Dealroom, which is based on data from the World Bank, around 450 dollars per capita have already been invested in start-ups in the United States this year. In Germany, on the other hand, it was only 86 dollars, in France 101 dollars and in the UK 207 dollars. As a result, every second start-up is currently co-financed by US investors, according to the Atomico report.

The report states that this development is creating „a pull away from Europe“. Talent, knowledge and economic power could migrate. However, the founders still seem to be reasonably satisfied with the business location – more than 50% of them would set up again in the same country where they are currently based.

A good fifth, on the other hand, would start their next attempt in the USA. The attitude towards the business location has not changed significantly since 2015 and shows „how strongly European founders believe in the local ecosystem“, according to the report. For the qualitative survey, Atomico, together with UK bank HSBC and law firm Orrick, also surveyed more than 3,500 founders and investors in Europe.