“Europe is at a very promising point right now”

Europe’s decisive advantage stands on a farmer’s field. Slowly the light green Claas tractor rumbles to life. Founded in 1913, the German company Claas is not only one of the world’s leading manufacturers of agricultural machinery – it also provides the systems and the controls behind them. Using satellite images and drone data among others it helps farmers to decide where to fertilise.

For Marta Czekaj, a financing expert at the asset manager DWS, this combination of AI and industrial base illustrates one of Europe’s most important advantages. “The next phase of technological development will increasingly be about bringing AI into traditional industries – and that is where Europe is structurally strong,” she says. “Europe is at a very promising point right now.”

That observation challenges the persistent prejudice of Europe being a technology laggard. Czekaj argues that this view overlooks some of Europe’s fundamental strengths. “Europe has tremendous capabilities in engineering, scientific research and industrial expertise, while continuing to produce highly innovative companies,” says Czekaj, who focuses on growth financing for European technology companies within DWS.

Two gamechangers for Europe’s main barriers to growth

Many of those companies are so-called scale-ups: former start-up-companies that are growing extremely rapidly. And it is precisely at this stage that the real challenge begins: when companies move beyond the start-up phase, their capital needs often rise sharply, and that is where Europe still has a significant gap.

One factor that would substantially help is deeper and more integrated European capital markets – and ultimately a capital markets union. “Today, tech investors still have to navigate different regulations across member states when investing across the EU,” says Czekaj. Experts agree that a European capital markets union would remove obstacles to cross-border investments and make it easier for companies to access the capital market. 

Europe shouldn’t try to become Silicon Valley but instead scale what it does best.Marta Czekaj

However, differing regulation is not only an obstacle when it comes to capital markets. That is why Milos Spiridonovic, expert in Corporate Banking at Deutsche Bank, calls for decisively strengthening the European single-market. “A company expanding from Germany into France, Belgium or Italy faces different labour law, taxation and permitting procedures,” says Spiridonovic, who advises fast growing European technology-companies in sectors such as Software, Finance, Deeptech and AI.

The differing rules between the European countries make it difficult for scale-up-companies to expand within the continent. And they can have consequences for whole economies. In 2024 experts of the International Monetary Fund (IMF) estimated that the EU’s internal barriers for selling goods are equivalent to a tariff of around 45 percent, while across U.S. states this number was roughly 15 percent.

One approach to improve this is the concept of EU Inc. “Such a harmonised corporate legal regime would lead to much more unified rules within Europe for companies,” says Spiridonovic. He and Czekaj agree that these kinds of reforms would increase the already strong interest of investors in Europe immediately. 

A recently published Deutsche Bank-survey among 1200 senior decision-makers backs the perception of investor’s strong interest. For 81 percent of respondents, Europe is more important to investment decisions today than it was three years ago. A report of Deutsche Bank Research points in the same direction. It states that venture capital investment in Germany, Europe’s largest economy, rose by 44 percent year-on-year in the first half of 2026, driven in particular by several large funding rounds for scale-ups.

Looking at the potential that can be unlocked by the right structural reforms, Czekaj and Spiridonovic are optimistic for Europe’s future as a whole – and even more for its scale-ups. “Europe has everything it needs to drive innovation, “says Czekaj. “It shouldn’t try to become Silicon Valley but instead scale what it does best.”  

These companies combine advanced technology and software with deep expertise in their niche.Milos Spiridonovic on the new generation of innovative European companies

Spiridonovic even sees a new generation of European companies having the potential to become world market leaders in their sector. “These companies focus deep on specific industrial problems”, he explains. “And they combine advanced technology and software with deep expertise in their niche.”