Executive summary

Europe is producing more climate tech startups than ever before, yet too few are scaling. At the crucial Series B stage, where technologies move from prototype to production, Europe faces a persistent funding gap with Series B rounds averaging 20% below US rounds.

This shortfall reflects a deeper structural imbalance. Europe’s venture landscape is crowded with small early-stage funds but lacks the mid-sized vehicles able to write $25–100 million cheques. At the same time, institutional investors such as pension funds and insurers remain largely absent from venture capital, constrained by regulatory frameworks like Solvency II. As a result, scale-ups depend heavily on foreign or public backers, and Europe risks losing both economic value and strategic autonomy.

Bridging this “missing middle” will determine whether Europe’s climate ambitions translate into industrial strength. Unlocking growth-stage capital will require mobilising institutional investors, building larger domestic funds, and expanding blended-finance models that de-risk private capital.

This report draws on exclusive data and contributions from Dealroom, PitchBook, EIF, Almi Invest, Cleantech for Europe, Cleantech Scandinavia, EIFO, Innovate UK, and Tesi to quantify Europe’s Series B funding gap. It outlines the structural changes needed to bridge this gap, ensuring Europe not only invents the technologies of decarbonisation, but scales them to global impact.

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<span style="font-weight: 500;">European capital is insufficient for late stage rounds</span>

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Section 1

The scale of the problem

Full report available <span style="color: #4F2780 !important; text-decoration: underline !important;">here.</span>

Europe’s climate tech ecosystem is booming, but not scaling. The continent now creates more climate tech startups than the United States, yet far fewer reach industrial or commercial maturity. The problem is not innovation, it’s capital.

At the crucial Series B stage, where companies transition from prototype to scale, Europe faces a persistent funding gap. This “missing middle” in the venture ecosystem means that promising technologies struggle to grow, forcing founders to seek foreign capital. The result: Europe loses not only economic value, but also strategic autonomy in the global climate tech race.

Between 2020 and 2024, average Series B rounds in Europe stood at $35.2 million, roughly 20% smaller than in the US. Furthermore, only 14.7% of European climate tech startups that raised a Seed round between 2010 and 2020 reached Series B, compared with 24.5% in the US.

The result is a European Series B funding shortfall of $13.5 billion between 2020 and 2024, compared to the US. This amounts to an annual deficit of $2.7 billion with the gap continuing to grow as the pipeline of early-stage companies expands.

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<span style="font-weight: 500;">Capital availability gap widens significantly for later stage rounds</span>

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Section 2

The missing middle

Europe’s venture market is polarised. At one end are many small early-stage funds; at the other, large infrastructure or private-equity vehicles that focus on late-stage or established assets. What’s missing are the mid-sized funds capable of writing $25–100 million cheques, the scale-up capital climate tech needs most.

From 2020 to 2025, Europe raised 259 funds under $250 million investing in climate, while the US raised 295. But the US launched 29 funds over $500 million in that time, Europe raised only 11. As a result, less than 20% of active European climate tech funds pursue a growth-stage strategy. Most are limited to early-stage deals, leaving scale-ups without domestic lead investors.

The consequences are clear: by Series B, only three-quarters of funding still comes from European sources, and at $250 million plus, nearly half of all capital is foreign.

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"Without dedicated funds focused on growth and scaling, and with sufficient critical mass, we risk losing our most promising solutions to regions with deeper capital pools or worse yet, failing to support the deployment of game-changing innovations that could radically enhance our energy security, climate resilience and environmental sustainability.”

Adelaide Cracco, European Investment Fund (EIF)

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<span style="font-weight: 500;">Europe has too few large funds</span>

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Section 3

The institutional capital gap

Europe’s climate tech bottleneck is not about performance, it’s about participation. Venture returns in Europe and the US are comparable, but institutional investors, pension funds, insurers, and endowments, remain largely absent from European VC.

In the US, 72% of venture capital originates from institutional sources; in Europe, just 30%. The gap is filled by public entities such as the EIF, which accounts for 31% of all European VC, compared with only 4% in the US.

Regulatory frameworks like Solvency II and IORPs make unlisted equity less attractive for long-term investors, fragmenting capital across national borders. Without reform, the European venture landscape will remain dominated by small, early-stage funds, unable to anchor the growth rounds that climate tech urgently requires.

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<span style="font-weight: 500;">Less private institutional capital is available for VC in Europe</span>

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Section 4

Unlocking Europe's growth-stage future

To close the Series B gap, Europe must build the financial infrastructure to match its climate ambition. That means:

• Mobilising institutional capital through regulatory reform and clear incentives for pension funds, insurers, and banks.

• Creating larger, mid-sized domestic funds capable of leading $25–100 million growth rounds.

• Expanding blended-finance models that combine public catalytic funding with private institutional capital to de-risk investment at scale.

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“Scaling clean technologies is a top political priority for Europe, but institutional capital is missing in action. Policymakers should enable and actively encourage insurance companies, pension funds and banks to invest. The example of the Tibi initiative in France shows it can be done.”

Jules Besnainou, Cleantech for Europe

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Regional disparities illustrate both the challenge and the opportunity. Germany and France have relatively mature growth ecosystems, while the Nordics, Netherlands, and Denmark remain constrained by smaller funds and dependence on foreign syndicates. The UK, Europe’s largest venture hub, still lacks sufficient climate-specific growth capital.

Closing this gap is essential for Europe to retain ownership of its clean-tech breakthroughs and translate innovation into industrial strength. With the right reforms, funding structures, and investors at scale, Europe can lead not only in inventing the technologies of decarbonisation, but in commercialising them globally.

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<span style="font-weight: 500;">The European capital deficit is especially pronounced in later stages</span>

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Conclusion

A defining decade for European climate tech

Europe’s climate tech moment is here, but its future will be decided not in labs or startups, but in capital markets. The continent has already proven its ability to generate breakthrough ideas and entrepreneurial depth. What remains is to build the financial architecture capable of carrying those ideas to scale.

The Series B funding gap is not a temporary imbalance. It reflects a deeper structural weakness in how Europe channels long-term capital toward innovation. Fixing it will require systemic alignment, between policymakers setting incentives, institutional investors seeking sustainable returns, and fund managers building vehicles that can bridge early-stage ingenuity with industrial deployment.

If Europe succeeds, it will unlock a new growth engine: one that anchors climate innovation domestically, strengthens energy security, and sustains technological sovereignty. If it fails, the next generation of climate champions will scale elsewhere, and Europe will watch its own inventions power the world’s transition from afar.

The choice is not whether Europe innovates, but whether it captures the value of its innovation. Closing the Series B gap is the test that will determine whether Europe leads the clean industrial revolution, or remains a customer of its own inventions.

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You can access more insights, region-specific data, and all the takeaways by downloading the full Report below.