Europe Lags in Unicorn Creation—What’s Holding It Back?

Europe continues to trail the United States and China in producing unicorns as structural barriers slow startup scaling and investment.

European Union flags fly outside the EU Commission headquarters in Brussels, Belgium. Yves Herman/Reuters

Europe’s structural barriers, including fragmented markets and limited late-stage capital, are holding back many firms from scaling into billion-dollar unicorns, analysts say.

A unicorn is a privately held startup company valued at more than $1 billion. Europe trails the United States and China in producing unicorns, and European Union policymakers are now scrambling to close the gap.

As of Sept. 30, 2025, there were about 1,577 unicorns worldwide, according to the PwC Global Top 100 Unicorns report published in November. Earlier figures, released in June by the Hurun Research Institute, put the total number at 1,523 unicorns globally. The rankings were topped by U.S.-based companies such as SpaceX, OpenAI, xAI, and Ant Group.

“When it comes to unicorns, the world can essentially be split into three regions: the U.S., China, and the Rest of the World,” Hurun Chairman Rupert Hoogewerf said. “The U.S. accounts for half of all unicorns, China a quarter, and the remaining quarter is spread across dozens of other countries, led by India and the United Kingdom.”

The top 100 unicorns based in the United States surged 78 percent, to $2,030 billion in the year to Sept. 30, 2025, PwC figures showed, reflecting a hike in valuation growth and the number of companies. Elon Musk’s SpaceX enjoyed a $220 billion (122 percent) increase in its valuation.

The United States acquired 64 percent of the total global venture capital fundraising in the second quarter of 2025, with software and companies acquiring 45 percent, according to Boston-based analytics firm DemandSage.

The UK accounted for 61 unicorns, while the entire European Union (27 countries combined) has 112 unicorns in total, according to Hurun. The largest unicorns in Europe include UK-based fintech Revolut, valued at $45 billion, and Sweden’s Klarna, valued at about $14 billion.

Germany, with 36, and France, with 30, led within the EU bloc, but activity remained concentrated in industrial technology and software-as-a-service. Hoogewerf said that Europe’s position is particularly striking given its economic weight.

“Surprisingly, perhaps, the EU countries together have just over 112 unicorns, less than 8 percent, despite contributing to 20 percent of the world’s GDP,” he noted.

Structural Challenges

Europe’s underperformance is rooted in structural challenges that extend well beyond the availability of early-stage capital, according to analysts.

While European startups often benefit from strong research institutions and public support at the seed and early stages, many struggle to secure the large amounts of risk capital required to scale rapidly.

Fanis Matsopoulos, a member of the executive committee of the Athens Chamber of Commerce and Industry, cited Europe’s shortage of large venture capital funds and limited late-stage financing as key obstacles to reaching billion-dollar valuations.

He also said the high liquidity of the U.S. economy plays a central role, pointing to the global role of the U.S. dollar and the depth of public markets, such as the Nasdaq Composite, as creating a self-reinforcing cycle in which capital is continuously reinvested into startups.

“This significantly boosts capital availability and supports rapid scaling,” Matsopoulos told The Epoch Times, describing an ecosystem where exits and listings quickly recycle capital back into new ventures.

European leaders have acknowledged this financing gap. On May 28, 2025, the European Commission unveiled a strategy called “Choose Europe to start and scale,” aimed at narrowing the distance with technology hubs in the United States and China.

As part of the plan, the EU’s executive branch proposed creating a Scaleup Europe Fund of at least 10 billion euros ($11.3 billion), financed through a mix of public and private money. The fund is designed to support high-growth companies as they expand and prepare for potential stock market listings.

The bloc’s industry chief, Stephane Sejourne, said the initiative was intended to keep European innovation at home and “unlock growth drivers for Europe’s most innovative and promising companies.”

He added that the strategy would cut red tape, improve access to financing, and make it easier for companies to operate across the single market.

“We want to put Europe right in the middle of the global innovation map, for companies and investors,” Sejourne said.

Fragmentation, Regulation

Beyond capital constraints, European startups must navigate a fragmented regulatory landscape across 27 countries, with different rules governing taxation, labor, and data protection.

That fragmentation can slow cross-border expansion and raise costs in ways that U.S.-based competitors, operating within a single regulatory market, do not face.

Matsopoulos said the lack of a truly unified market makes it harder for startups to achieve economies of scale.

While frameworks such as the EU’s General Data Protection Regulation (GDPR) promote consumer trust and data protection, Matsopoulos said they also increase compliance costs and reduce flexibility for fast-growing firms.

He added that equity-based compensation is generally less tax-efficient than in the United States, weakening a critical tool for attracting and retaining top talent.

Michael Ashley Schulman, a chartered financial analyst, said cultural factors also play a role in shaping outcomes.

“America’s mix of deep capital markets, top research universities, optimism, acceptance of failure, and strong legal protections creates an ideal environment for tech start-ups,” Schulman told The Epoch Times. “Add the global pull of Silicon Valley, and the ecosystem becomes uniquely powerful.”

Slower Scaling

Despite the gaps, Europe continues to produce notable success stories. In early 2026, Belgian cybersecurity startup Aikido Security reached unicorn status following a $60 million funding round led by DST Global, valuing the company at about $1 billion.

CEO Willem Delbare said the company’s growth reflected rising demand for tools that help developers manage risk as artificial intelligence reshapes software engineering.

“Our growth is driven by demand for tools to help developers address risk as AI reshapes software engineering,” Delbare told Reuters on Jan. 14.

Yet observers say the overall pace and concentration of scaling remain muted across the continent. Many European firms still struggle to access large late-stage funding rounds, and a significant number ultimately choose to list on U.S. exchanges, where capital markets are deeper and investor demand is stronger.

Tiffany Hill, a venture operator and social impact investor, echoed those concerns.

“Across much of the EU, heavier compliance, fragmented markets, and slower capital deployment increase the cost of experimentation,” Hill told The Epoch Times. “The U.S. venture system prioritizes speed and iteration. Regulation in the EU doesn’t prevent innovation, but it does slow its pace.”

That trend risks siphoning value, talent, and future investment away from European ecosystems, reinforcing the very gap policymakers are trying to close.