Europe's tech sovereignty push gives VCs pause

France’s President Emmanuel Macron and Germany’s Chancellor Friedrich Merz astatine a Berlin acme connected Europe’s technological sovereignty successful November

John MacDougall/Getty Images

Sovereignty has go the connection du jour, but immoderate investors interest that imposing geopolitical constraints connected portfolios mightiness interaction returns.

Reducing dependence connected US exertion has go a precedence for European governments during President Donald Trump’s 2nd term, arsenic transatlantic relations person soured.

Surging tariffs past year, on with the imaginable of a tech “kill switch"—where companies would beryllium ordered to suspend services successful Europe—have go a caller world that the continent mightiness person to face.

This governmental urgency has started to power the travel of capital. In conscionable the past month, the UK launched a £500 cardinal Sovereign AI Fund, German startup Aleph Alpha sold itself connected a sovereignty pitch, and present Brussels is weeks distant from what it says volition beryllium the EU’s astir important integer sovereignty authorities yet.

Against this backdrop, sovereignty is rising up the docket not conscionable for governments but besides among VC investors.

“Sovereignty is the caller buzzword astatine the moment,” Simone Lavizzari, main astatine Berlin-based heavy tech VC steadfast Join Capital, said. “When you look astatine a batch of exertion [in Europe], we don’t ain it, and it could beryllium taken distant from 1 time to the next. We ne'er thought this could beryllium a possibility, but I’m not truthful definite that’s the lawsuit anymore.”

State money, authorities priorities

US tech companies predominate Europe’s integer infrastructure, controlling much than 70% of the region’s unreality marketplace and astir 60% of its endeavor bundle market. Hyperscalers and AI infrastructure are mostly concentrated successful the US, and European defence relies heavy connected American tech.

That is what European governments privation to solve, and investors expect startups to play a important relation successful offering alternatives.

But Lavizzari notes that portion investors speech astir sovereignty successful strategical terms, wealth is the much contiguous driver.

A important information of Europe’s LPs successful VC funds are state-backed oregon person authorities ties, peculiarly successful smaller countries. The European Investment Fund is by acold the largest superior allocator successful the portion and, with the European Investment Bank and the European Commission arsenic cardinal shareholders, its concern mandates align with EU argumentation priorities.

The fundraising prospects for European VCs person improved from past year’s grounds low—capital raised successful 2026 has already surpassed past year’s halfway mark, and money number is besides pacing supra 2025 levels, according to PitchBook data—but it is inactive a hard clime for managers.