In the modern history of financial markets, few narratives have proven as resilient — and as functionally hollow — as that of venture capital. For decades, the VC model has stood as both a symbol of innovation and an architecture of power: selecting winners, shaping markets, and imposing values cloaked in optimism. But behind the pitch decks and press releases, a deeper structural shift is underway — not an evolution of the venture model, but its slow and inevitable decline.
Venture capital is not a neutral financing mechanism. It is a socially constructed epistemology — a way of organizing access to capital, shaping economic outcomes, and defining what counts as “innovation.” Especially in the context of European capital market development, the question is no longer whether VC is evolving, but whether it remains relevant at all. The more urgent inquiry is this: what comes after a regime whose time may have passed?
A European Ambivalence
Europe has always been ambivalent about venture capital. Despite decades of policy ambition — from Lisbon via the Capital Markets Union (CMU) to the newly proposed Savings and Investment Union (SIU) — the continent has never fully embraced the VC ethos. The reasons are both structural and philosophical.
Structurally, Europe’s capital markets remain fragmented, overly reliant on bank lending, and constrained by regulatory divergence. This hinders the scale and speed on which traditional VC thrives. Philosophically, the VC model — with its imperative of exponential growth and rapid exit — clashes with Europe’s social priorities: stability, inclusion, cohesion.
Yet EU policy continues to tether itself to this paradigm. The EU Startup and Scale-up Strategy, along with associated funding tools like InvestEU and the European Innovation Council, remains disproportionately focused on venture capital and business angels as the default mechanism for startup growth. This institutional bias risks reinforcing the very structural inefficiencies and access asymmetries the EU claims to address. Rather than enabling diverse capital pathways, these frameworks often double down on the venture-centric logic of selective acceleration — overlooking the potential of more distributed, transparent, and regionally inclusive financing mechanisms.
Recent EU frameworks such as the European Crowdfunding Service Providers Regulation (ECSPR) and the Markets in Crypto-Assets Regulation (MiCA) represent more than regulatory updates. They mark a quiet but radical departure from the venture capital paradigm. These tools aim to democratize access to capital, empower small investors, and foster geographically diverse innovation — a clear contrast to the closed, elite networks that have defined VC.
The Commission’s Recommendation (EU) 2024/1673 on financing for small and mid-cap enterprises further reflects a shifting policy lens. Though still tethered to traditional investor profiles like VCs and angels, it opens space for reconsidering how we value early-stage capital — and who gets to allocate it.
The Myth of Evolution: Venture Capital’s Stagnant Core
According to Invest Europe’s Private Equity Activity 2024 report, total early-stage venture capital investment in Europe reached EUR 6.8 billion, EUR 5.9 billion for start-up investments and EUR 900 million for seed investments. Some, 4,236 companies received seed or startup funding in 2024 — remaining a minority in value terms. The limited scale of seed and start-up investments underscores the structural inefficiencies in traditional venture financing.
This imbalance highlights the growing need for complementary mechanisms to align financing tools with Europe’s broader innovation and cohesion objectives. The smaller average deal sizes at the early stages result in a proportionally lower share of total investment value. Moreover, the investment focus of venture capital is highly concentrated in specific sectors, with ICT receiving nearly half of all venture capital investment in 2024, followed by biotech & healthcare just under one third, and business products and services with just under 10%.
Venture capital has remained structurally unchanged for half a century: the 10-year fund lifecycle, the 2-and-20 fee structure, the relentless push for outsized returns. These mechanisms were never neutral — they were tools for enforcing a Silicon Valley logic of exit over sustainability.
Attempts to “reinvent” venture capital — through startup studios, scout programs, or pre-seed syndicates — are surface-level modifications. The epistemic foundation remains intact: capital flows from the top down, governed by a narrow, often unaccountable class of allocators with limited alignment to the public interest.
This is not just capital allocation — it is the framework of financial power: everyday mechanisms that reinforce elite control while disguising themselves as innovation.
Business Angels and the Theater of Informality
According to EBAN, the European Business Angel Network, business angels in Europe invested around EUR 1.25 billion into 4,789 companies in 2023. The data only refers to “visible” investments reported by business angel networks or active business angels, and assumes — given the private and opaque nature of angel investing — that a significant number of investments go unreported.
The adjacent world of “business angels” is often presented as the more humane cousin of VC. But in practice, it is a performance of access and trust, conducted by individuals with surplus capital who wrap private risk-taking in the language of mentorship and community.
Angel investing suffers from the same opacity and exclusionary logic as VC. It lacks oversight, resists standardization, and depends on informal networks rather than accountable, evidence-based practices. While often romanticized, this form of finance reinforces inequality, not innovation.
The “angel” becomes a symbolic figure in the mythology of startup finance — the benevolent gatekeeper — while the underlying processes remain arbitrary, opaque, and ideologically narrow.
The Real Frontier: Regulated, Transparent, Post-Venture Capital Markets
What replaces VC is not a shinier version of the same logic — but an emergent architecture of capital grounded in transparency, pluralism, and systemic design:
- Crowdfunding under ECSPR: Providing a harmonized European regime for equity, debt, and hybrid instruments — with institutional-grade governance and cross-border reach. The new regulation is transforming the market, with 2023 the first year offering initial data from the European Securities and Markets Authority, showing activity of around EUR 200 million in early-stage investments only. The market doubled in number of actors in 2024, and we may see significant growth as platforms transition from legacy national regimes into the new professional EU rules. Given that larger crowdfunding platforms have transacted more than EUR 1 billion each over the past decade, this is a space to watch.
- Programmable assets under MiCA: Enabling flexible, compliant, and transparent ownership structures that bypass centralized fund managers and support secondary market liquidity. As of now, the integration of crypto-assets into SME financing remains in its early stages across the EU. As MiCA becomes fully operational and market participants adapt, more substantial data and use cases are expected to emerge.
- Pan-European SME exchanges: These could allow for liquidity in private markets, perhaps via simplified and streamlined multilateral trading facilities (MTFs) for private securities — and policy-backed platforms — shaped not by hype, but by public interest. These do not yet exist, but we understand that, beyond market demand, there may also be political interest in exploring this idea.
The question is no longer who picks the winners, but how trust, disclosure, and liquidity are engineered. Power shifts from exclusive networks to regulated rulebooks. From insider signals to open protocols of participation.
Europe’s Opportunity — and Responsibility
Europe is not behind in venture capital. It is free to move beyond it. Its regulatory framework — while often slow — is building the infrastructure for a post-venture capital market: one that is open, mission-aligned, and fit for a socially cohesive, digitally enabled Union.
This demands letting go of outdated myths: that unicorns drive prosperity; that only elite investors generate innovation; that risk capital must remain private and opaque. These fictions have long distorted the allocation of talent, resources, and legitimacy.
The public sphere is where legitimacy is built. If future capital markets are to be legitimate, they must be public in structure, transparent in operation, and plural in participation.
Venture capital, as we have known it, is not evolving. It seems to be receding — into history.
