Can private capital help Europe close its investment gap?

Europe’s policymakers, investors, and businesses are facing a common challenge: how to fund the region’s next phase of growth.

It stretches across a range of priorities. As we’ve explored in Preqin First Close, governments are looking to support innovation in areas such as AI, quantum computing, biotechnology, and manufacturing. Businesses need modern infrastructure to support economic activity, including digital networks and energy systems. And investors continue to seek long-term opportunities that can simultaneously deliver returns and support broader economic objectives.

Against this backdrop, private capital is increasingly becoming part of the solution. Recent developments across venture capital (VC) and infrastructure suggest Europe is becoming more focused on mobilizing private capital at scale, as policymakers and market participants look for ways to strengthen competitiveness and long-term growth.

EU Startup and Scaleup Strategy: ‘the best of Europe can choose Europe’

Efforts to strengthen Europe’s innovation ecosystem are visible across the region, as we highlighted recently in Preqin First Close.

In May, the European Innovation Council Fund Board announced it had selected EQT to act as investment advisor and fund manager for the €5bn Scaleup Europe Fund. Financed by a mixture of public-sector and private investment, the initiative forms part of the EU Startup and Scaleup Strategy. It’s expected to back ventures in strategic technology sectors including AI, quantum computing, robotics, semiconductors, biotech, space, and energy.

Earlier this month, EQT announced that the fund had completed its first investment. It co-led ICEYE’s series F funding as part of a €1bn financing round, which includes a €450mn primary investment at a valuation exceeding €10bn.

Speaking about the initiative, European Commission President Ursula von der Leyen said the fund is intended to help ‘make sure the best of Europe can choose Europe’. The objective reflects a broader concern among some policymakers that promising European businesses may struggle to access the scale of capital available elsewhere, such as North America.

Our latest fundraising figures illustrate the extent of the challenge. Preqin Pro data shows Europe-focused VC funds have raised $10.2bn across 81 vehicles so far this year, while North America-focused funds have raised $49.3bn across 761 vehicles.

But investor appetite for innovation-related strategies remains strong. Preqin’s 12-month plan data as of Q1 2026 shows 54% of private equity (including VC) investors are looking at venture and 45% are targeting growth vehicles over the next 12 months (Fig. 1).

Fig. 1: Appetite among Europe investors for venture and growth remains strong as the region focuses on innovation
Strategies targeted by Europe-based private equity and VC investors over the next 12 months (limited to buyout, growth, and venture)

_{Source: Preqin data as of Q1 2026}

Europe’s ambition to cultivate globally competitive technology businesses is also reflected in the activities of firms such as Paris-based Mistral. The AI company secured significant financing in March, and intends to continue investing in infrastructure and expansion to strengthen its position in a competitive market.

The infrastructure behind innovation

For many investors and policymakers, competitiveness depends not only on funding innovation, but also on investing in the infrastructure for economic growth. Digital connectivity, energy networks, transport systems, and climate-related infrastructure are increasingly being viewed as essential foundations for future productivity.

Germany offers a glimpse into how this is unfolding.

Last spring, the Bundestag approved a new Special Fund for Infrastructure and Climate Neutrality, expected to provide a total €500bn of funding over 12 years. It aims to support both infrastructure and climate-related investments across the country.

Alongside public-sector activity, private investors continue to show interest in infrastructure opportunities. Preqin data as of Q1 2026 suggests that nearly half of Germany-based infrastructure LPs intend to invest in the asset class over the coming year, with a further 17% considering new commitments.

Investor preferences also reveal where attention is concentrated. Energy and renewable energy account for the largest shares of sector interest among Germany-based infrastructure investors, potentially reflecting both decarbonization objectives and broader energy security considerations (Fig. 2).

Fig. 2: German investors focusing attention on energy and renewables as infrastructure remains key to innovation
Sectors targeted by Germany-based infrastructure investors over the next 12 months

_{Source: Preqin data as of Q1 2026}

Preqin’s fundraising figures indicate that Europe remains an important destination for infrastructure capital. According to our Infrastructure Q1 2026: Preqin Quarterly Update, unlisted, Europe-focused, core-plus, diversified infrastructure funds raised $9.2bn in the first quarter of this year – 40% of the global total.

The combination of public spending initiatives and private capital participation highlights a growing recognition that infrastructure investment could play an important role in Europe's long-term competitiveness.

At the same time, questions remain about implementation. Economists and policy observers have debated whether funding alone will be sufficient to address structural challenges, arguing that project delivery, regulation, and investment conditions are equally important.

A broader investor base is emerging

Europe’s ability to mobilize capital ultimately depends on the strength and size of its investor base.

While much of the attention tends to focus on established financial centers, developments in Central and Eastern Europe (CEE), for example, indicate that participation in private markets is expanding across the region.

In June, Preqin First Close highlighted data that shows CEE-based investors have steadily increased their allocations to private markets. Their average allocation reached 27.5% in May 2026, closing the gap with Europe as a whole to only two percentage points.

Regulatory developments are supporting this trend. For example, pension reforms in countries, including the Czech Republic, are helping to expand access to private markets and creating new opportunities for institutional investors.

This growing participation is occurring alongside broader economic momentum. According to Eurostat, GDP growth rates in several CEE economies have outperformed some of Europe’s largest Western markets in recent years. Countries such as Poland have continued to attract foreign direct investment (FDI), despite a broader decline across Europe.

The development of regional private capital ecosystems is also becoming more visible. Firms across CEE, including in Prague, Vilnius, and Ljubljana, have launched and raised new private equity vehicles. And the number of active LPs tracked by Preqin has risen by 72% since 2024, and more than tripled since 2020.

Investors in CEE generally remain positive on private markets. According to our data as of May 2026, nearly two-thirds of CEE-based LPs said they expected to allocate capital to private equity over the next 12 months, exceeding the European average of 57%.

As Europe’s capital base becomes more geographically diversified, emerging investor communities may help expand the pool of capital available to private markets across the continent.

From isolated developments to a wider trend

Viewed in isolation, developments in VC and infrastructure, as well as regional LP shifts, may seem unrelated. Taken together, however, they reflect a broader strategic direction in Europe: mobilizing more private and institutional capital to support investment, competitiveness, and economic growth.

That ambition is becoming increasingly visible in the policy agenda. The Savings and Investments Union (SIU) reform agenda is focused on improving the flow of European savings into productive investment, while initiatives such as the European Commission’s supplementary pensions package seek to both strengthen long-term savings and expand the pool of institutional capital that can be invested in the economy. At the same time, measures to deepen venture and growth financing, broaden equity investment, and reduce barriers across Europe’s capital markets are intended to strengthen the channels through which that capital reaches companies and projects.

Seen through this lens, initiatives such as the Scaleup Europe Fund, infrastructure initiatives to modernize the foundations of economic activity, and regulatory reforms are all part of a wider effort to expand private markets participation and broaden the investor base available to support future growth.

But significant challenges remain. Europe continues to trail North America in venture fundraising, FDI has declined in several of the region’s major economies, and questions remain about how effectively public and private investment can be deployed at scale.

Nevertheless, recent developments suggest growing alignment between policymakers, investors, and firms around a common objective: strengthening Europe’s capacity to generate, attract, and deploy long-term capital.

Whether these will narrow Europe’s investment gap is yet to be determined. But mobilizing private capital is becoming an important part of the answer.

Alfie Finch-Critchley and Albert Frank are Analysts in the Preqin EMEA Investor Data Team.

Kerstin Weil is Research Editor of Preqin First Close.

Second Look is edited by Libby Fennessy, Production Editor of Preqin First Close.

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Read the original newsletter stories:

€5bn Scaleup Europe Fund aims to accelerate deeptech ventures

Vive l’innovation! Europe’s investors zoom in on VC

The ups and downs of German infrastructure investment

Central and Eastern Europe LPs look to private equity

_{The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin accepts no liability for any decisions taken in relation to the above.}