More is needed to foster investment in Europe's digital economy

#CriticalThinking

Digital & Data Governance

Picture of Matthias Ummenhofer
Matthias Ummenhofer

Head of venture capital at the European Investment Fund

Not a day goes by without European policymakers stressing the importance of the digital economy for Europe’s “Digital Agenda” and competitiveness and growth. It seems like digital is the last weapon to defend Europe’s position and ensure a prosperous future in an ever more globalised world. EU member states and regions are even competing to become thedigital economy within Europe.

Unfortunately, these statements are often perceived as defensive, and the sometimes cumbersome processes at both European and member state levels add to the lack of policy alignment and funding dedicated to the sector. This leaves institutional investors with the impression that Europe has already fallen substantially behind on building a digital economy, and that there’s a risk this cannot be reversed. The available budget for the next seven years to implement the “Digital Agenda” is a telling example of this. At the end of the day, policymakers tend to urge the private sector to step forward, thereby implicitly acknowledging the lack of government leadership and vision.

If Europe is to avoid being perceived as lagging behind other established and even emerging digital economies, investors must regain confidence in a European digital economy. Paradoxically, this is mainly true for domestic investors who invest their capital in other sectors or digital economies elsewhere. And this at a time when Europe can clearly show that it is capable of delivering attractive risk-commensurate returns to investors investing in digital.

Investments in Europe in early and growth stage technology businesses that contribute to building or taking advantage of digital markets are performing strongly, and in many cases either have or are about to create global leaders.

Shared vision and leadership, backed by a concerted and firm commitment to fund smart policy equity instruments would signal Europe’s determination to become one of the world’s leading digital economies. The change in perceptions and fostering of private sector investment this would bring has the potential to change Europe’s course.

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