Skip to main content

Europe: Fertile Soil for Purpose-Driven Startups

Posted at: 04.21.2022
Why is Europe seen as the best location to start purpose-driven startups


An annual survey of the state of European tech from Atomico, a London venture capital firm, has become the industry standard and a must read. The most recent report included an eye-popping number: in 2021, investment in purpose-driven startups in Europe was more than 2 billion, up more than 50 percent from the year before.

That was hardly the only remarkable statistic. Overall investment in purpose-driven startups in Europe was 16 percent of the total investments in tech companies, well ahead of 10 percent in North America. And Europe’s share of early-stage purpose-driven investing (amounts of less than million) was 61 percent of the global total.

Clearly, Europe has become a center for such types of investments. But what are they and why are they popular in Europe

The idea of a purpose-driven startup would appear to be an oxymoron as any company has to have a purpose if it is to succeed. But the term refers to 17 sustainable development goals of the United Nations, which were first defined in 2012 at a conference in Rio de Janeiro. They encompass a range of priorities, including combating poverty and hunger, improving education, reducing inequality, reducing pollution, and combating global climate change.

Those issues have no regional bias or boundaries, but they may have a particular resonance with Europeans.

A receptive ecosystem

Lawrence Leuschner, the co-founder and chief executive of Tier Mobility, a Berlin-based company that was started in 2018 but is already one of Europe’s leading clean-energy mobility providers, said that he thought that it was easier to establish and grow his company in Europe.

“In Europe, many of our cities have excellent public transport options, they have built infrastructure to accommodate micro mobility (to varying degrees), and the populations are used to living with and already readily use micro mobility for travel,” Mr. Leuschner said.

He added, “Also, climate change has been firmly on the political agenda in Europe for longer, making it a receptive and more supportive market in which to launch a company like TIER, dedicated to reducing emissions.”

Regulation can be helpful

Europe has a reputation of being more tightly regulated than other markets and entrepreneurs often chafe at those rules because they say that it can stifle innovation and creativity.

There is doubtless truth to those claims.

But the regulations arise out of concerns for protecting small companies from predatory competition, fighting against inequality in the workplace, and protecting the environment, among other concerns. Companies that adapt to European regulations may have an easier time expanding in other markets because they have already overcome obstacles and proved themselves.

Pierre Dubuc, the co-founder of Open Classrooms, a company that has provided online vocational training for 2.5 million people, explained, “Education is a very regulated market and the fact of having started in Europe, where the market is basically more regulated, is probably an asset. We are indeed more ‘equipped’ compared to our American competitors, with an already accredited product and an organization accustomed to regulation and the public sector.”


OpenClassrooms has raised almost $150 million in funding since its start. Photo credit: Salesforce

Many bright spots

Looking around Europe, it is easy to be optimistic about the place of purpose-driven startups in the ecosystem. The ten largest fundraising deals for such investments in 2021 all surpassed $100 million, according to Atomico, with one, for Northvolt, the company that makes lithium-ion batteries, raking in $2.8 billion.

Other deals included Back Market (35 million), Kry ($312 million), Vinted ($275 million), Volocopter ($241 million), and Vestiaire Collective ($210 million).

Some catching up to do

Despite the progress of purpose-driven startups in Europe, investments in them still lag behind those in the United States, according to Atomico. In 2021, the total capital in such investments in the United States was $24 billion, or about double the investments in Europe. In addition, the total amount of capital invested in purpose-driven deals as a percentage of all investing declined in Europe to 14 percent in 2021 from 17 percent in 2020.

Mr. Dubuc, whose company has raised $150 million over the years, said that, in general, he had found it easier to raise capital outside of Europe. “There are more investors outside of Europe, particularly in the United States,” he said. “And they are often more agile.”

Mr. Leuschner of Tier Mobility, which completed a $200 million round of series D funding last October, with investments from Softbank of Japan and Mubadala Capital of the United Arab Emirates, among others, said investors outside Europe were more knowledgeable about his sector, which made approaching them easier.   


Tier offers e-scooters, e-mopeds, and e-bikes in urban settings. Photo credit: Tier Mobility

EU plans

Leaders in Europe are sensitive to the needs of entrepreneurs and are taking steps to help the European ecosystem catch up to North America and Asia.

The European Commission has created what it calls a Digital Compass that has identified four areas that must be addressed to improve Europe’s digital future. It includes improving government services by having them 100 percent online, having a trained workforce of at least 20 million information and technology specialists, improving infrastructure by putting highly secure edge nodes into service and developing high-end semiconductor factories, and helping most businesses have access to cloud, artificial intelligence and big data service.

Spurred by the French government, a project called Scale-Up Europe has also been created. It will have access to $3.5 billion in late-stage funding, will help cut through bureaucracy to make recruiting talent easier, and identify the next generation of unicorns.

These steps may not be enough to allow Europe to overtake North America and Asia, but they should help. They are making entrepreneurs like Mr. Leuschner, who has started his own investment fund for purpose-driven startups called Blue Impact Ventures, more comfortable with Europe as a nexus for startups.

“These factors, combined with the fact that I am from Berlin and know my home market, means that Germany - and Europe in general - was the best place for me to start TIER,” Mr. Leuschner said.

Share this