European tech has its momentum again.

The 2025 State of European Tech (SoET) report shows a continent that has bounced back from the post-boom hangover. Investment is up, ecosystem value is up, founder optimism is up.

At the same time, the report is very clear about something Czech founders feel every day: Europe still makes it too hard to scale, to raise big rounds, and to keep its best companies at home.

This article translates the headline data into founder language, with one question in mind:

What does all this mean for Czechia and the CEE startup ecosystem?

1. Europe vs US: same talent, different firepower

After a rocky few years, European tech funding is growing again. Capital invested in European startups in 2025 is expected to reach around 44 billion USD, roughly 7% up on 2024 and the highest level since the 2021–22 boom.

Founder confidence is recovering as well. About half of founders and operators say they are more optimistic about European tech than a year ago, the best reading since the 2021 peak.

So far, so good. The problem appears when you compare this to the United States.

• In the first 9 months of 2025, US tech companies raised about 177 billion USD, almost double the same period in 2024, driven mainly by gigantic AI rounds like OpenAI’s 40 billion USD “giga-round”.
• In GDP terms, US tech investment is around 0.74% of GDP.
• Europe sits at roughly 0.17% of GDP.
• Even Europe’s strongest sub-region, UK & Ireland, comes in at only about 0.35% of GDP.

The SoET report sets a bold target: 1% of GDP in VC by 2030. Europe is not even at one fifth of that yet.

If you look at VC funds raised over time, the gap is just as stark. Between 2014 and 2025:

• US VC funds raised around 0.39% of GDP.
• European VC funds raised about 0.07% of GDP.

That is less than one fifth of the US level.

Why this matters for founders

VC works with power laws. A small number of outlier companies generate most of the returns, job creation, and ecosystem gravity.

If those outliers need very large late-stage rounds and deep public markets to reach their potential, and those conditions exist mainly in the US, then:

• Europe becomes very good at producing innovation,
• but not as good at monetising it at home.

The SoET report itself warns that, without deeper local capital pools, Europe risks turning into an “exporter of innovation rather than an economic winner” of its own tech.

According to our own data in Impact Report 2024, Every fourth founder (25%) considers relocation abroad. We take that seriously. Founders in Prague know what that looks like in practice: flipping to a Delaware C-Corp, so they can do raising in the US, and often shifting value creation outside the region.

2. Deep tech: Europe is playing, the US is scaling

If there is one field where Europe should shine, it is deep tech: AI, quantum, climate, defense, advanced materials.

There is good news:

• 36% of all European VC in 2025 went into deep tech, up from 19% in 2021.
• Europe has produced eye-catching deep tech rounds, such as:
  • Helsing (defense AI)
  • Isomorphic Labs (DeepMind spin-out)
  • IQM (Finnish quantum computing)

But again, the US scale is different:

• In 2025, just two private US AI labs attracted around 63 billion USD combined, roughly a quarter of global VC.
• Europe’s entire deep tech investment was about 16 billion USD, spread across dozens of companies.

US startups are raising rounds an order of magnitude larger than most European equivalents. OpenAI’s 40B round and Anthropic’s 13B round are the most visible examples of this firepower.

For Czech deep tech founders, this is the core challenge:

Europe is increasingly good at generating deep tech startups,

but still too small and fragmented to consistently scale them into global category leaders.

According to our Impact Report data, 28.6% of startups are deep tech in Czechia.

3. The structural blockers: friction, talent flight, and shallow capital markets

Despite the positive trend lines, the SoET survey data is blunt. Founders and investors still see three main pain points.

3.1 Regulation and market fragmentation

Around 70% of founders say Europe’s operating environment is too restrictive.

They highlight:

• Complex, overlapping regulations
• 27 different legal regimes within the EU
• Slow and unpredictable processes

On paper, the EU has a Single Market. In reality, scaling across borders still requires wrestling with different company laws, tax rules, labor codes, and compliances.

Investors see the consequences on the other end of the journey:

• 43% of VCs say the top barrier to investing more is poor exit options (weak M&A and IPO markets).
• Another 37% cite the shallow depth of public markets.
• Around 36% point to a lack of LP capital for VC.

This is the same story from two angles. From the founder side: friction to scale. From the investor side: friction to exit and recycle capital.

3.2 Talent: strong inflow, weak retention

Europe is not short of talent. Quite the opposite.

• A record 27,000+ new founders started companies in 2025, the highest number so far.
• Around 40% of startups say hiring has become easier compared to the 2021 peak, helped by layoffs in Big Tech and the spread of remote work.

The real issue is where experienced founders choose to base their companies.

• Around 4 in 5 European founders still build in Europe.
• But the share of seasoned European founders who now headquarter new startups in the US has almost doubled since 2016, from roughly 10% to 18%.
• 15% of European founders say they already moved their HQ abroad, and another 42% have seriously considered it.
• The number one destination is the United States, driven mainly by:
  • better access to capital,
  • easier access to large customers.

In other words, Europe is great at producing founders, but not yet great at keeping them.

3.3 Underused capital pools

One of the most striking numbers in the SoET analysis is about pension funds.

• European pension funds allocated only 0.01% of their assets to VC in 2024, around 1 billion USD.
• US pension funds allocate roughly three times more to VC.

If European pensions simply matched the US share, SoET estimates an extra 210 billion USD could flow into European tech over the next decade.

That is the kind of money that creates deeper late-stage markets, more patient capital, and a realistic path to 1% of GDP in VC.

For our community, access to capital was a top 3 priority.

4. 2026: a once-in-a-generation EU policy window

The timing of the 2025 State of European Tech is no coincidence. The report lands just as Brussels prepares a heavy startup-relevant agenda for 2026.

On the table:

• 28th Regime for Innovative Companies aka EU.INC

A single, optional EU-wide company form for startups. One set of rules to operate across the EU, instead of re-incorporating in each country. The details matter: if it comes as a strong Regulation with direct effect, it could be transformative. If it ends up as a watered-down Directive, it may add complexity instead of removing it.

• European Innovation Act

A package to boost innovation capacity. Likely to include R&D incentives, regulatory sandboxes, and measures to streamline funding for deep tech and scale-ups. It should connect to broader skills and competitiveness initiatives.

• Savings & Investment Union (SIU)

Often described as Capital Markets Union 2.0. Its aim is simple to state and hard to implement: mobilise European savings for European investment, especially in sectors like AI, digital, energy, and defense. That means:

• • more integrated capital markets,
  • easier cross-border VC fundraising,
  • and better incentives for pensions and insurers to invest in innovation.

• Cloud and AI Development Acts, Quantum Act, Advanced Materials initiative

Sector-specific frameworks intended to support critical technologies rather than only regulate them.

• Public Procurement Act

A reform of how governments buy from startups and innovative companies. Since 2021, only about 9% of European public procurement has gone to innovative providers, well below a 20% target set back in 2014. Even a small shift here could have big macro impact. One study cited in SoET suggests that increasing innovation-related procurement by one percentage point could lift GDP per capita by around 15% over time.

Put together, this is effectively a Startup Agenda for Europe.

The risk is obvious to any founder who lived through GDPR or is now grappling with the AI Act: important goals, but heavy implementation that hits startups hardest.

The SoET report’s message is clear:

This time, the startup ecosystem cannot sit on the sidelines.

Founders, operators, and local associations need to help design these rules, not just comply with them.

5. Czechia and CEE: where we stand

So where does Czechia fit into this continental picture?

On talent and ambition, we are in a good place:

• Strong technical universities and a high density of engineers
• A track record of globally known companies like Avast, Productboard, Rohlik, Mews
• A growing number of repeat founders and angel investors

On capital, we still lag behind.

• According to the 2024 SoET, Czech VC investment was around 0.07% of GDP, that is 590 mil EUR according to our own sources based on the Impact report and our Funding and Exits table
• The European average is roughly 0.17% of GDP.
• In absolute terms, Czech startups raise hundreds of millions per year, while the UK raises tens of billions, and countries like Germany are in the multi-billion range.

Domestically, many of the obstacles listed by European founders show up in an even sharper form:

• Complex and inconsistent taxes
• Rigid employment laws
• Weak or unusable employee stock option frameworks
• Persistent bureaucracy for incorporating, hiring, and dealing with authorities
• Pension funds and institutional investors that essentially do not invest in startups
• Until recently, no coherent national startup strategy

Czech Republic still significantly lags in support for startups and needs structural reforms to catch up with leading European ecosystems.

The result is a familiar pattern: promising Czech teams incorporate abroad, raise from foreign funds, and sometimes move key functions or headquarters outside the country. The value creation still has Czech fingerprints, but the bulk of the upside accumulates elsewhere.

The good news is that we are trying to change this with other ecosystem players across Czech Republic and Europe.

• Czech Founders, a community of startup leaders, has set a clear mission: help turn Czechia into a leading European startup hub over the next decade, with 10,000 Czech startups instead of just a few thousand.

The SoET data gives these efforts a strong foundation and a sense of urgency.

6. What Czechia should push for

Using the SoET findings, we can outline a concrete agenda for Czechia and CEE. Think of it as a shortlist of priorities where policy and community action can genuinely change our trajectory.

6.1 Lift VC investment as a share of GDP

Talking in percent of GDP makes sense to finance ministries and central bankers.

Czechia at around 0.07% is:

• below the European average of 0.17%,
• far below UK & Ireland,
• and nowhere near the 1% of GDP level Europe is targeting for 2030.

A realistic medium-term goal would be:

• move towards 0.2–0.3% of GDP in venture investment,
• with a long-term path toward the 1% target.

How to get there:

• Create or scale a government-backed fund-of-funds that invests in local VC funds.
• Introduce tax incentives for angel investors and VC funds, mirroring best practices from other EU countries.
• Adjust regulations so that pension funds and insurers can allocate a small but meaningful share of assets to Czech and European VC.
• Maximise the use of EU instruments such as EIF and InvestEU to crowd in private capital.

6.2 Use the EU’s 2026 agenda, not fear it

The 28th Regime, Innovation Act, SIU and procurement reforms will shape the playing field for the next decade.

Czechia should aim to be a fast adopter and active shaper, not a reluctant follower.

That means:

• Czech founder groups feeding concrete feedback into Brussels: what would a usable 28th Regime look like for a startup in Prague? What would make stock options actually work here?
• Czech policymakers supporting strong, simple EU instruments rather than pushing for national exceptions that re-introduce fragmentation.
• Domestic laws being adjusted early to align with the new frameworks, so Czech startups can benefit from cross-border scale on day one.

If done well, Czech startups would be able to:

• incorporate once under a 28th Regime structure,
• hire and incentivise employees in a modern, tax-efficient way,
• and access broader European capital markets with fewer legal hurdles.

6.3 Fix talent incentives: make staying attractive

To keep seasoned founders and senior operators in Czechia and Europe, the local environment has to feel competitive with the US and Western Europe, not only in lifestyle but in upside.

Key levers:

• Stock options: this is consistently obstacle number one. Employees should be able to receive and exercise options without prohibitive tax bills. This is central if we want global-class teams based in Prague and Brno.
• Bankruptcy and second chances: founders should not be permanently punished for a failed startup. A lower “cost of failure” encourages experimentation and ambition.
• High-skilled visas and talent attraction: Czechia can leverage quality of life and cost advantage to attract tech talent from across Europe and beyond, but only if the visa and residence processes are predictable and reasonably fast.

Real success stories like Productboard, which raised from top US and European funds while keeping a strong Czech base, can be used as proof points in these discussions.

6.4 Make the public sector a real customer

If governments bought more from startups, a lot of things would change:

• predictable revenue for early and growth-stage companies,
• credible references when selling abroad,
• and a strong signal that innovation is welcome at home.

At EU level, only about 9% of public procurement has gone to innovative companies despite a 20% target. Czechia can commit to being a leader here rather than sitting near the average.

A few practical steps:

• Set a national target for innovation procurement.
• Create simple, startup-friendly procurement tracks with lighter documentation and faster decisions.
• Encourage ministries and agencies to run pilots and sandboxes with local startups in areas like digital government, health, energy, defense, and education.

7. Turning data into action: the role of Czech Founders and the community

The 2025 State of European Tech gives us something extremely valuable: evidence.

We now have:

• hard numbers on the funding gap,
• clear data on founder migration and sentiment,
• quantified potential from pension reforms and innovation procurement,
• and a visible policy window in 2026.

For Czechia, this should not remain an interesting PDF. It can be a playbook for advocacy.

What the community can do next:

• Arm policymakers with the right numbers

Next time someone in government asks whether startup policy is “worth it,” we can point to:

• • 210 billion USD of additional potential VC in Europe if pensions change allocations,
  • large GDP per capita gains from smarter public procurement,
  • and the fact that experienced founders are increasingly choosing the US unless we improve conditions.

• Push for a Czech “Startup Act”Use the best ideas from SoET and from countries like Estonia, France, or Sweden:
  • modern stock option rules,
  • simpler incorporation and closure,
  • reduced bureaucracy for early-stage companies,
  • and predictable incentives for investors.

• Coordinate voicesCzech Founders, the Czech Startup Association, CzechInvest, angel groups, VCs, and successful scale-up founders should coordinate around a small set of clear asks, repeated consistently in Prague and in Brussels.
• Tell the story of what is possibleData is powerful, but so are narratives. Czechia can position itself as:
  • the natural startup hub of CEE,
  • a bridge between Western capital and Eastern talent,
  • and a place where global companies can be built without leaving the region.

Closing: from cautious optimism to confident ambition

The 2025 State of European Tech describes a continent in a phase of cautious optimism.

Europe has:

• more founders than ever,
• nearly 4 trillion USD in public and private tech company value,
• over 400 unicorns,
• and a growing share of investment flowing into deep tech.

The missing pieces are not imagination or engineering skill. They are:

• deeper and smarter capital markets,
• less fragmentation and bureaucracy,
• better talent incentives,
• and governments that buy from innovators instead of only talking about them.

For Czechia, the message is both a warning and a huge opportunity.

If we do nothing, we will stay a nice source of talent and early-stage startups that often scale elsewhere. If we use this moment, we can help shape the European rules, fix local bottlenecks, and make Prague and Brno core nodes in Europe’s innovation map.

The data in SoET gives us the diagnosis and many elements of the prescription.

Now it is on us, as founders, investors, and ecosystem allies, to turn it into action.

If we succeed, a future State of European Tech will not talk about Czechia as a laggard on VC per GDP, but as one of the small countries punching far above its weight.

The window is open. It is time to step through it.

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