An interview on the structural gaps holding Europe back in deeptech
Deeptech isn’t SaaS. It’s often slow, risky, physical and still underfunded in Europe. What’s behind the gap with the US? A rare cross-Atlantic perspective.
An interview with Alain le Loux, Cottonwood Technology Fund
This article is part two of a three-part series on venture capital and deeptech investing. It builds on my earlier conversation with Patrick Claessen, Alain’s colleague at Cottonwood, and continues the thread by asking: how does Europe really compare with the US in deeptech?
To explore that question, I spoke with Alain le Loux, partner at Cottonwood Technology Fund, one of the few firms that operates on both sides of the Atlantic.
Cottonwood stands out not just because it backs deeptech, but because it backs hardware, often long before revenue is in sight.
From SaaS to Science
Deeptech is not app development. It’s not platform optimisation or software-as-a-service.
It refers to breakthroughs grounded in science or engineering; fusion energy, quantum computing, robotics, photonics, advanced materials, and sensor technologies.
These are ventures built on physical processes, complex hardware, or novel scientific principles. They often require long development cycles, significant upfront capital, and carry fundamental technical risk. There is no minimum viable product. And no easy pivot.
A Cross-Atlantic Lens
Alain’s perspective, both sharp and wide-ranging, offered a kind of informal litmus test. Where is Europe really, if you compare it to the US? Can it close the gap? And what would that take?
This article focuses on the structural differences: money flows, cultural risk profiles, and the policy scaffolding behind innovation.
Why Europe Lags Behind
Alain didn’t hesitate: “Europe is 20 to 25 years behind when it comes to venture capital.”
The reason, he says, is structural. The US had a head start, a longer compounding runway, and a broader base of high-net-worth individuals willing to take risks.
That created a self-reinforcing ecosystem: more exits, more reinvestment, more capital willing to wait. In contrast, Europe’s VC culture is younger, smaller, and still seen as niche, even exotic, by many institutional investors.
This isn’t just a problem of available funds, but of what Alain calls “economic reflexes.” European pension funds, for example, have historically favoured bonds and real estate. Venture capital is still widely perceived as too risky, too opaque, or too foreign.
“Unknown makes unloved,” as Alain puts it. Pension funds and most institutionals have never invested in deeptech, not even with small tickets as a test, and therefore have no experience.
The Cost of Capital Flight
Meanwhile, in China, the dynamics are different again. State-led investment and capital controls ensure that money circulates internally, and fast. In the US, investors rarely look outward; there’s more than enough deal flow at home.
In Europe, wealth is more mobile. And when founders do succeed, many leave. “If you have a €100 million exit in the Netherlands,” Alain told me, “you move to London, or Switzerland, or Mallorca. In China, you can’t even take the money out.”
The result? A structural bleed of both capital and confidence.
This mobility undermines the very ambitions set out in European policy, where strategic autonomy and innovation leadership are recurring goals, but capital often fails to stay within the ecosystem long enough to reinforce them.
Still, even amid these structural gaps, a few firms have learned to navigate and bridge both worlds. Cottonwood is one of them. Their model reflects the limits of the European landscape, but also its hidden strengths.
Looking Ahead
In part three of this series, we’ll take a closer look at what it means to invest early, invest in atoms, and operate between two very different investment cultures.
Rob Hoeijmakers
Rob Hoeijmakers