Europe’s Missing Links
Collaboration and strategy will determine whether Europe builds systems or stalls in niches
Europe has the talent, technology, and industrial history to lead in tech, yet it struggles to turn potential into impact. Its diversity—cultural, linguistic, and industrial—too often becomes a source of friction rather than advantage. The result is a continent that excels in niches but lacks systems.
Fragmentation costs Europe dearly. Startups face barriers to cross-border expansion. Industrial sectors remain insular, duplicating efforts instead of sharing knowledge. Governments and institutions struggle to coordinate strategy, leaving capital, ideas, and talent trapped. Without dense networks connecting people, companies, and technologies, European innovation cannot scale.
Global competitors show what’s possible. China uses shared technological platforms, such as the Electric Tech Stack, to link industries and accelerate learning. The US relies on dense human networks and institutional continuity to amplify ideas. Europe has neither, yet it could build its own path: structured diversity, where differences generate innovation through connection rather than in spite of them.
In this context, venture capital has a unique role. European VCs are naturally positioned to become the connectors that bind the continent’s New Industrial ecosystem together—linking startups, legacy firms, investors, and governments.
By combining shared technology with human networks, Europe can turn its fragmentation into a competitive advantage rather than a handicap. This edition examines how.
1/ Europe struggles to turn diversity into a strength
In a meeting earlier this week in London, I found myself discussing New Industrials in Europe: the work needed for this segment of the market to take off and why Europe has a chance to outperform its results from the previous software-dominated cycle. My interlocutor immediately raised what is often cited as Europe’s main weakness: fragmentation.
I have covered this topic extensively in this newsletter and usually stress a point many miss: European fragmentation is NOT primarily about regulations. In fact, given everything harmonised over the past four decades as part of building the single market, Europe is in many ways less fragmented legally than the US.
The reason the US often sees it differently is twofold. First, a shared language and culture make the differences in local regulations seem more legible and familiar. Second, the US has a culture of solving regulatory problems by throwing lawyers at them—made easier by a far higher number of lawyers per capita than anywhere else in the world.
So, it is not regulations that make Europe fragmented. Instead, it is language, and above all, culture. A German and a French person already struggle to understand and respect each other when both speak imperfect English to communicate. Even if they manage that, the cultural gap between the high-context, irony-prone French and the structure-driven, clarity-seeking Germans can still make collaboration and business difficult.
In the end, Europe’s challenge is not to erase its diversity but to learn how to make it work as a strength rather than a source of friction.
2/ Industries close themselves off and block innovation
Then my interlocutor and I went on to discuss another form of fragmentation in Europe, one that is specific to the industrial sector. It is the fragmentation between industries themselves, which makes them insular and inward-looking, and prevents the collaboration and cross-pollination that could turn them into fertile ground for innovation.
What is an industry, really? It is not a group of companies doing the same thing and competing with one another. Rather, it is a network of companies that cooperate along the value chain—from raw material extraction at the top to serving the final customer at the bottom.
From a distance, a design studio specialising in automobiles, a car manufacturer managing labour and logistics, and a car dealer focused on sales may seem to have little in common in terms of work culture or mindset. Yet because they belong to the same industry—automotive—they share a culture. They use a common jargon, follow the same customs, and operate under the same long-established regulations and best practices.
This shared knowledge and language make an industry competitive and efficient. But they also come at a cost: isolation. The industry becomes an ingroup; the rest of the economy becomes the outgroup, ignored at best, rejected at worst. The older and more optimised the industry, the stronger this isolation tends to be, as habits and best practices harden into barriers.
Meanwhile, innovation today depends on openness—on thinking and building in public. In the tech world, we take for granted the culture of sharing ideas through blogs, newsletters, and social media. But this is not how things work in the old industrial world. There, insularity still prevails. Industry players rarely share beyond their own circles, often confining communication to obscure trade publications, leaving the rest of the world unaware of what is happening inside.
3/ Fragmentation slows Europe and weakens competitiveness
All in all, by this point, we all see the problem. Europe is fragmented across so many dimensions—culture, language, regulations, and inward-looking industries. It is no wonder it struggles to compete in a fast-moving innovation economy that rewards scale and depth. We can try to mitigate some of these divides—by improving Europeans’ English, for instance, or by making the single market even more unified—but these efforts barely move the needle.
At this stage of the conversation, my interlocutor mentioned something intriguing: a January edition of Kyle Chan’s High Capacity newsletter, which focused on “China’s overlapping tech-industrial ecosystems”. It highlighted one striking fact. Many of China’s leading players may appear to belong to different industries—some building phones, others cars, others drones or batteries—yet in reality, they are deeply interconnected. They sell to one another, draw from the same talent pool, and maintain shareholding ties or other forms of partnership. Have a look at Kyle’s graph:
The key question is: why is it so different in China? And further, what does this mean for industrial competition on the global stage? Most importantly, how can Europe overcome its industrial fragmentation and build cross-industry connections that turn its legacy strengths into a platform for innovation and growth?