If you’re an early-stage founder toggling between Europe and the U.S., one difference hits you in the wallet: how much money you can raise – and at what cost to your ownership. In this second part of our series (drawing on candid input from VCs at Alumni Ventures, 10VC, etc., and broader market data), we explore the funding landscape differences. From typical round sizes to dilution and the availability of follow-on capital, the “capital gap” is a critical factor in strategic fundraising.
Bigger Checks, Bigger Vision in the U.S.
Silicon Valley investors like to say, “think big,” and their term sheets back it up. In the U.S., seed funding rounds routinely reach $3–6 million for ambitious startups, and Series A rounds in the $10–25 million range are common. These larger check sizes reflect not only the depth of capital available but also an expectation: with more money, a startup is supposed to shoot for faster growth and a larger outcome. One Silicon Valley seed fund partner advised us that founders should raise “just enough to get through 18 months” – essentially, secure a hefty runway to hit big milestones, rather than a string of small, incremental raises. This contrasts with a practice sometimes seen in Europe of “phased” or bridge rounds (raising a bit, then a bit more six months later, and so on). As 10VC’s Ben Patterson noted, such phased approaches don’t fly in the U.S. market. American investors expect a decisive round that fully capitalizes 12–18 months of progress; anything less can signal a lack of confidence or ambition.
The U.S. also boasts a deeper pool of later-stage capital. If a startup shows promise, there’s usually no shortage of Series B, C, or growth funds ready to pour fuel on the fire. With VCs like WestCap, also operational support can be brought to bear, allowing the startup to focus on growing the customer base and move through to the next round. This abundant capital enables U.S. startups to scale aggressively. WestCap was special in a sense that it really focuses on supporting their scaleups in this critical phase, where they move from a typical startup to a large, multi-billion dollar company.
However, it comes with a trade-off: U.S. VCs often push for hyper-growth and “go big or bust” outcomes. From a founder’s perspective, the benefit is clear – you can raise more money at earlier stages, potentially outpacing competitors. The challenge is ensuring that you don’t dilute yourself too much and that you can actually deliver the aggressive growth your investors expect with that capital.
On the dilution front, U.S. norms have trended founder-friendly in recent years. It’s not uncommon for founders to still own ~80% combined after a seed round, and many top VCs explicitly state they want founders to retain significant equity for the journey. For instance, one Silicon Valley fund we encountered won’t invest if the founding team owns less than ~60% post-round – a policy meant to avoid over-diluted teams. This aligns with broader data: median dilution for seed rounds in the U.S. has hovered around 20% (Dilution is on the decline – Carta), meaning investors take a fifth or less of the company in exchange for those multi-million-dollar seed checks. For some lucky startups with super high growth at this stage, or an excellent founding team, dilution figures can even trend to 10%. The net effect is U.S. founders often end up with more cash and similar or greater ownership percentages compared to their European counterparts who raised smaller sums.
The European Reality: Smaller Rounds, More Dilution?
In Europe, funding rounds at equivalent stages have historically been more modest. While the gap is narrowing, a typical European seed round might range from €500K up to €2–3M (though outliers exist), and Series A could be in the €5–€10M range for many countries. Even as of late 2024, data shows European startup valuations and round sizes remain significantly lower – roughly a 30–50% discount – compared to U.S. startups at the same stage. On the flip-side, talent is much cheaper in Europe, with a similar quality. However, some VCs do not want teams to hire in Europe as they do not see an upside in hiring cheaper versus keeping talent local. Additionally, political changes might even prevent such remote hiring decisions, and require teams to source locally in the U.S.
As an example of a funding round, let’s consider a Bay Area startup that raises $5M at a $20M pre-money valuation, a similar-stage startup in, say, Paris might raise €2.5M at a €8–10M pre-money. Both founders might end up ceding ~20-25% of their company in the round – but one ends up with double the capital to spend. This means European founders often face the tough choice of either living with a shorter runway (and planning for another raise sooner) or accepting heavier dilution to get equivalent funding. Often, they end up doing a bit of both: taking a smaller round now and expecting to top up later (bridge rounds, convertible notes, or seeking government grants to extend the runway). The result can be a cap table that gets crowded more quickly and founders owning less by the time they reach Series B than a comparable U.S. company’s founders would.
Why are European rounds smaller? Partly it’s due to fewer large funds – Europe’s VC industry, while growing, has traditionally had smaller fund sizes and less capital under management than the U.S. Also, investor mindset plays a role. European VCs have often been more conservative on valuations, wanting to see more traction before pricing a company like its Silicon Valley peers. One investor remarked that in Europe there’s still a penchant for “number crunching” and ensuring the valuation is justified by revenues or KPIs, whereas a U.S. VC might price more on potential and team. The availability of public funding in Europe also factors in: many European startups get grants or subsidized loans (e.g., Horizon Europe grants, national innovation programs). While this non-dilutive capital is great for founders, it can lead private VCs to commit less – expecting the startup to piece together funding from multiple sources. Interestingly, several U.S. VCs told us they discount these government funds when evaluating a company. One bluntly stated that direct state investment “is not an added benefit” to impress a Silicon Valley fund; in fact, it can raise questions. This is an interesting dynamic as such grants are seen as “free money” but they have strings attached (administration, loss of focus, lower ambition). They’d rather see a founder who convinced private investors of their vision (or even bootstrapped to MVP) than one relying heavily on government money.
The Funding Gap in Numbers
It’s worth looking at the macro level for a moment. Over the past decade, roughly 74% of venture capital dollars went into U.S. startups, versus about 26% into European startups. Europe’s share of the pie is growing slowly, but this statistic underscores the sheer difference in scale. Not surprisingly, this translates into exit values: in the last ten years European companies accounted for only ~15% of the combined exit value of U.S. and Europe (and an even smaller fraction of the large exits over $5B). While Europe has minted some unicorns and even higher, the ecosystem hasn’t yet produced the volume of $10B+ outcomes that the U.S. has. One reason often cited is this funding gap – U.S. companies simply have more fuel to capture markets quickly and grow into giants, whereas European startups might stall out or sell earlier for lack of scale-up capital.
European startups face a thicket of new EU tech regulations—from the AI Act to GDPR and the MDR – that, while well-intentioned, are hampering innovation. Founders and investors say these laws often have vague wording and no case law yet, leaving startups guessing about compliance. The broad scope means even tiny companies must meet complex requirements, and the cost of compliance (often tens or hundreds of thousands of euros and months of effort) hits small firms much harder than big ones (https://sifted.eu/articles/german-startups-ai-act). Many early-stage companies lack the lawyers and resources to cope, leading some to abandon products or even relocate to the U.S. where rules are looser. The result is a growing concern that Europe’s regulatory complexity is unintentionally stifling its own startups and ceding ground to nimbler U.S. competitors. And worse, these U.S. competitors grow fast in the U.S. and then come to take over the European market when they are financially capable of coping with the onerous regulation or when they can circumvent it (example: Uber took over European market even though Europe tried to regulate it).
However, an interesting counterpoint some VCs raised: “It’s not just about capital; the best European startups aren’t starved for money – the real bottleneck is not enough world-class founders going after big ideas,” as one veteran LP told us. In other words, top-tier European startups can and do get funded (sometimes even drawing money from U.S. funds), but there are fewer of those breakout candidates. This is a bit of a chicken-and-egg scenario: if more capital were available broadly, perhaps more founders would swing for the fences rather than aim for a moderate exit. Either way, as a founder, it’s crucial to know where you stand. If you truly have a category-defining vision, you might not face a funding shortage – investors will come (take the example of Mistral AI in France, or Lovable in Sweden). But if you’re in that vast middle, you may feel the pinch of Europe’s more cautious funding environment and need to strategize accordingly.
Bridging the Divide: Strategic Fundraising Tips
So, what can founders do to navigate the capital gap?
- Understand Local Benchmarks: Research typical round sizes and valuations in your country/region so you know what’s “normal.” If local seed rounds are usually €1M but you believe you need €3M, be prepared to justify that with a solid plan – or identify foreign investors who might step in.
- Optimize for Milestones: Plan your spending so that each round (however small) gets you to a clear value-inflection point. If you only raise half of what an equivalent U.S. startup might, you must be that much more efficient. This could mean narrowing focus to achieve one great metric (e.g. hit a revenue target or build a proprietary technology) which you can then leverage to raise the next round at a better valuation.
- Beware of Over-Dilution: Track your cap table religiously. Don’t give away 10% here, 5% there in minor SAFEs or to too many advisors without seeing how it adds up. Indeed, VCs in the U.S. will scrutinize your equity spending and raise a red flag if you spend it unwisely. As a rule of thumb, try to retain well over 50% as founders through seed, aiming to be in the healthy >60% range if possible, when approaching Series A (many top funds expect this). If you find your equity slipping, consider whether you can delay fundraising by bootstrapping a bit longer or seeking non-dilutive funds (grants, revenue financing) to tide you over.
- Leverage Government Funding Wisely: European startups have unlocked over €520 billion in enterprise value and created more than 600,000 jobs globally, thanks in large part to public funding programs like Horizon Europe, which allocates €95 billion between 2021 and 2027. The European Innovation Council (EIC) adds another €10.1 billion, supporting high-risk, high-reward technologies through grants of up to €2.5 million and equity investments up to €15 million. While this funding is a powerful catalyst at the early stages, it’s no substitute for private capital. EU venture investment still lags far behind the U.S.—just 0.03% of GDP compared to 0.19%—creating a significant funding gap for scale-ups. Founders should use public money to validate and de-risk their technology, then leverage that momentum to attract private investors. U.S. VCs in particular value scrappy execution and market traction, so it’s important to position public funding as a launchpad—not a lifeline.
- Consider a U.S. Fundraise if Appropriate: More European founders are flipping the script and raising in the U.S. (often after an initial EU seed). If you have the network or story to attract interest stateside, a larger Series A from a U.S. lead can dramatically alter your trajectory – you get more cash, often at a higher valuation, and a stamp of approval that can attract talent and customers. The flip side: you’ll need to operate at U.S. pace and scale, and your new investors may expect you to relocate or at least heavily target the U.S. market. Weigh these factors, but don’t self-select out; some sectors (like deep tech or biotech) especially can command bigger U.S. checks even for European teams.
