U.S. investors dominate Europe’s private-led space scale-up rounds

U.S. investors are establishing dominant positions in European private-market scale-up financing, particularly in aerospace, defense, and space technology sectors, even as European institutional support and strategic initiatives attempt to narrow the funding gap. According to Dealroom.co data, U.S. investors demonstrate nearly 3x greater participation in European deals above $40 million, with Asian investors showing 6x higher involvement at later stages, indicating a structural concentration of international capital at scale-up funding rounds where European competitors are materially underrepresented.

The transatlantic venture capital disparity reached historic proportions in 2025. U.S. venture capital deployed $339.6 billion in deal value compared to Europe's €23.3 billion—a $340 billion versus €23 billion gap—with American investors allocating 65.4% toward artificial intelligence while European investors directed 35.5% into AI-focused companies. European fundraising performance deteriorated to €12.0 billion, the lowest level in a decade, constraining regional fund formation and follow-on investment capacity. J.P. Morgan and PitchBook analysis attributes this divergence to risk-asset reallocation patterns favoring markets with superior liquidity, demonstrated exit activity, and predictable return profiles—dynamics currently favoring U.S. markets.

The European Union responded with targeted scale-up support through the EIC STEP Scale Up scheme, which announced €146.5 million in equity investments across eight strategic technology companies, including notable space and quantum computing entrants. Payload Aerospace (Spain), developing cargo and human spaceflight transportation services to the Moon and Mars, joined quantum computing developers Alice & Bob (France) and Quantware (Netherlands) as selected recipients of €10-30 million commitments. European space companies attracted €1.4 billion in private investment during 2024, representing 67% growth year-over-year, yet this regional momentum contrasts sharply with investor participation dynamics favoring U.S.-based capital.

Concurrent acceleration in aerospace and defense private capital deployment reinforced American investor positioning. Global PE and VC investment in aerospace and defense nearly doubled to $10.63 billion in 2025 from $4.88 billion in 2024, with European deals surging 4.8x year-over-year to $658.8 million. This expansion reflects NATO defense spending commitments, with member states pledging to increase defense budgets to 5% of GDP by 2035, while Germany approved a €500 billion defense and infrastructure spending package in 2025. Regional defense sector underinvestment over preceding decades created acquisition and growth financing opportunities, though regulatory constraints in certain jurisdictions, including the UK, continue to limit pure-play defense sector participation by institutional investors.