In 2025, European startup founders face an uphill battle as the traditional venture capital (VC) landscape becomes increasingly challenging. With a staggering 30% decrease in active VCs over the past two years, securing funding is more difficult than ever. The decline from €34 billion raised in 2022 to approximately €21 billion in 2024 exemplifies the funding drought in Europe. However, as established channels tighten, European entrepreneurs are turning their eyes to tokenization—a potential lifeline to invigorate their fundraising efforts.
Tokenization represents a disruptive innovation that allows businesses to bypass traditional VC routes, enabling them to tap into a diverse pool of investors. With equity tokens acting as digital shares on a blockchain, private companies that lack the scale for an IPO can nevertheless unlock significant funds. This democratization of access allows smaller businesses to leverage technology for funding without incurring the extensive costs associated with public market penetration.
Despite these advantages, the regulatory environment in Europe remains a significant barrier. European regulators have yet to adapt sufficiently to accommodate the burgeoning tokenization landscape. Compliance hurdles, such as the need for private companies to register as public entities and obtain cumbersome prospectus approvals, curtail opportunities for adoption. Fortuitously, many European entrepreneurs are exploring avenues in more progressive jurisdictions such as the United States and Singapore, where the regulatory framework is more conducive to tokenization.
Countries leading in tokenization have established several key practices that contribute to their advantages:
- Low barriers to entry: Investment processes are streamlined, encouraging innovation among SMEs.
- Exemptions for foreign securities offerings: This permits businesses to operate freely abroad without the cumbersome licensing requirements present in their home countries.
- Flexible corporate laws: Legislation allows for efficient transfer of equity tokens, promoting liquidity and ease of trading.
As Europe grapples with regulatory rigidity, it becomes evident that the continent is missing out on a golden opportunity in the tokenization realm. The Markets in Crypto-Assets Regulation (MiCA) further complicates matters by focusing primarily on crypto assets while neglecting tokenized real-world assets (RWAs). With European companies reportedly underinvesting €700 billion annually in tech compared to their US counterparts, the potential for growth and innovation is palpable.
Ultimately, to harness the full potential of tokenization and compete on the global stage, Europe must refine its corporate laws and regulations. Facilitating direct investment in private companies through blockchain technologies could catalyze a significant boost in economic activity. European founders must embrace the shift towards more agile, tech-friendly fundraising avenues or risk being left behind as the world progresses.
