Why the Draghi Report outlines the decisive path Europe and Italy must take to ensure a future of growth: fostering the birth and development of new tech enterprises.
By Marco Gay, Executive Chairman, Zest S.p.A.
Europe faces a critical economic challenge: maintaining and strengthening its competitiveness in a global landscape increasingly shaped by technological innovation. The United States and China have long embraced this path, investing heavily in venture capital across strategic sectors such as life sciences, clean tech, aerospace, mobility, advanced materials, and enabling technologies like artificial intelligence—hallmarks of the industrial revolution we are living through.
Europe’s lag is stark when contrasted with the investment activity in the U.S. and China. Silicon Valley has cemented U.S. technological leadership, fostering an integrated ecosystem that nurtures startup growth. China, through significant public investments, has rapidly risen as a global leader in AI and fintech.
The numbers speak volumes: in the past decade, $1.5 trillion has been invested in venture capital in the U.S., $800 billion in China, and only $500 billion in Europe, primarily concentrated in the UK, France, and Germany. In Italy, venture capital investments totalled €8 billion over the same period—a significant gap. This disparity is also evident in the AI race: in 2024, 41% of U.S. venture capital investments targeted AI startups, compared to 22% in Europe and a mere 8% in Italy.
Reversing this trend is crucial. Venture capital and startups are cornerstones of economic development. The Draghi Report underscores that innovation, technology, and digitalisation are the drivers of future growth, highlighting the pivotal role venture capital and startups play in shaping new markets and responding to change with agility.
Venture capital, as an asset class, fuels the creation and scaling of high-potential tech enterprises. These investments aim not only for maximum returns but also serve broader developmental and societal objectives. They channel resources into innovation, research, and technology—the true value-added sectors of a modern economy, capable of generating extraordinary returns in employment and income.
As economist Enrico Moretti illustrates in The New Geography of Jobs, innovation sectors drive global job creation at an overwhelming pace and deeply influence traditional industries. For every job created in innovation, five additional roles emerge in traditional sectors, making innovation the linchpin of economic growth.
Creating a Thriving Startup Ecosystem
The Draghi Report proposes building a more conducive ecosystem for startups and attracting venture capital investments. A unified regulatory framework across all 27 EU nations is essential to simplify the creation and growth of startups. Regulatory fragmentation currently hampers the scalability of high-potential tech companies, burdening them with costly, complex, and inconsistent rules across countries.
A true Single Market for startups is also necessary, enabling businesses to achieve the scale required to adopt advanced technologies. Enhanced cooperation among EU member states, easier access to European funding, and a dynamic labour market aligned with the needs of emerging tech industries are vital. Collaboration between companies and universities is another key pillar, fostering new technologies and disseminating innovation throughout the economy.
The Report envisions a decisive step forward in creating a European innovation ecosystem, where businesses must play a central role. Europe’s productivity hinges on technology. American corporates invest €270 billion more annually in research and innovation than their European counterparts. Addressing this gap requires a “European Union for Research and Innovation,” guided by a comprehensive Action Plan co-developed by member states and the European Commission.
Public-private partnerships are pivotal. On both national and European scales, Open Innovation and Corporate Venturing models should be incentivised. Open Innovation enables firms to collaborate with external stakeholders to develop more effective technologies and processes, while Corporate Venturing facilitates large companies investing directly in startups, enabling technology transfer and scalability. This approach not only provides startups with critical capital but also grants established firms rapid access to disruptive innovations.
Accelerating the Technological Transition
The ecosystem of startups, Open Innovation, and Corporate Venturing is essential to advancing Europe’s technological transition. By integrating artificial intelligence, industries like pharmaceuticals, automotive, and energy can enhance productivity and fuel strategic growth.
AI’s market value grew by 35% between 2022 and 2023, with banking, telecoms, media, and utilities leading adoption. In the “post-ChatGPT” world, the services sector saw AI growth rates of 64%. Startups are vital enablers for integrating AI into businesses of all sizes, transforming Europe’s wealth of data into value and competitive advantages for industries and startups alike.
The Italian Perspective
From Italy’s vantage point, the Draghi Report signals urgency—a call for a new industrial policy. Though starting from a disadvantaged position relative to France, Germany, and Spain, Italy has made strides in the past three years.
With the establishment of CDP Venture Capital, Italy’s venture capital market surpassed €1 billion annually in startup investments, peaking at €1.8 billion in 2022. In 2024, despite macroeconomic headwinds, venture capital investments reached €1.2 billion by Q3, with forecasts suggesting a total of €1.5 billion by year-end.
This growth reflects the maturity of Italian startups excelling in cleantech, life sciences, deep tech, and aerospace. Combined with infrastructural innovation investments by Big Tech players like Microsoft, Amazon, and Google, Italy’s future development prospects are promising.
Italy boasts unparalleled potential: world-class talent, research excellence, entrepreneurial ingenuity, and a cultural shift recognising the necessity of digital, technological, and environmental transformation. This momentum must be propelled by a bold national vision focused on innovation-led industrial policy.
By fostering the creation and growth of startups within a robust ecosystem, Italy can revitalise its industrial and production sectors, laying the foundation for a prosperous economic future. The Draghi Report provides a clear roadmap to achieve this vision.