The VC Home Bias Problem: Why European Investors Refuse to Cross the Street

Venture capital, in theory, is about finding the best startups, wherever they may be. In practice? Many European VCs barely invest outside their own postal code.

While American startups are routinely advised to incorporate in Delaware or Florida to attract capital, European founders often find themselves stuck in a bizarre game of geographical musical chairs—where the music only plays for companies in the right country, right city, and preferably within a 20-minute Uber ride of the investor’s office.

The result? Extreme home bias, where some funds seem to think the future of deep tech innovation is conveniently clustered around their favorite lunch spots.

The “Must Be Based in Our Region” Syndrome

In Europe, some VCs will only invest in startups from their home country—and even then, only within a specific region.

• A French VC may back Parisian startups but ignore ones in Lyon.
• A German fund might focus exclusively on Berlin or Munich—as if biotech startups in Hamburg were operating under different laws of physics.
• A Swiss investor could happily fund Zurich-based ventures while considering Geneva a logistical nightmare.

And if you’re based in Llanfair­pwllgwyngyll­gogery­chwyrn­drobwll­llan­tysilio­gogo­goch, good luck. The PR department might love you, but the investment committee will never find you on Google Maps.

This kind of hyper-regional focus makes sense for small-scale, local businesses (say, a new bakery chain or a trendy co-working space). But for biotech and pharma—industries that require hundreds of millions in investment, global supply chains, and multinational regulatory approvals—it’s comically impractical.

The “Tiny Ticket, Big Expectations” Dilemma

Even when local VCs do invest, the check sizes are often laughably small. A €250k investment might work for a SaaS startup with low overhead, but for biotech and pharma, it’s about as useful as handing a racing driver a bicycle and telling them to compete in Formula 1.

• “We’re proud to support the local deep-tech ecosystem!” = A €200k check that barely covers a year of lab rent.
• “We believe in the future of medtech innovation.” = But not enough to fund the clinical trials necessary to prove it works.
• “We invest in early-stage biotech.” = Just not early enough to actually take any risk.

At these funding levels, many European biotech founders immediately start looking for U.S. investors—not because they prefer the American model, but because they have no choice.

Meanwhile, in the U.S.: "Welcome to Delaware"

The U.S. has its own peculiarities, but when it comes to fundraising pragmatism, it’s miles ahead.

• American investors don’t hesitate to push startups into legally favorable jurisdictions.
  • “You want VC money? Incorporate in Delaware.”
  • “You’re doing fintech? Wyoming. AI? Maybe Florida.”
  • “Just don’t try launching a SPAC in Nebraska.”
• Funds aren’t geographically allergic.
  • A Silicon Valley firm might invest in a Boston-based startup.
  • A Miami-based investor will fund a company from Austin.
  • The key question isn’t “Are you from my hometown?” but “Will you make me money?”
• American biotech companies can raise $10 million+ pre-seed.
  • Meanwhile, European startups get a €150k grant and a LinkedIn feature.

The Problem With Europe’s Micro-Catchment Areas

The irony is that Europe has incredible biotech and deep-tech talent—but home bias prevents capital from flowing where it’s needed.

• A VC that only funds startups from one German Bundesland? Might as well invest in bratwurst.
• A fund that restricts itself to the Benelux region? Biotech isn’t tulip farming; it needs global capital.
• A firm focused on Nordic healthtech but only if the HQ is in Stockholm? You’ve already lost half the good startups.

Some of the most innovative companies in history didn’t emerge from pre-approved tech clusters. If European VCs only fund companies within their country or city, they miss out on huge opportunities.

How to Fix This?

Simple: Investors need to think beyond their backyard.

1. Accept that biotech and pharma require serious capital.
   • Stop pretending €250k is a game-changer.
2. Invest across borders.
   • The best opportunities won’t always be within a 50km radius.
3. Stop waiting for startups to relocate.
   • U.S. VCs convince companies to move to Delaware because it’s strategic, not because it’s next door.
4. Recognize that science doesn’t follow national boundaries.
   • AI-driven drug discovery doesn’t care if the company is in Vienna or Warsaw.
   • Genomic startups aren’t inherently better just because they’re based in Copenhagen instead of Barcelona.

Final Thought: Are We Funding Innovation or Just Local Networks?

If European VCs want to compete globally, they need to act like investors, not regional development offices. Because science doesn’t care about national borders—but capital does. And until that changes, the best European startups will keep flying to the U.S. to find investors who don’t need a local train ticket to meet them.