Europe’s deep-tech sector could create $1 trillion in enterprise value and up to one million jobs by 2030—but only if an entire ecosystem collaborates to help deep-tech ventures bridge two “valleys of death” between lab and factory. Successful scaling of the sector requires venture and growth capital, corporate partnerships, infrastructure investors, debt providers, government programs, and private equity working in sequence. 

 

Collaboration between corporates and founders proves particularly critical to succeed. Successful partnerships require founders to engage corporates strategically—understanding what different partners can contribute beyond capital. Corporates, in turn, need to approach deep tech differently than traditional start-ups, bringing industrial expertise, customer access, and commercialization pathways alongside investment. Europe’s combination of world-class technical talent and underutilized industrial capacity creates a unique opportunity for both sides if they work together effectively.

The Hello Tomorrow team spoke with McKinsey Partner Tobias Henz, who explains what both founders and corporates need to learn from what’s happening in deep tech today. 

Looking at the European deep-tech ecosystem, what developments do you consider most striking?

“Geopolitical challenges are shifting investment flows. Capital is increasingly flowing into fields like defense technology, resilient energy supply, and semiconductor production—areas considered strategically important for European sovereignty and prosperity. The second development concerns the industrialization of new technologies. For a long time, spinning companies out of universities was considered a success story. But now it’s becoming clear that sustainable value creation only occurs when technologies are translated into business models that scale. Products—often involving hardware or industrial software applications—must be brought to a level where they are suitable for practical use. This raises the central question: How can the industrialization of these new technologies be achieved?”

 

 

Especially considering the “valleys of death” you mentioned that deep tech ventures have to face. What do these entail?

“Deep-tech companies face two critical ‘valleys of death.’ The first spans the journey from scientific discovery to proof of concept. The second, often more challenging one extends from pilot validation to commercial deployment. At that stage, start-ups typically require between €50 million and €200 million for first-of-a-kind production facilities, which is well beyond the capacity of most European venture capital funds.

“These valleys are even deeper in Europe than in the United States because founders are not only scaling difficult technologies; they are scaling across a fragmented ecosystem. The first valley is often harder because Europe has historically struggled to translate scientific excellence into commercial outcomes at the same pace as the US. The region has world-class universities and research institutions, but less commercialization infrastructure, smaller tech-transfer organizations, and in some cases more restrictive frameworks around academic entrepreneurship and equity participation. 

 

“When it comes to the second valley, scaling in Europe means navigating multiple regulatory environments, languages, procurement systems, and customer dynamics much earlier in the journey. US start-ups benefit from a large domestic market, deeper pools of late-stage capital, and more mature technology ecosystems. European ventures are often forced to internationalize earlier to reach scale. Around 70 percent of European unicorns needed to do so, compared with roughly 50 percent in the United States. This dynamic also becomes self-reinforcing. Because Europe has historically produced fewer large-scale technology outcomes and lower venture returns than the United States, institutional investors remain more cautious about allocating capital to high-risk deep-tech scaling. Many of the most promising ventures therefore look to North America for later-stage funding, commercialization, or market access, which further concentrates capital and ecosystem advantages outside Europe. In deep tech, where industrialization already requires long timelines, specialized infrastructure, and large amounts of capital, those structural disadvantages become even more visible.”

 

How can the European deep-tech sector bridge these valleys?

“With an ecosystem that provides the right sources and depth of capital at the right time and, even more importantly, strategic partnerships between deep-tech ventures and corporates. 

 

“When we look at capital, success requires collaborative financing models that combine public, private, and corporate capital. Founders need different types of funding. Do they have access to grants from public institutions and debt financing, or do they have to buy everything with equity? This has direct implications for control over their own company and strategic flexibility in later financing rounds. 

 

“Even with access to multiple sources of funding, the real challenge is orchestrating six investor types with distinct return expectations and roles: venture capital and growth funds, private equity, infrastructure banks, debt providers, corporates, and government institutions. Each operates on different timelines, seeks different returns, and enters at different stages. Venture capitalists might seek 20 to 30 percent returns within seven to ten years. Infrastructure banks accept 8 to 12 percent returns over ten to twenty years, but require hard assets and contracted revenue streams. Corporate

strategics prioritize supply chain access over financial returns. Without sequencing these players effectively, even the best technology stalls.”

 

What role can corporates play in particular within the ecosystem of partners?

“European corporates are significantly underweight in supporting their own innovation ecosystem. Research shows that corporate venture capital accounts for only about 15 percent of venture funding in Europe, compared to 30 percent in the United States. Even more striking, European corporates actually direct more capital to US start-ups than to European ones. This creates a double disadvantage. Europe loses both the capital and the strategic partnerships that come with it.

 

“The opportunity here is substantial. First of all, corporates can play a much larger role as growth investors, particularly in late-stage rounds where European capital becomes scarce. A recent example is the partnership between ASML and Mistral AI. The strategic €1.3-billion investment gives ASML a seat on Mistral’s Strategic Committee and the opportunity to explore the use of the AI models across its product portfolio, R&D, and operations. In our research, we’ve identified four distinct investment archetypes that work for different situations: corporate venture capital for early-stage strategic positioning; direct growth investments where corporates take meaningful stakes as anchor investors in later rounds; indirect investments through venture funds for broader ecosystem exposure; and acquisitions for full integration of mature technologies. Investment is only the beginning, though. 

 

“Broader strategic collaboration between deep-tech ventures and corporates creates even more value. Deep-tech start-ups need expertise in industrial scaling, market access and commercialization, and validation. That’s precisely where corporates become essential. Europe’s industrial base provides experience in industrialization, manufacturing expertise, quality systems, and established customer relationships. Right now, automotive and mechanical engineering sectors face underutilization. Their capacity and capabilities remain intact, even as they navigate their own transformation challenges.

 

“When deep-tech start-ups need to transition from lab-scale prototypes to industrial production, they need to achieve reliable, cost-efficient production at scale and how to design for it. This creates a natural partnership dynamic. Founders need to identify which corporates possess the specific industrialization capabilities their technology requires—whether that’s precision manufacturing, regulatory navigation, or quality certification systems. Corporates can strengthen their competitive position by gaining early access to breakthrough technologies while activating underutilized capacity. Start-ups and industry have much to learn from each other.”

 

What about regulation? How can it help or hinder the transition?

“New technologies often get forced into regulatory frameworks designed for something entirely different. Nuclear fusion illustrates this perfectly. It’s barely regulated today because it doesn’t exist at

commercial scale yet. When regulators first examine fusion, they instinctively think of nuclear fission—a fundamentally different technology with much higher risk profiles. If existing fission regulations get directly applied to fusion, it substantially impacts investment decisions, even though the technologies have different risk characteristics. That is why it is critical that new technologies are examined with an open mind from the regulatory side.”

 

The collaboration between Pfizer and BioNTech during the pandemic is often cited as the model for corporate-start-up partnerships. What made it work?

“That collaboration literally gave us back a piece of freedom during the pandemic. BioNTech had breakthrough technology. Pfizer had the industrialization know-how—specifically, global production capacity and distribution networks. 

 

“Whether this exact model can be replicated depends on the specific context. There are multiple partnership models that can work, depending on where the deep-tech venture stands in terms of market readiness and where corporates have complementary skills or assets. The key is matching the right partnership structure to the right stage and capabilities.”

 

Can you expand on those partnership models?

“We’re seeing successful collaborations that range from strategic procurement—where corporates move beyond pilots to become cornerstone customers with multiyear commitments—to joint development partnerships that combine a start-up’s technology with the corporate’s real-world assets and use cases. Some focus on go-to-market acceleration, using corporate distribution channels to reach customers the start-up couldn’t access alone. Others center on industrialization, where the corporate brings manufacturing capabilities and supply chain expertise to help scale production, like the partnership between DEUTZ and ARX Robotics. Through the cooperation, DEUTZ gains access to state-of-the-art innovation, while ARX Robotics taps into distinctive industrialization capabilities and a powerful production network. Finally, there are broader ecosystem platforms that can identify promising start-ups and funnel them toward deeper commercial relationships. What matters most is matching the model to the specific situation. A deep-tech scale-up needing customer validation to prove market demand follows a different path than one that’s already proven but needs help scaling manufacturing.”

 

What should founders and corporate leaders take away from this conversation? 

“First, recognize that the opportunity is real and immediate and that it requires mindset shifts from everyone involved. Europe could create tremendous enterprise value from deep tech as early as 2030, but only if the ecosystem orchestrates effectively. For founders, that orchestration is a core capability. Understanding when to engage different partners determines whether you can scale without excessive dilution or loss of control. For corporates, it requires a shift from de-risking exposure and protecting margins to recognizing strategic value in earlier engagement with emerging technologies.

 

“Second, approach these partnerships as strategic collaborations. For founders, this means leveraging corporate relationships to compress development timelines and access markets that would otherwise take years to penetrate independently. For corporates, it’s about recognizing that early engagement with breakthrough technologies can create competitive advantages that pure R&D investment cannot match. The value exchange happens through specific, tangible contributions.

 

“Third, be deliberate about partnership design. Successful collaborations establish clear goals upfront, define governance structures that account for speed differences between corporates and start-ups, and set specific milestones with aligned success criteria. This means agreeing on what constitutes progress, how decisions get made, and what happens at each stage. 

 

Finally, engage with the deep-tech ecosystem systematically. These partnerships require relationships, mutual understanding, and often exploratory conversations before the right match becomes clear. Forums like Hello Tomorrow Summit that bring together founders, investors, corporates, researchers, and regulators create the conditions for these connections to form.

 

Join us at the Hello Tomorrow Summit –  CSO Roundtable – June 11, Amsterdam – 15:00 – 17:30 

If your organization is navigating how to engage Europe’s deep-tech ecosystem, this session is for you. Join me and my McKinsey colleagues for a roundtable with leading Chief Strategy Officers to discuss how your company can capture value from deep tech through venturing, partnerships, and acquisitions.

Reserve your spot  

 

 

About Tobias Henz

Tobias is a core member of McKinsey Advanced Industries Sector with extensive experience in Mobility (people and goods) and other ecosystem-focused business models. He co-leads McKinsey’s work around corporate-startup collaboration globally, and start-ups more broadly in Germany.