Democratic Capitalism’s Defining Moment: Europe vs The Authoritarians
“What is at stake is not European pride. It is the collapse of the only civilisation that translated moral universalism into institutional reality,” Otto Vogt from the Good Leadership Society recently posted. While his perspective on European exceptionalism may be debatable, his timing isn’t. Europe stands at a critical inflection point, particularly in relation to the United States.
The combination of political uncertainty across the Atlantic, an increase in authoritarian regimes worldwide and emerging technological solutions has created what Phill Robinson, Chairmanof Boardwave, calls a “moonshot moment” for European software companies. Boardwave, a not-for-profit community of European software CEOs and investors, recently partnered with McKinsey to examine how European companies can break free from the vicious circle where limited capital availability drives talent to the US, which in turn attracts more capital away from Europe.
The question isn’t whether Europe can compete—it’s whether European companies will seize this moment to scale globally while remaining European.
Breaking The Capital Constraint
The funding landscape tells a stark story. According to the Boardwave-McKinsey report there is a critical funding gap at the scale-up stage (above €30m ARR). While Europe has made progress in seed and early-stage capital, late-stage funding remains constrained.
The numbers are revealing: in 2023, just 11% of late-stage software funding in Europe came from venture capital, compared with 89% in the United States. Europe’s ratio of late-stage venture capital to private equity was 1:3, while the US maintained more than 2:1 in favor of venture capital. This matters because venture capital typically takes bigger investment risks on high-growth potential, while private equity tends toward more conservative returns. As one founder shared with the researchers, “European investors can’t see the bigger market and take bets.”
The result is European scale-ups are often backed by capital that favor measured returns over bold bets. As Robinson points out “pension funds in the US allocate 100 times more to venture capital—2% compared to 0.02% in Europe”. A disparity summed up by one startup accelerator cofounder “European pension funds are risk-averse from the moment they get given capital.”
To help overcome this risk aversion, in May 2025, the EU announced the creation of a €10bn public-private scale up fund.
AI As Europe’s Great Equalizer
Historically, European companies faced a unique scaling challenge that their US counterparts never encountered: operating across multiple languages and legal systems. A software company targeting the entire European market needed to navigate 27 different regulatory environments and communicate in dozens of languages.
AI is changing this equation fundamentally. Language barriers that once required expensive localization teams can now be overcome through sophisticated translation and localization AI. Regulatory compliance, previously requiring country-specific legal expertise, can be increasingly automated and standardized through AI-powered systems.
This technological shift arrives at a crucial moment when Europe is also working to streamline its regulatory framework for innovative companies.
The Promise Of The 28th Regime
Ursula von der Leyen, President of the European Commission, at WEF 2025 announced a “28th regime” framework—a unified legal structure that would allow startups to operate seamlessly across all 27 EU member states under one set of rules. This would be comparable to what US companies take for granted: the ability to incorporate once and operate across an entire continental market.
This structure would standardize investment processes and simplify cross-border operations. The European Commission estimates that around 182,000 innovative small and medium-sized companies could benefit from this proposal, essentially eliminating the regulatory fragmentation that has historically handicapped European scaling efforts.
Combined with AI’s ability to overcome language and operational barriers, this regulatory harmonization—if enacted—could level the playing field between European and US companies.
Europe’s Cultural Advantage
Robinson identifies a less obvious but potentially crucial European advantage: social and cultural diversity. “You can go from Rome to Paris to Munich and they’re all completely different,” he notes. “It is this understanding of different cultures that allows European companies to scale globally.”
This diversity advantage may extend beyond cultural sensitivity to competitive differentiation. While academic research shows mixed results for cultural diversity in board governance—often due to coordination costs—Robinson’s point addresses operational cultural competence rather than boardroom dynamics. European companies have diverse markets, customers, and operational environments built into their DNA. This creates cultural intelligence at the organizational level that becomes invaluable when scaling to new global markets where understanding local nuances can determine success or failure.
Otto Vogt’s warning about the collapse of institutionalized moral universalism may sound dramatic, but the stakes are real. As democratic institutions face pressure globally and authoritarian powers gain influence, the world needs successful companies rooted in democratic values and institutional respect.
Yanis Varoufakis, a former Greek finance minister has written a book on TechnoFeudalism. His argument is that democratic capitalism is already dead as “the owners of big tech became the world’s feudal overlords”. Therefore, Europe’s moonshot moment isn’t just about building $100 million software companies—it’s about proving that democratic capitalism can still produce global champions that won’t become feudal overlords. With AI removing traditional barriers, regulatory harmonization on the horizon, and capital constraints beginning to ease, European companies have a unique window to scale globally while maintaining the institutional depth and cultural sophistication that Vogt argues the world desperately needs.
The question isn’t whether Europe can compete with Silicon Valley anymore. It’s whether European entrepreneurs will seize this moment to show that the future of technology doesn’t have to be shaped by regions where institutional norms are increasingly fragile. The civilization Vogt fears losing may well depend on it.
