Over the past decade, European venture capital has become increasingly effective at building software companies that can scale quickly across markets and fit comfortably within a traditional ten-year fund cycle. But many of the region’s most urgent challenges — from defence and energy security to healthcare — can’t be solved by software alone. They require hardware, infrastructure, and more patient capital.
At the Vestbee CEE VC Summit, investors from Sunfish Partners, Hard2Beat, Calm/Storm Ventures, and InnoEnergy discussed whether Europe’s VC model can support these capital-intensive technologies and where CEE could compete.
Why Europe’s VC model still favours software
Investor interest in hardtech is growing, with both VC funds and LPs paying closer attention to the sector. Still, Johannes Blaschke, Partner at Calm/Storm Ventures, argued that the traditional VC model remains better suited to software: it is easier for generalist investors to understand, can scale across countries and fits more comfortably within a ten-year fund cycle. “I still think there’s a long way to go until hardware is considered a traditional VC play,” he said. Growing interest has not yet translated into the same institutional readiness to invest.
The gap is most visible at the earliest stages. As Mikołaj Budzanowski, CEO of InnoEnergy, put it, “Not everybody is so open to investing at the early stage. Everybody wants to invest at a later stage, which is much simpler." This preference leaves pre-seed hardtech companies competing for a relatively small pool of specialist capital.
Hard2Beat’s Partner Maciej Frankowicz also questioned whether software still offers inherently better economics. As more software companies rely on AI infrastructure and tokens, their margins may come under pressure, bringing them closer to those of hardware businesses. But specialist expertise and early-stage capital for hardtech continue to lag behind investor interest.
Why pre-seed remains the biggest gap
Marcus Erken, Partner at Sunfish Partners, described pre-seed as a structural weakness in Europe’s funding market. “Pre-seed is incredibly important, but pre-seed itself is not a functioning industry,” he said, pointing to the difficulty of sustaining small funds over ten years.
The problem is not only the amount of capital available, but where it goes. Large institutions often prefer sizable commitments to established funds, leaving less capital for emerging managers and early-stage experiments. “We have a shot if we try to play our own game and start a thousand new experiments in Europe right now,” Erken argued, rather than waiting to invest once global leaders are already years ahead.
Where CEE can compete
For Budzanowski, Europe’s need to reduce its dependence on external suppliers creates an opening for CEE. “We have to invest in our own materials and products, because we cannot be dependent on external suppliers,” he said. The region’s engineering base could support companies in areas including energy, defence, AI infrastructure, physical AI and robotics.
But funding alone will not be enough. An energy investor noted that while some corporate LPs move quickly, others struggle to find the right internal partners and deploy technologies developed by early-stage companies. For hard-tech startups, access to industrial customers can therefore be as important as access to capital.
The investors also highlighted AI tools for scientific research, preventive healthcare combining software and hardware, physical AI, robotics and space infrastructure as areas where CEE could build globally relevant companies.
“It only takes one, two or three big companies, and you are on a completely different trajectory,” Erken said. To produce those companies, however, Europe first needs to finance enough early-stage experiments.
