With Linda Griffin: Reset for Growth - VCs and Policymakers Need a New Platform to Scale Responsible Innovation
Linda and I share a passion for innovation, politics, and tech. We know each other from efforts around Slush to create a dedicated VC and policy track and have been discussing and advocating for avenues to reset relationships between VC and Policy in Europe. Based on our efforts, discussions with key actors, and lessons learned, this article puts forth the need for a new approach and corresponding platform for the two worlds to meet. Linda is today the VP of Global Policy at Mozilla, and has, in the past, co-founded the European Tech Alliance (EUTA) and worked for European scale-ups, as well as large global companies.
Paul Fehlinger is Director of Policy, Governance Innovation & Impact at Project Liberty Institute, Affiliate at Harvard University, and Senior Fellow at Hertie School of Governance
Linda Griffin is Vice President of Global Policy at Mozilla
VCs are from Mars and policymakers from Venus? They are two massive spheres of influence when it comes to technology development, yet often their language, motivations and interests are worlds apart.
As Europe stands on the cusp of a new era with a freshly selected incoming College of Commissioners, as the Draghi Report on competitiveness begins to be digested, and as the data and AI stack, frankly, is widening the gap between the a handful of winners and everyone else in the market, we find ourselves at a critical juncture for the continent's digital economy. Is this our window to reimagine how venture capital and policymaking might work towards similar ends in the EU? Coupled with a change of government in the UK, still a major European hub for digital investment, now feels like the time to re-examine this relationship - which has long been marked by disconnect and missed opportunities.
The Regulatory Pendulum Swings
Another month, another government seeking to rein in big tech's influence. As online platforms have rapidly scaled and are showing resilience in retaining dominance, regulators face ongoing and valid concerns about consumer welfare, market consolidation, personal data, security and the evolving complexity of the data and AI markets. Startups and their supporters worry about the growing shopping list of implementation and enforcement emerging from recently passed regulations. Amid this pressure, views around tech policy can often pingpong between two stark poles: regulation is bad (founders, startups, dominant players ) and regulation is good (policymakers, regulators, civil society).
This binary thinking often ignores a key stakeholder group: venture capital - the financial rocket fuel behind Europe's innovation economy.
VCs Drive the Innovation Economy
Venture capitalism is a high-risk, (sometimes) high-reward form of financing which is now synonymous with some of the largest and most successful tech firms, those that have been the focus of center-piece regulation from the European Commission, such as the Digital Markets Act, Digital Services Act and AI Act, not to mention GDPR. VCs provide the backing for world-changing startups and accordingly have outsized influence on which ideas get funding and attention. With three out of four VC investors taking board seats at their portfolio companies, they also wield significant governance power over startups from early to late-stage development.
Yet even as governments zero in on regulating further aspects of the digital economy, very few formal channels exist today connecting policymakers with the VC community in Europe or globally. This disconnect seems like a missed opportunity, especially for Europe. As Atomico’s State of European Tech report shows every year, VCs have unique insight into data, trends and the needs of Europe's next generation of (potential) high growth businesses. Policymakers are known to be proactive proposers and enforcers of digital regulation, which has a major impact on the broader operating environment for those businesses.
This disconnect gains attention at the highest levels. Just last week, European Central Bank President Christine Lagarde urged policymakers to "look under the hood of venture capital to understand what's missing and address that." Meanwhile, President Macron used bleaker words to call for resetting relations: "The EU could die […] – we are over-regulating and under-investing."
VC-Policymaker Relations Don't Scale
Past efforts to bridge the gap between VCs and policymakers in Europe have remained piecemeal at best. Initiatives like Scale Up Europe, Horizon Europe, and the European Innovation Council, while well-intentioned, have failed to create lasting, systematic impact. Isolated VC and policy events on the sidelines of Slush, for example, Europe's largest gathering of VCs, or campaigns by larger VCs on single issues have similarly fallen short of fostering true collaboration. And let’s be clear, a big name panel event or fancy private dinner, does not add up to a policy plan.
Towards Responsible Tech Innovation
This fragmented approach feels like an ongoing missed opportunity. The recent Draghi report underscores the urgency of our situation, calling for unprecedented levels of investment in the European economy to maintain global competitiveness. This aligns with a growing sentiment within the venture capital community. At the recent FRAME conference in London, which brought together 300 venture capitalists (VCs) and limited partners (LPs - the institutions and individuals who invest in VC funds), there was a palpable desire for a new kind of relationship with policymakers in our increasingly regulated digital economy.
This shift in attitude may be significant. A growing number of VCs and their LPs are recognizing that the old habits of engagement with regulators and policymakers are no longer sufficient. They're eager for more constructive, ongoing dialogue that can help shape a regulatory environment that fosters innovation while addressing societal concerns.
So the question is how do we forge a new model of collaboration between those who fund innovation and those who shape its regulatory landscape?
Bridging the Gulf Between Two Worlds
On the VC side, we need the larger investors to move beyond narrow commercial interests and engage more actively and consistently in policy issues like personal data agency, algorithmic accountability and platform governance. Similarly, policymakers need greater literacy of how early-stage technologies are funded and commercialized globally. They should explore new ways proactively tap industry perspectives when formulating and implementing new regulations, rather than (in some cases) reflexively viewing tech with suspicion or completely overlooking the investor community.
Past efforts in Europe to connect VCs and policymakers remain piecemeal at best. Often the key challenge is that where the innovators are, policymakers don't go - and vice versa. This divide may even be growing. We need to go much further with sustained VC-policymaker interactions to bridge divides on issues where new technologies or practices will impact people at scale.
A Third Way: Europe's Opportunity for Responsible Tech Leadership
Europe stands at a crossroads, with a fleeting opportunity to chart a new course beyond the tired innovation vs regulation debate. What is now needed is not another two-hour panel or private dinner, but a dedicated platform for responsible innovation that operates at VC speed with policymaker depth, addressing pressing issues such as geo-economic competition, technology interdependence, and resilience.
To be able to convene all parties, the platform should however be neither initiated by governments nor trade associations, but by a dedicated, mission-driven secretariat. It should facilitate ongoing dialogue between VCs and policymakers with tech founders, civil society representatives, and academics around the table. It would focus on critical areas where technology and society intersect, such as creating a better data economy, catalyzing a responsible and competitive AI stack, and preparing a quantum era that works for all. It could help produce policy approaches and agile investment guidelines that are based on real-time feedback between innovators, regulators, and other key stakeholders. Crucially, it would reflect the reality of the European political system(s), addressing the strengths, weaknesses and gaps in this continent’s innovation ecosystem, rather than trying to copy and paste from other regions. Responsible technological development and economic growth should not be a zero-sum game.
As time ticks on, will Europe's leaders in venture capital and policy step up to the challenge? The continent's future may well depend on this reset, with the world watching to see if Europe's "third way" of regulated tech can truly deliver results.
