The True Value of The Venture Mindset - and the Path Forward for Europe
May 3, 2025
Authors
Thomas H. Sorensen, Founder and CEO of Oneday Lab
Walther V. Bech Sorensen, Principal at Oneday Lab
Global venture-capital funds today oversee a record $ 3.3 trillion - a sum that has quintupled in barely a decade. Yet 50% of that money is managed in the United States, about 40 percent in Greater China, and only around 5% in the whole of Europe (including UK). The European slice, roughly €190 billion, highlights a real issue for Europe - and equally worrying, less than 1% of European pension funds' AUM is allocated to European VC funds.
The True Loss Comes from a Lack of The Venture Mindset
Even though VC is important in itself, it is still a very small portion of the resources / assets controlled and allocated by large corporations, institutions and governments. Therefore, the real issue actually come from spill-over effects - or more accurately, a lack of spill-over effects. When a region is lacking a thriving VC industry, its large corporations and government is not forced to adopt the venture mindset - which will eventually hurt the growth and prosperity in a society.
In the U.S, Fortune-500 companies routinely bankroll internal spin-outs and disrupt their own cash cows - because they understand that the alternative is not merely sub-optimal but non-viable. In countries where venture capital remains fringe, that discipline never embeds itself; regulation tilts toward preserving the familiar, and corporate innovation defaults to incrementalism. Regions with a deep VC industry teach policymakers and Corporate CEOs to think like founders with a true venture mindset. A good example of this is Satya Nadella, Chairman and CEO of Microsoft; he is obsessed with the term "re-founding" - a term he got from Microsoft Board member Reid Hoffman - who is founder of LinkedIn and General Partner at Greylock Partners, a leading VC firm.
Be Aware of The Tipping Point
Once a society passes a certain threshold, a tipping point is reached where rapid change and the courage to innovate stops feeling dangerous or impossible and turns into consensus - and something that is encouraged and celebrated - triggering a new growth curve where the venture mindset becomes the standard.
What Happened in the 1970s that Set the US on a Path So Far from the rest of G7?
Up until the 1970's, the US didn't grow or create large companies at a higher rate than other G7 countries. Over the last fifty years since mid 1970's, real U.S. GDP has grown almost twice as fast as the non-U.S. G7 average the US has created new companies at a much higher rate. Stanford Professor Ilya Strebulaev's research tried to uncover all possible explanations for this - but could only conclude one plausible reason: venture capital.
Two obscure policy tweaks - the 1974 Employee Retirement Income Security Act (ERISA) and its 1979 “prudent-man” clarification - freed U.S. pension funds to allocate to high-risk assets. Venture fundraising exploded, and with it the rate at which the country created large new firms. Stanford’s Ilya Strebulaev and Will Gornall, exploiting the reforms as a natural experiment, show that:
Creating an Idea Meritocracy is Where the True Magic Lies
Venture capital is not magical in its own right; the magic lies in the conditions it embodies and the behaviours it unlocks. More than any other financing mechanism, venture capital draws society toward an idea meritocracy - a system in which the quality of an idea, not the weight of incumbency, determines where resources flow.
An idea meritocracy is arguably the closest thing economics has to a holy grail. When capital consistently chases the strongest ideas rather than the safest balance sheets, three virtuous effects follow. First, productivity accelerates: the same unit of labour or capital yields more output as superior technologies displace inferior ones. Second, opportunity broadens: anyone who can articulate and execute a high-value idea can secure backing, regardless of pedigree or entrenched market power. Third, the feedback loop between experimentation and learning tightens, making the entire economy more resilient to shocks. Combined, these effects push a society toward its prosperity frontier - maximising wealth creation while continually refreshing the stock of solutions to its most pressing challenges.
Creating a Society Where Being the Better Business also Means Doing Business for the Better
When the venture mindset is the mainstream mindset, the focus shifts from protecting existing, outdated businesses to prioritising innovation and building a better future. Under an idea-meritocratic system, progress dispels the notion of a zero-sum game; people begin to understand that opportunity and wealth can expand rather than merely change hands. That insight reshapes business culture itself. Companies - that, in a more stagnant environment, might default to lobbying for protective regulation or squeezing margins at any cost - start to see that long-term success depends on continuously creating value - technology that works better, products that delight customers, solutions that raise overall wellbeing of people. Profit and principle stop being rivals: doing what is best for the business and focusing on being the best business in the industry increasingly overlaps with doing what is best for society and people, because the market rewards those who unlock the greatest net gain for all. As a result, being the better business also means doing business for the better.
The Path Forward for Europe - Getting Large Corporations and Institutional Investors to Understand the Value and Importance of The Venture Mindset
Europe is already in the process of proving that change is possible. Over the past decade the continent’s VC AUM has almost quadrupled from around €50B to around €190B today. Yet until the region removes the structural brake - pension rules, solvency regimes and listing regulations that still channel household savings into low-yield incumbency - the flywheel will spin below capacity and the full prosperity potential will not be unlocked.
A modern-day ERISA for Europe need not copy U.S. law verbatim. But directing even a modest slice of the more than €10 trillion European pension pool into professionally managed venture funds would likely push the ecosystem past its threshold - unleashing the same virtuous cycle of experimentation, corporate self-disruption and broad-based growth that has powered the U.S economy since the 1970s.
However, with the right effort from the right people, it will also be possible to create the awareness and understanding that will make the large corporations, institutional investors and governments adopt the venture mindset based on the learnings from other regions.
Until then, Europe will keep importing the venture mindset one deal at a time - better than nothing, but a far cry from the compounding advantage that comes when the best ideas systematically outrun the merely established ones. A strong idea meritocracy also holds the power to strengthen and preserve the true advantages of democracy. A topic, which we will address in one of our future articles.