Innovation lies at the heart of successful companies, and by extension is the lifeblood of growing economies. Innovation starts with creativity and bright ideas, but it also requires new products or services to be useful. They must be viable, fulfil a need, and ultimately have a commercial goal.

Intellectual property in its various forms serves both to protect innovations, ideas and creativity as well as to protect and to promote prestige and commercial goodwill, leading the innovation path that goes from ideas to products available to the public and back again, ensuring remuneration for the creators.

For centuries, Europe was the global leader in innovation, driven by a thirst for discovery. Today, many of the greatest innovations are being born and developed elsewhere. In fields including artificial intelligence, software development, quantum computing, or biotechnology, Europe is often outpaced by the U.S. and China. Yet, many of the characteristics that made Europe great in the past still exist today – world-class universities and research institutions, global businesses that are market leaders in their fields, and highly-educated people combining skills and unquenchable curiosity. What the continent needs is more investment to release its potential. 

Private Equity and Venture Capital offer a key to unlock many of the challenges Europe faces. European venture capital funds actively seek out and back innovation, nurturing start-ups and financing scale-ups. They provide not only capital but also expertise, often from teams who have already tasted success. European private equity – including buyouts and growth capital – comes with the investment and tools to take companies to the next level. Firms work with management teams to enter new markets and address new customer needs, building better businesses that are more resilient and sustainable for the long term. Private equity’s ability to help develop and commercialise innovation is what makes it an Ideas Factory.

Private equity’s role in innovation can be measured by the relationship between investments in private companies and the creation of intellectual property rights. The registration of patents and trade marks are tangible results that demonstrate innovation and entrepreneurship in action. Patents illustrate innovative developments that have a use, while trade marks point to products and services that have a market. 

This study shows the positive relationship between private equity investments and intellectual property rights in the companies that funding backs. Those markers of innovation are present in every sector – from tech and biotech to agriculture and chemicals. Moreover, they are evident in every country across the continent where private equity and venture capital firms are building better businesses.

1. European Union as of November 2024; U.K. excluded over entire period.