Forget Silicon Valley – Europe should back startups in emerging markets, says impact investor

For years, global investors have treated the US as the default destination for capital, and startups the world over have long looked to the US to scale. Impact-focused ventures, too, have largely followed the same playbook.

However, with US politics growing more unpredictable and transatlantic relations under strain, Sagar Tandon, a partner at Beyond Impact VC, thinks Europe needs to make a shift – and look for new opportunities in underserved markets.

“Why do we keep serving 350 million people when there are almost eight billion people who want to industrialise, go through a green transition, and live a better life? I’m sorry, but that’s not enough impact,” Tandon told Impact Loop at the sidelines of the GoWest Conference in Gothenburg last week.

His frustration is partly with where capital keeps ending up. Despite years of talk about diversification, money continues to funnel into the same US assets, particularly a small group of listed tech giants.

“The whole world is stuck in seven companies in the S&P 500,” Sagar said. “That’s where all the money goes. And fundamentally, they’re bloated.”

Tandon also thinks the current AI investment trend follows a similar pattern. “Funding for AI is completely out of control,” he says. “It’s pretty much a Ponzi scheme at this point.”

‘Huge growth markets’

Global flows of venture capital have created an unfortunate contradiction – markets already saturated with technology and capital receive more of both, while regions facing the biggest food, energy, and jobs challenges struggle to attract funding.

Tandon believes European impact investors should start taking a serious look at middle-income economies in particular – countries that are growing fast but remain underserved by global investors.

“Why not go to Southeast Asia? Why not Latin America?” he said. “Thailand, Vietnam, Brazil. They want better energy systems, better food, better education. These are huge growth markets.”

Sagar, who spent decades living in Indonesia, disagrees with the idea that investing outside the US or Europe is high risk by default. In his view, these markets are risky only because investors refuse to understand them.

“Impact investors, of all people, should be the ones taking that leap,” he said.

Europe, Tandon argues, has deep pools of capital, strong research institutions, and a growing pipeline of climate and industrial technologies. Yet much of its money remains parked in low-yield savings accounts or recycled back into US markets.

“Europe has the infrastructure,” Sagar said. “But the money is just sitting here. Or flowing back to the US. A lot of it is passive.”

As reliance on both the US and China becomes more politically uncomfortable, he believes Europe should be using its strengths to build partnerships elsewhere, rather than competing head-on with Silicon Valley.

Unicorns aren’t everything

Tandon thinks the shift would also require a rethink of how impact venture capital works. In fact, he is sceptical of the idea that success means producing unicorns or billion-dollar exits.

“Not everything needs to be a startup,” he said. “Not everything needs to be a billion-dollar company. A lot of impact businesses should be €50m or €100m SMEs.”

He points to Europe’s mid-sized industrial firms as a more realistic model for building energy systems, food supply chains, and employment at scale.

For him, the bigger failure is that capital remains trapped in a narrow loop, chasing the same assets while billions of people are left out of the transitions investors claim to care about.

“Six or seven billion people are looking for solutions,” he said. “We should be doing more.”

As US unpredictability forces Europe to rethink its dependencies, his message is blunt. The next growth market isn’t another AI startup in California. It’s the rest of the world.