There were 25 unicorns (private, venture-backed companies worth at least $1bn) created first half of 2017 but only one – Improbable – in Europe after Softbank led a $502m round for the UK-based company, according to data provider Pitchbook at the end of last month.

For context, Improbable’s round was about a tenth of the size of the entire venture capital market in Europe in 201t, which was €4.3bn ($4.9bn), according to local venture capital and private equity trade body Invest Europe. There were 3,124 venture-backed companies in the European union last year, which remains below the pre-financial crisis levels nearly a decade earlier.

Maybe 25 of those are unicorns – a big maybe judging by a spat between investment bank GP Bullhound and news provider Fortune last summer. Fewer than a handful (four) of European private, venture-backed companies have raised more than $1bn in venture funding and 86 have raised at least $100m, according to last month’s ScaleUp Europe report by Startup Europe Partnership.

This relative paucity of funding strikes home on reading at the weekend China Money Network’s China Unicorn Ranking 2017, the most complete list of all private startups in China currently valued at $1bn or more, which counted 108 Chinese unicorns in total with a combined net worth of $445.66bn, just shy of Belgium’s gross domestic product (GDP) and about 10 times that of Bulgaria (which I currently have the pleasure to be visiting for the first time).

The prevalence of Chinese technology firms Baidu, Alibaba and Tencent, commonly referred to as BAT, is evident throughout the list, China Money Network said. Thirteen unicorns worth $124.51bn are directly affiliated with or controlled by the BAT, taking 29% of the total in terms of valuation.

The trio has also invested in 38 unicorns worth a combined $163bn. Adding the two together, the BAT have owned or, through corporate venture capital (CVC), invested in two-thirds of the unicorns in terms of valuation (Tencent, Alibaba and Baidu have 22, 13 and 10 unicorns, respectively).

Helmut Kraemer-Eis, chief economist and head of research and market analysis at European Investment Fund (EIF), which is Europe’s largest limited partner in venture capital funds, has been exploring the issue for a number of years, particularly through its excellent European Small Business Finance Outlook series of papers, the latest of which was published last month.

The paper said: “Before the crisis, later stage venture was the driver of VC investment, but it is now far away from these activity values; in 2016, it was still 43% below its 2007 level. In contrast, since 2009, investments at the startup stage have been higher than later stage VC investments.”

An earlier paper by the EIF’s research team assessed the exit returns of 3,600 EIF-supported seed and startup venture investments between 1996 and 2015. It found: “About 50% of the performing EIF-backed European investees are acquired by non-European corporations, particularly from the US.

“US-based buyers are typically larger in terms of assets and revenues, more innovative and mostly active in the ICT domain. This raises the issue of whether the missing scale-up phenomenon in Europe could be linked to the lack of serial tech buyers, that is, incumbents in highly innovative and competitive sectors (and often former successful startups).

“At the crossroads between scaling up and being acquired, later-stage funding becomes essential. While both acquisitions or foreign buyers are not per se negative, their joint existence may be a signal that European startups lack the growth capital necessary to expand and strengthen their position. As such they may end up being acquired, unless they have the chance to go public.”

By email, Kraemer-Eis said: “Scale-up funding is indeed in Europe an increasingly important topic and we are trying to flag this as well to policy makers. From the research side we are looking at this from the general perspective of lack of scale-up capital, and in this regard of course CVC plays a role.

“From a policy perspective, we think that the fragmented ‘support landscape’ could be improved if various resources could be merged to one tool (with single set of rules, more flexibility, etc). It would then also be easier to address scale-up issues.”

But while the focus is on venture-backed companies, traditional corporations are important.

There is no question the leading corporations are increasingly active in their mergers and acquisitions (M&A) as well as CVC activity, complementing established research and development (R&D) investments.

Analysis by Global Corporate Venturing in last month’s magazine looked at the top 25 corporations by R&D investment and found most had increased their CVC and M&A investments since 2013. However, with less free cashflow, the midcaps are caught by the same disruptive factors as larger incumbents, but with fewer resources to buy or invest in the startups to increase their innovation potential.

The EIF’s Outlook paper said: “In the shadow of companies driving or directly affected by the ‘digital revolution’, [small and medium-sized enterprises] and midcaps in traditional industries are reshaping their strategies for competing in a rapidly changing economic environment and are in need of flexible funding instruments with growth equity, mezzanine debt and hybrid debt to classical debt features.”

From Europe’s perspective, there is probably much value in helping an established midcap – for example Germany’s family-owned mittelstands – become more innovative as they are already tapped into the supply chain for large conglomerates, as there is in helping the next startup try to scale to a unicorn valuation.

Deals such as private equity firm EQT Partners’ purchase of a 20% stake in Germany-based prosthetics maker Ottobock late last month, reputedly at a valuation of about €3bn, indicates unicorn status is slightly in the eye of the beholder. That mittselstand company was founded nearly 100 years ago.

Ultimately, therefore, Europe is right to be concerned about its lack of venture funding to startups but misses the elephant in the room when it comes to keeping its established companies successful through an innovation capital toolkit.