INTRODUCTION Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
concentrated in six key sectors – namely, Infor - mation and Communications Technology (ICT), wholesale, retail, financial activities, professional activities and manufacturing – the control of FDI assumed heightened significance in regulating these sectors. The six main jurisdictions of ori - gin were the US, the UK, the United Arab Emir - ates, China (including Hong Kong), Canada and Japan. Outlook for 2025 Despite continued significant geopolitical uncer - tainty, particular headwinds that have held back activity in the VC industry during the post-pan - demic years may be fading in 2025: a shift back to more accommodating monetary policy condi - tions, ventures that have tended to “de-risk” by increasing focus on profitability as opposed to growth, policy trends such as a recognition of the start-up industry as a driver for prosperity in Europe and an openness on the part of the new US administration in respect of crypto-curren - cies all point to a general resurgence of activity. While the lackluster environment for (sizeable) exits has strained the traditional VC model over the past couple of years, promising candidates, notably in the fintech space, including Stripe, Revolut, Klarna and Chime, may alleviate linger - ing concerns. In terms of funds to be deployed, AI is expected to remain the primary focus for VC investors globally. From generative AI that produces con - tent to agentic AI that operates independently, the fields of application are expected to pro - foundly affect virtually every industry, includ - ing healthcare, law and software development. Beyond AI, healthcare and biotech continue to be prime investment sectors, including due to their relative resilience in economic downturns, in both the US and Europe.
Given the current and ongoing geopolitical developments, defence technology and cyber - security are also becoming increasingly impor - tant, illustrated by massive defence technology rounds including, but far from being limited to, California-based Anduril Industries and Mach Industries (specialised in advanced autonomous systems and systems for vertical take-off and landing as well as cruise missiles and other high- performance vehicles) and German start-up Helsing which develops AI software for defence applications. As a notable intergovernmental ini - tiative, the NATO Innovation Fund (NIF) – backed by 24 allied nations and equipped with EUR1 bil - lion – further illustrates the growing institutional focus on defence tech, with prominent venture capitalist Klaus Hommels (Lakestar) serving as chair of NIF’s board of directors. Due to the European Commission’s five-year plan to streamline regulations and accelerate investments, an instrumental step in attracting capital for financial services has been taken. The so-called “Omnibus” package covers, inter alia, far-reaching simplifications regarding ESG regu - lations, and aims to reduce the regulatory bur - den on businesses and thus enhance the EU’s global competitiveness. Moreover, the movement toward onshoring high-tech manufacturing is in full swing. Devel - oped country jurisdictions globally are striving to reduce their dependence on global supply chains, opening up new and domestic invest - ment opportunities. FDI regulations play a criti - cal role for countries pushing for onshoring by incentivising foreign companies to invest in local production while safeguarding national security, fostering technology transfer, and supporting economic growth.
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