Venture funding into Europe is heading for a flat year, but this may obfuscate the fact that European AI startups are thriving.
According to VC firm Balderton Capital and Dealroom, 25% of VC funding into the region — approximately $13.7 billion — went to AI startups this year, compared to 15% four years ago, resulting in several new unicorns, such as Poolside and Wayve.
For Balderton Capital general partner James Wise, the most important takeaway is that “you can raise hundreds million euros, even billions euros, as a very early-stage AI company if you’ve got a breakthrough technology in Europe, just as you can in the U.S.”
This counters what he sees as a “relatively negative narrative” around Europe: Collectively, European AI companies have doubled in value in just four years, reaching $508 billion. Per these new figures, this category now represents nearly 15% of the entire tech sector in value, up from 12% three years ago.
This means there’s funding available to AI startups, whether at early or at later stages, although it may not always come from Europe itself. In addition, American AI companies also see Europe as a talent pool to tap into.
“We’re still probably a derivative of the U.S. market, we’re still reliant on it, but it’s not like nothing’s happening here. It’s actually a really buoyant ecosystem,” Wise told TechCrunch.
This may not be news to TechCrunch readers already familiar with European AI rising stars such as Mistral AI and Photoroom, but also newcomers like Dottxt. What’s less expected, however, is Dealroom’s finding that 349,000 people were employed by AI companies in Europe this year, a 168% increase since 2020.
This may sound surprising, as many AI teams are on the smaller side; but for Wise, this is in line with the thesis of his recent book, “Start-up Century: Why we’re all becoming entrepreneurs — and how to make it work for everyone.” Says Wise: “You’re going to see a rise in hundreds of small, very productive companies, rather than one large, medium productive company.”
There’s also a snowball effect, as AI companies make others more productive.
“In our CTO survey, 93% of the companies we work with have said that generative AI tools have significantly changed their workflow in the last year,” Wise said. Among these, some said their engineering teams are now twice as productive, while others see an impact on other functions — averaging out to 20% savings in operating costs.
All of this leads Wise to think that the adoption of AI will continue to increase. Will this be good news for Europe’s AI sector? Perhaps, although Wise and his colleagues now think that “there’s no longer an AI sector.” This would potentially make similar data pointless next year.
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