Venture capital investment in Europe is expected to remain stagnant this year; however, this does not reflect the impressive performance of AI startups across the continent.
Research from the venture capital firm Balderton Capital and Dealroom indicates that 25% of venture funding in the region — approximately $13.7 billion — has been allocated to AI startups this year. This marks an increase from 15% just four years ago and has led to the emergence of several new unicorns, including Poolside and Wayve.
James Wise, a general partner at Balderton Capital, highlights that “early-stage AI companies with breakthrough technologies in Europe can successfully raise hundreds of millions, or even billions of euros, just as they can in the U.S.”
This contradicts what he perceives as a “somewhat negative narrative” surrounding Europe. The total value of European AI companies has doubled over the last four years, reaching $508 billion. These figures suggest that the AI segment now accounts for nearly 15% of the total tech industry value, up from 12% three years prior.
Consequently, there is funding readily available for AI startups at various stages, though it may not always originate from Europe. Furthermore, American AI firms are actively looking to Europe as a source of talent.
“Although we still largely mirror the U.S. market and depend on it, the European ecosystem is actually flourishing,” Wise mentioned during an interview with StartupSuperb.
For readers of StartupSuperb who are already acquainted with rising European AI stars like Mistral AI and Photoroom, there are also exciting newcomers such as Dottxt. Interestingly, Dealroom has reported that 349,000 individuals were employed by AI companies in Europe this year, marking a remarkable 168% increase since 2020.
This statistic may come as a surprise, given that many AI teams tend to be relatively small. However, according to Wise, this aligns with the argument made in his latest book, “Start-up Century: Why we’re all becoming entrepreneurs — and how to make it work for everyone.” Wise asserts: “We are likely to see the emergence of numerous small, highly productive companies, rather than a few large, moderately productive businesses.”
There is additionally a cumulative effect as AI companies enhance the productivity of others.
“According to our CTO survey, 93% of the companies we collaborate with reported that generative AI tools have significantly transformed their workflows over the past year,” Wise explained. Among these businesses, some indicated that their engineering teams have doubled their productivity, while others noted improvements across various functions, leading to an average 20% reduction in operational costs.
All these developments lead Wise to conclude that the integration of AI technologies will continue to rise. Will this be beneficial for Europe’s AI landscape? It is possible, although Wise and his team believe that “the concept of an AI sector may no longer exist.” This could render similar data irrelevant in the upcoming year.
