Venture funding to Europe is trending flat, which could obscure the fact that European AI startups are thriving.
According to VC firm Balderton Capital and Dealroom, 25% of VC funding in the region (approximately $13.7 billion) went to AI startups this year, compared to 15% four years ago, resulting in investments such as Poolside and Wayve. Created several new unicorn companies.
For James Wise, general partner at Balderton Capital, the most important takeaway is: “If you have a breakthrough technology in Europe, you can earn hundreds of millions or even billions of euros as a very early-stage AI company. This means that we can procure
This counters what he sees as a “relatively negative narrative” about Europe. The overall value of European AI companies has doubled in just four years, reaching $508 billion. According to these new figures, the category now accounts for almost 15% of the overall value of the technology sector, up from 12% three years ago.
This means that there is funding available for AI startups, whether early or late stage, but not necessarily from Europe itself. Additionally, American AI companies also see Europe as a talent pool to tap into.
“We're probably still an outgrowth of the U.S. market, we're still dependent on the U.S. market, but that doesn't mean there's nothing going on here. In fact, this is a very active ecosystem.” Wise told TechCrunch.
This may not be new to TechCrunch readers who are already familiar with European AI upstarts like Mistral AI and Photoroom, but also to newcomers like Dottxt. But what was less expected was Dealroom's finding that 349,000 people were hired by AI companies in Europe this year, an increase of 168% from 2020.
This may seem surprising since many AI teams are small. But for Wise, this aligns with the theme of his recent book, The Startup Century: Why We All Become Entrepreneurs. Wise said: “Instead of one large, medium-productivity company, we will now have hundreds of small, highly productive companies.”
There is also a snowball effect where AI companies improve the productivity of other companies.
“In our CTO survey, 93% of companies we partner with say generative AI tools have significantly changed their workflows in the last year,” Wise said. Some say their engineering teams have doubled in productivity, while others say they've had an impact on other functions, reducing operating costs by an average of 20%.
All of this leads Wise to believe that AI adoption will continue to increase. Will this be good news for the European AI sector? Perhaps Wise and his colleagues may now be thinking that “the AI sector no longer exists”. This could make similar data meaningless next year.
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