Startups across the board continue to face significant headwinds when it comes to venture capital funding, which only improved slightly in the second quarter from lows in the previous two quarters, according to Crunchbase.
But there's one category that still seems to be opening doors and checkbooks: AI.
The United States currently leads the world with nearly 30 artificial intelligence-related investments worth more than $100 million through 2024. But Europe is not far behind: According to our research, there were 14 $100 million-plus investments in European AI companies as of August, with one company attracting two investments.
AI is a major driver of Europe’s long-tail startup ecosystem: by 2024, there had been a cumulative total of more than 1,700 funding rounds for AI startups in the region, according to data from PitchBook.
When it comes to fundraising, the largest AI startups building the foundational models continue to have the most influence, in part because AI remains an expensive field to develop in. Mistral AI, which has already attracted more than $1 billion in investment this year, is apparently raising funds again, according to sources.
Mistral is headquartered in Paris, which has established itself as the European epicenter of AI development, especially in the field of generative AI. Given that promising emerging markets like India receive only a fraction of the AI funding that more developed markets receive, it will be interesting to see whether Paris can maintain and leverage its leadership, or how the balance of power (and funding) shifts.
There are four main reasons why AI is in need of significant investments, including autonomous driving technology, LLM startups, and players that also have a hardware component.
The amount of compute power required to train and query AI models is huge. AI startups are competing for talent. In some cases, AI companies need capital to pay royalties on all the content IP they use to train and run their models. Investors struggling with huge amounts of money for growth investments (and pressure to deploy from LPs) need to find places to put their money. Looking at the behavior of the big tech hyperscalers, investors are viewing outsized AI companies as big, potentially profitable bets.
Below is an overview of the biggest rounds in European AI this year, which is something of a who’s who roster of who’s who in AI right now.
Wave: $1 billion
Going head-to-head with companies like Tesla, GM, Intel, and Alphabet requires a lot of capital, and Wave has been raising just that. In May, the Cambridge, UK-based startup raised $1.05 billion to focus on self-driving technology, the largest single round to date for an AI company in the region. Like Intel's Mobileye, Wave sells its AI technology to a range of automakers and OEMs rather than building vehicles in-house, theoretically broadening its reach and putting more of a focus on startup operations.
But unlike many other self-driving companies, Wayve is “pivoting” away from a heavy reliance on expensive LiDAR technology. The company is already rolling out its service, with British grocery chain Asda as a customer. “Seven years ago, we founded the company to build embodied AI,” Wayve co-founder and CEO Alex Kendall told TechCrunch. “We've been working tirelessly on building the technology. Last year, everything really started to take off.” The company's investors include SoftBank, Nvidia, Microsoft and Meta's AI head Yann LeCun.
Mistral: $650 million and $431 million
Mistral has grown to be one of the leading companies building large-scale language models that serve as the basis for generative AI applications in Europe and around the world. One of the company's unique selling points is its embrace of open source, which in theory makes its technology easier to customize and use for businesses and developers.
So far, Mistral's funding story has been quite “flashy”. The company started just a year ago with the announcement of a $113 million seed round. This year, it raised $431 million in a first tranche, then $650 million (final value) in a second round, totaling more than $1 billion, from notable VC, tech and financial backers such as DST, Andreessen Horowitz, Lightspeed Venture Partners, Microsoft, Salesforce, BNP Paribas, CMA CGM and General Catalyst. Combined, these rounds make the company the most funded of any startup in the AI space in Europe so far this year. And if our sources are correct, the company is currently working on further fundraising.
Hellsing: $484 million
Defense was one of the earliest application areas for AI back then, and now geopolitical events are bringing defense tech AI startups back into the spotlight.
Hellsing was founded in Germany and its European roots have been crucial to the company's development. It is considered a “home-grown” solution, and its presence signifies greater resilience for the European defense economy, helping countries in the region reduce their reliance on outside third parties. The company has a number of announced contracts with select countries, including Estonia and Germany, as well as a number of additional undisclosed contracts.
To date, Helsing has focused primarily on software, and one of its core missions is to build AI services that work in conjunction with traditional infrastructure to improve defense systems, increase weapon capabilities, and provide better combat analytics for decision-making. The threat from Ukraine, and especially Russia, has been a big stimulus for Helsing's growth.
“Ukraine has been using technology to defend against a full-scale Russian invasion. It's been a big driver for us to be able to help there, deploy technology and execute on the mission we set out three and a half years ago of using AI to protect democracy,” Hellsing co-CEO Gundbert Scherf told TechCrunch in an interview. The company is likely to move into hardware as well, having raised $487 million in July. Investors include General Catalyst, Prima Materia, Elad Gil, Accel, Saab, Lightspeed, Plural and GreenOaks.
Poolside: $400 million
Poolside's focus is on developers, especially building AI tools that help speed up software development. There are certainly plenty of startups looking to attract programmers, but investors see a special talent for product-market fit in its founders. CEO Jason Warner was CTO at GitHub and led engineering at Heroku and Canonical. Another co-founder, CTO Eiso Kant, previously founded Athenian, where he developed a set of tools to help developers optimize what they build and do.
Like many other European AI startups, Poolside is based in Paris, and its early backers included early-stage specialists like BCV, London's Air Street, Abstraction, and Scribble Ventures, as well as France's New Wave and Frst, plus Bpifrance, Felicis, Point Nine, and Redpoint. This latest $400 million round, which may not yet be closed, or at least not publicly disclosed, is reportedly being co-led by BCV and DST.
DeepL: $320 million
There are a number of companies offering text translation and writing tools, including startups and big platform players like Google and Microsoft, but Germany-based DeepL believes its AI-based approach is far superior. It also has a slightly different approach, focusing on the B2B/enterprise opportunity in the market, rather than the consumer.
The company currently has about 100,000 enterprise customers, and in May of this year announced a $320 million funding round in hopes of expanding that number. The company's investors include ICONIQ Growth, Teachers' Venture Growth, IVP, Atomico, and WiL.
H: $220 million
H stands for “heady,” which is exactly what the AI market is today. And so is the name of a company that proves the saying: The startup, formerly known as Holistic AI, took a more cryptic turn, shortening its name to H and raising a $220 million seed round in May.
The company has yet to release a product, but when it does, it will likely be focused on AI agents, one of the most popular AI applications right now. Specifically, the company's website says it will focus on “cutting-edge action models to boost worker productivity” and “incredible AI capabilities for task automation and decision-making.” It's not clear yet which industries, which models, when they'll be released, what they'll cover, or what roles they'll play. Exciting, indeed.
Flow Health: $200 million
London-based Flo Health billed itself as the first “purely digital” (no hardware or wearable components) women's health tracking app to be valued at over $1 billion when it raised $200 million from General Atlantic earlier this year. It's currently focused on pregnancy and period tracking, but wants to expand this to older and younger people, as well as more health categories. The company claims to have 380 million cumulative users to date, with 70 million monthly active users.
Pigment: $145 million
Pigment, a startup from Paris, specializes in enterprise software, specifically enterprise resource planning for finance teams. Like Flo Health, Pigment is not an AI startup, but it does use AI in its functions. As such, Pigment is part of a growing set of AI applications that validate the prediction that AI will eventually become an integral part of all digital services. A $145 million funding round earlier this year came less than a year after its last round, and valued Pigment at more than $780 million.