Despite the overall stagnation of venture capital in Europe, the thriving growth of AI startups in the region may be overlooked. Data from venture capital firm Balderton Capital and Dealroom indicates that this year, 25% of venture capital in Europe (approximately $13.7 billion) has flowed into AI startups, compared to only 15% four years ago. This has led to the emergence of several new unicorns, such as Poolside and Wayve.
James Wise, a general partner at Balderton Capital, believes that the key point is, "If you have a groundbreaking technology in Europe, even as a very early-stage AI company, you can raise hundreds of millions or even billions of euros, just like in the United States."
This counters the "relatively negative rhetoric" he has observed surrounding Europe. Overall, the value of AI companies in Europe has doubled in just four years, reaching $508 billion. According to this new data, the AI sector now accounts for nearly 15% of the total value of the tech industry, up from 12% three years ago.
This means that AI startups, whether in early or later stages, can secure funding, even if this funding may not all come from within Europe. Moreover, American AI companies also view Europe as a talent pool. Wise told TechCrunch, "We may still be a derivative of the U.S. market; we still rely on it, but that doesn't mean nothing is happening here. In fact, it's a very active ecosystem."
For TechCrunch readers familiar with European AI newcomers like Mistral AI and Photoroom, as well as emerging players like Dottxt, this may not come as a surprise. However, it is more surprising to find out from Dealroom that the number of employees in European AI companies has reached 349,000 this year, an increase of 168% since 2020.
This may sound surprising, as many AI teams are relatively small. But for Wise, this aligns with the views he expressed in his recently published book, "The Entrepreneurial Century: Why We Are All Becoming Entrepreneurs and How to Make It Work for Everyone." Wise stated, "You will see hundreds of small, highly productive companies rising, rather than one large, moderately productive company."
Additionally, AI companies have created a snowball effect, leading other companies to improve their productivity. Wise said, "In our CTO survey, 93% of the companies we work with reported that generative AI tools have significantly changed their workflows over the past year." Some companies indicated that their engineering teams have now doubled their productivity, while others believe AI has impacted other functions, saving an average of 20% in operational costs.
All of this leads Wise to believe that the adoption of AI will continue to increase. Is this good news for the European AI sector? Perhaps. However, Wise and his colleagues now believe that "the AI sector no longer exists." This may render similar data next year meaningless.
