The State of European Tech report dropped this week, and there are some interesting trends and data in it. I thought the report was glossing over a lot of weakness in the market and trying to put a positive spin on what was an ugly year for the startup scene in Europe. However, that is their prerogative. They need to market Europe and I’m all for that, what with living here and all. I am long term bullish on European tech, but I believe it won’t compete without better integration between different member countries and a smarter approach to working with Americans and launching products in America. That relationship has been dominated by one side for too long. Behind the gloss there were two areas that stood out as cause for excitement in Europe; AI and Climate tech.
1. The Rise of AI in Europe: Sneaky Good
The European tech sector has made remarkable strides the AI Domain. It is remarkable how deep the talent pool is here. I’m continually amazed at how many excellent AI researchers there are in Europe. The only issue is they are too distributed! There needs to be more density of AI startups in a particular place. I selfishly hope it is berlin, but it’s actually looking like Paris will take that trophy. Europe outpaces even the US in AI talent, clocking in at 108,000 AI specialists compared to America’s 8,700. The two companies you have likely heard about are Mistral AI, which set record-breaking seed round, and Hugging Face, which is freaking awesome. (Sorry on review Hugging Face was started by two French people but is based in New York. In 2023, 22% of all European megarounds (over $100 million) were dedicated to AI-focused companies, underscoring the sustained investor confidence in this sector despite the broader macroeconomic turbulence.
2. Climate Tech: Europe A is Actually Doing Something!
Climate technology, or ‘climate tech’, is another area where Europe is leading the charge. Accounting for 30% of all capital invested in European tech in 2023, climate tech has tripled its share of total investment since 2021. This shift marks a critical transition, with the sector overtaking fintech and software to become the largest in terms of capital raised. Europe’s focus on climate tech is not just about fostering innovation; it’s a commitment to solving the world’s most urgent environmental issues. There is a deeply ingrained passion to do this in Europe, something I don’t really see in the US. My concern is that alot of these models are based on government subsidies, and whether or not they can reach sustainability before that dries up.
3. Conclusion
There’s no doubt it was a rough year, but the highlights are undeniable. I am bullish on 2024 and excited about leaning into the AI scene in Berlin. There is an abundance of talent and I really think the best AI companies might be European in the next 5 years. They have the talent and the regulatory framework to build and calm doomers down, respectively. On the climate side, not much needs to be said. It is one of the most important issues facing humanity, and I’m overjoyed to see Europe leading the way in climate tech. Long may that continue.