Europe's AI Boom: 25% of VC Funding Flows to AI Startups
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European AI startups are experiencing a surge in funding, attracting a significant portion of venture capital investment in the region despite overall flat venture funding, according to a report by TechCrunch, citing data from VC firm Balderton Capital and Dealroom.
This year, AI startups secured 25% of Europe's total VC funding, approximately $13.7 billion, a substantial increase from 15% four years ago. This funding boom has led to the emergence of several new "unicorns," including Poolside and Wayve.
"You can raise hundreds million euros, even billions euros, as a very early-stage AI company if you’ve got a breakthrough technology in Europe, just as you can in the U.S.” said James Wise, general partner at Balderton Capital. He attributes this to a shift away from the idea that Europe's tech sector is lagging.
Wise highlights a significant increase in the valuation of European AI companies, which has doubled in just four years, reaching a combined value of $508 billion. This represents nearly 15% of the entire European tech sector, up from 12% three years prior.
While some funding may originate from outside Europe, Wise emphasizes that the region has a thriving AI ecosystem. This includes both established players and emerging companies such as Mistral AI, Photoroom, and Dottxt.
The report also notes a substantial increase in employment within Europe's AI sector, with Dealroom estimating that 349,000 people were employed by AI companies in 2024—a 168% increase since 2020.
Wise attributes this to a rise in "hundreds of small, very productive companies," rather than a few large companies. The adoption of AI is also driving productivity gains across industries, with 93% of companies surveyed by Balderton reporting significant workflow improvements due to generative AI tools. Some companies have reported a doubling of engineering team productivity, and an average of 20% savings in operating costs.
Despite the positive trends, Wise suggests that the concept of a separate "AI sector" may be outdated, implying that future data analysis will need to adapt.