Like it or hate it, artificial intelligence — especially generative AI — is at technology story 2024.
OpenAI, with the launch of viral services like ChatGPT and billions in funding, has probably gotten most of the attention and money so far. But according to a new report from top VC Accel and analysts at Dealroom, in Europe and Israel there is a wave of hope that is now emerging to signal.
Together, Europe and Israel typically make up about 45% of all venture funding each year, but if you translate it into AI-specific fields, the proportion drops to less than half (and generative AI is even less). You can take that as a signal that Europe and Israel are lagging in the market. Or more optimistically, it means that we will see some interesting developments in the coming months and years as the region continues to move forward.
Investors are now hunting for the next big thing, at a lower price than in the U.S. Interestingly, Accel partner Harry Nelis told us that one of the reasons why this report is possible is because his company has been struggling. works to evaluate all the generative AI startups emerging across the region, to determine what to invest in. So watch this space.
In the meantime, here are some of the most interesting data points from the report:
London is the city that has ‘produced’ the most GenAI startups.
Of the 221 startups Dealroom and Accel analyzed, about 27%, almost one-third of the group, were created in London. Tel Aviv took the second slot at 13%; Berlin 12%; and Amsterdam 5%. Interestingly, although Paris is the city that everyone has been talking about for some time as a hotbed for the development of AI, it finds itself in the middle of the city ranking, with 10%.
But the starters are packing a punch.
GenAI startups founded in France get the most money
Collectively, French startups that describe themselves as working in the field of generative AI have raised $2.29 billion so far, the most of any country in Europe, and more than Israel. Recent rounds include Mistral AI raising $640 million earlier this month (on top of the previous $500 million+), “H” raised a $220 million SEED ROUND a few weeks ago, and Poolside is reportedly also in the midst of raising a large round very.
Other prominent AI startup activities in Paris include Hugging Face, an open source repository for machine learning models, which raised $235 million by August 2023; as well as a new research-focused organization called Kyutai, which itself is armed with hundreds of millions of euros to make some waves in the open source AI model.
Why are some places better than others?
Overall, France’s $2.29 billion is almost the same as the next three countries combined. The UK has secured $1.15 billion in generative AI startup funding (Stable Diffusion makers Stability AI, Synthesia, and PolyAI are among the bigger players here); Israel $1.04 billion (with startups including AI21 and Run:ai, which Nvidia recently acquired); and Germany $636 million (with Aleph Alpha $500 million last year accounting for much of that). More than that, other countries in the region pulled in less than $160 million each – sometimes even lower than that, with funds in the low seven-digit range.
Nelis believes that the main reason is the perfect storm of strong educational institutions, which not only produce a lot of technical talent but also attract large technology companies to build their own operations to acquire this talent.
“You can see the importance of real, long-term investment in education producing many founders in Paris,” Nelis said. “The same goes for London food from schools like Cambridge, Oxford and UCL.” However, the step between the university and the founder, is not direct: the middle stage, for many, is working in a large technology company, which sets up shop to increase recruitment.
“Universities are clearly very important to attract hyperscalers,” said Nelis, stating that Facebook/Meta created an AI research laboratory in Paris early on, as well as Google eventually created a similar set-up there, having established operations with DeepMind on both sides. in London and Paris.
The “founder factory” – the hyperscaler technology company – is a big part of the story
Indeed, while startups may feel they are crucial to the development of AI, major tech companies have a major role to play in fanning the flames. Looking at the long tail of GenAI startups, about 25% of them have founders who previously worked at Alphabet (DeepMind or Google), Apple, Amazon, Meta, or Microsoft (let’s call it MAAMA). Get even more clubby that is higher up. Among the top 10 of these startups, 60% of the founders come from one of MAAMA.
In fact, one company in particular is a clear AI feeder:
This is not a good message for those coming from outside the group, although it will also develop and evolve as the field matures and grows.
