Like it or hate it, artificial intelligence — specifically generative AI — is THE the technology story of 2024.
OpenAI, with the distribution of viral services like ChatGPT and billions in funding, may have gobbled up 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 hopefuls emerging to make their mark.
Together, Europe and Israel typically account for about 45% of all venture funding each year, but when you translate that into the specific realm of AI, the percentage drops to less than half of that—and generative AI even less. You can take this as a signal that Europe and Israel are lagging behind in the market. Or more optimistically, it means we’ll see a number of interesting developments in the coming months and years as the region catches up.
Investors are now on the hunt for the next big thing, potentially at prices that are less inflated than in the US. Interestingly, Accel partner Harry Nelis tells me that one of the reasons this report materialized is because of his firm’s efforts to evaluate all generators. Artificial intelligence startups are popping up across the region. Here’s what they learned as they tried to figure out what to fund:
London has spawned most GenAI startups
Of the 221 startups Dealroom and Accel analyzed, around 27%, nearly a third of the group, were founded in London.
Tel Aviv took second place with 13%; Berlin 12%; and Amsterdam 5%. Interestingly, although Paris is the city that everyone has been talking about for a while as a hotbed for AI development, it found itself very much in the middle of the city ranking, with 10%.
But those Parisian startups are making a good shot.
GenAI startups founded in France are raising more money
Together, the French startups that describe themselves as working in the field of generative artificial intelligence have raised $2.29 billion to date, the most of any country in all of Europe and more than Israel. Recent rounds have included Mistral AI raising $640 million earlier this month, up from more than $500 million previously; and “H” raising a $220 million round, surprisingly, a few weeks ago. Meanwhile, major player Poolside, which moved its headquarters from the US to Paris last August, is also said to be in the midst of a major round.
Other notable AI startups in Paris include Hugging Face, the open source repository for machine learning models, which raised $235 million in August 2023, and a new research-focused organization called Kyutai, which which itself is armed with hundreds of millions of euros for it. make some waves in open source AI models.
Why do some countries perform so much better than others?
In total, France’s $2.29 billion is almost as much as the next three countries combined. The UK has seen $1.15 billion in AI startup seed funding (Diffusion Stability AI maker Synthesia and PolyAI are among the biggest players in the region); Israel saw $1.04 billion, thanks to startups including AI21 and Run:ai, which Nvidia recently acquired; and Germany’s draw has reached $636 million, with Aleph Alpha’s $500 million round last year making up the bulk of that amount.
Beyond that, other countries in the region have attracted less than $160 million each – sometimes significantly less, with some countries in Europe seeing total funding in the much lower seven-figure ranges.
Nelis believes the numbers reflect where some of the strongest educational institutions are located, producing a lot of technical talent, as well as large tech companies building their operations to tap into that talent.
“You can see the importance of real, long-term investment in education, bringing many founders to Paris,” Nelis said. “The same goes for food in London from schools like Cambridge, Oxford and UCL.”
The step between universities and founders, however, is not immediate: the intermediate stage has been, for many, working at large technology companies, which set up shop to improve recruitment.
“Universities are clearly very important for attracting hyperscalers,” Nelis said, citing Facebook/Meta that established its AI research labs in Paris early on, as well as Google that eventually established a similar facility there after building already an operation with DeepMind both. in London and Paris.
“Founder factories”—hyperscaling technology companies—are a big part of the story
Indeed, while startups may feel like the pinnacle of AI development, big tech has a big role to play in fueling 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 the group MAAMA.
It becomes even more of a club the higher you go. Among the top 10 of these startups, a full 60% of founders come from one of the MAAMAs.
In fact, one company in particular—Google—stands out as a clear purveyor of AI founders, even surpassing some of the world’s most prestigious universities once you count people.
My mom! It’s not a great message for outsiders and outsiders—though even that is likely to evolve and expand as the field matures and grows.