I like it or I hate itartificial intelligence (especially generative AI) is he Technology history of 2024.
OpenAI, with its deployment 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 leading VC Accel and analysts at Dealroom, a wave of hopefuls is emerging in Europe and Israel to make their mark.
Together, Europe and Israel typically account for around 45% of all venture funding annually, but when you translate that to the specific sphere of AI, the proportion drops to less than half (and generative AI even less). You can take this as a sign 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 less inflated prices than in the U.S. Interestingly, Accel partner Harry Nelis tells me that one of the reasons this report materialized was because your company has been tough in We work evaluating all the new generative AI companies that are emerging in the region, to determine what to invest in. So watch this space.
In the meantime, here are some of the most interesting data from the report:
London is the city that has ‘generated’ the most GenAI startups.
Of the 221 startups analyzed, Dealroom and Accel, 27%, almost a third of the group, were created in London. Tel Aviv came in second 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 in the middle of the city rankings, at 10%.
But those startups are having a big impact.
GenAI startups founded in France raise the most money
Collectively, French startups that describe themselves as working in the field of generative AI have raised $2.29 billion to date, the most of any country in Europe, and more than Israel. Recent rounds have included Mistral AI raising $640 million earlier this month (in addition to over $500 million before that), “H” raising a $220 million SEED ROUND a few weeks ago, and reportedly , Poolside is also in the midst of raising a sizable round.
Other notable AI startup activity in Paris includes Hugging Face, the open source repository for machine learning models, which raised $235 million in August 2023; as well as a new research-focused organization called Kyutai, which itself has hundreds of millions of euros to make waves in open source AI models.
Why is it that some places do so much better than others?
In total, France’s $2.29 billion is almost as much as the next three countries have raised combined. The UK has received $1.15 billion in generative AI seed funding (Stable Diffusion maker Stability AI, Synthesia and PolyAI are among the biggest players here); Israel, $1.04 billion (with startups like AI21 and Run:ai, which Nvidia recently acquired); and Germany, $636 million (last year’s $500 million Aleph Alpha round accounted for the bulk). Beyond that, other countries in the region have raised less than $160 million each, sometimes much less than that, with funding in the lower seven-figure range.
Nelis believes 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 develop their own operations to take advantage of that talent.
“You can see the importance of a real, long-term investment in education that generates many founders in Paris,” Nelis said. “The same goes for the London feed from schools like Cambridge, Oxford and UCL.” The transition between universities and founders, however, is not immediate: the intermediate stage has been, for many, working at large technology companies, which were established to improve hiring.
“Universities are clearly very important in attracting hyperscalers,” Nelis said, citing that Facebook/Meta established its AI research labs in Paris early on, as well as that Google eventually established a similar facility there, having already developed a operation with DeepMind. in London and Paris.
“Founding factories” (hyperscale technology companies) are a big part of the story
In fact, while startups may seem like the crucible of AI development, big tech companies have an important role to play in fueling those flames. If we look at the long tail of GenAI startups, around 25% of them have founders who previously worked at Alphabet (DeepMind or Google), Apple, Amazon, Meta or Microsoft (let’s call them MAAMA). It gets even more clubbing the higher you go. Among the top 10 of these startups, 60% of the founders come from one of the MAAMAs.
In fact, one company in particular stands out as a clear driver of AI founders:
It’s not a glowing message for those coming from outside that group, although it too is likely to evolve and expand as the field matures and grows.
