Like it or hate it, artificial intelligence – especially generative AI – is like that on the technological history of 2024
OpenAI, with its implementations of viral services like ChatGPT and billions in funding, has perhaps absorbed the lion’s share of attention and money so far. But according to a new report from top VC Accel and analysts at Dealroom, there’s a wave of hopefuls emerging to make their mark in Europe and Israel.
Together, Europe and Israel typically account for about 45% of all venture funding annually, but when you translate that to the specific field of AI, the ratio 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 Nellis told me that one of the reasons this report materialized was because of his firm’s efforts to evaluate all the generative AI startups emerging in the region. Here’s what they learned as they tried to determine what to fund:
London has generated the most GenAI startups.
Of the 221 startups Dealroom and Accel analyzed, around 27%, almost a third of the group, were founded in London.
Tel Aviv takes second place with 13%; Berlin 12%; and Amsterdam 5%. Interestingly, although Paris has been the city everyone has been talking about for some time as a hotbed for AI development, it ended up very much in the middle of the city ranking, with 10%.
But these Parisian startups are impressive.
French-based GenAI startups raise the most money.
In total, French self-described generative AI startups have raised $2.29 billion to date, 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 more than $500 million previously; and “H” raised a $220 million seed round, amazingly, a few weeks ago. Meanwhile, founding player Poolside, which moved its headquarters from the US to Paris last August, is also in the midst of raising a major round.
Other notable AI startups in Paris include Hugging Face, the open-source repository for machine learning models that raised $235 million in August 2023, and a new research organization called Kyutai, which itself is armed with hundreds of millions of euros to make some waves in open source AI models.
Why do some places perform so much better than others?
In all, France’s $2.29 billion is almost as much as the next three countries combined. The UK has seen $1.15 billion in generative AI startups (Stable Diffusion Stability AI maker Synthesia and PolyAI are among the region’s bigger players); Israel has seen $1.04 billion, thanks to startups including AI21 and Run:ai, which Nvidia recently acquired; and Germany’s profit reached $636 million, with Aleph Alpha’s $500 million round last year accounting for most of that amount.
In addition, other countries in the region have raised less than $160 million each — sometimes significantly less, with some countries in Europe seeing total funding in the low seven-figure regions.
Nellis believes the numbers reflect where some of the strongest educational institutions are located and which produce a lot of technical talent, as well as large tech companies that are building their own operations to tap into that talent.
“You can see the importance of the real, long-term investment in education that many founders are making in Paris,” Nellis said. “The same goes for catering in London from schools such as Cambridge, Oxford and UCL.”
The step between universities and founders isn’t immediate, though: the intermediate stage for many is working at large tech companies setting up shop to improve recruitment.
“Universities are obviously very important in attracting hyperscalers,” Nellis said, citing Facebook/Meta, which set up its AI research labs in Paris early on, and that Google eventually set up a similar organization there after already has built an operation with DeepMind both in London and Paris.
“Founder factories”—hyper-scaling technology companies—are a big part of the story.
Indeed, while startups may feel like the crucible of AI development, big tech plays a major role 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 gets even more clubby the higher you go. Among the top 10 of these startups, as many as 60% of the founders come from one of the MAAMAs.
In fact, one company in particular – Google – stands out as a clear source of AI founders, surpassing even some of the world’s most prestigious universities once you count the people.
MOMMY! This is not a brilliant message for outsiders and outsiders – although this too is likely to evolve and expand as the field matures and grows.
