I like or I hate thisartificial intelligence – especially generative artificial intelligence – is the technology story of 2024.
OpenAI, because of the implementation of viral services reminiscent of ChatGPT and multi-billion-dollar funding, has been in a position to absorb the lion’s share of attention and money so far. But in accordance with a recent report from leading VC Accel and analysts at Dealroom, there is a wave of up-and-coming players emerging in Europe and Israel that would make their mark.
Europe and Israel typically collectively provide about 45% of all enterprise funding annually, but if you translate this into the specific sphere of AI, the percentage drops to lower than half that quantity, and even less in the case of generative AI. This could possibly be considered a signal that Europe and Israel are lagging behind in the market. On a more optimistic note, this implies we’ll see a lot of interesting developments in the coming months and years as the region catches up.
Investors are currently hunting for the next big thing, potentially at prices less inflated than in the US. Interestingly, Accel partner Harry Nelis told me that a part of the reason for this report is his firm’s efforts to evaluate all the generative aspects of AI startups emerging across the region. Here’s what they learned when trying to find out what to finance:
London generated the most GenAI startups
Of the 221 Dealroom and Accel startups analyzed, around 27%, or almost a third of the group, were founded in London.
Tel Aviv got here second with 13%; Berlin 12%; and Amsterdam 5%. Interestingly, although Paris is a city that everybody has been talking about for some time as a hotbed for the development of artificial intelligence, it was very much in the middle of the city rankings, with a rating of 10%.
But these Parisian startups have power.
French startups GenAI earn the most money
In total, French startups that describe themselves as working in the field of generative artificial intelligence have raised $2.29 billion so far, the most of any country in Europe and greater than Israel. Recent rounds included Mistral AI raising $640 million earlier this month and greater than $500 million before that, and “H” unexpectedly raising $220 million a few weeks ago. Meanwhile, core player Poolside, which moved its headquarters from the US to Paris last August, is also reportedly in the strategy of raising a sizable round.
Other notable AI startups in Paris include Hugging Face, an open source repository for machine learning models that raised $235 million in August 2023, and a recent research organization called Kyutai, which has a whole bunch of hundreds of thousands of euros to make waves in open source AI models.
Why do some places do so much higher than others?
France’s total of $2.29 billion is almost as much as the next three countries raised combined. The UK has committed $1.15 billion to funding startups in the field of generative artificial intelligence (Stable Diffusion maker Stability AI, Synthesia and PolyAI are among the largest players in the region); Israel earned $1.04 billion from startups including AI21 and Run:ai, which were recently acquired by Nvidia; and profits from Germany totaled $636 million, with most of that quantity coming from Aleph Alpha’s $500 million haul last 12 months.
Additionally, other countries in the region have raised lower than $160 million each – sometimes much less, with some countries in Europe seeing overall funding in the low seven-figure range.
Nelis believes the numbers reflect the location of the strongest educational institutions that are producing loads of tech talent, in addition to the large tech corporations that are developing their very own operations to tap into that talent.
“You can see the importance of real, long-term investment in education, which has brought success to many founders in Paris,” Nelis said. “The same applies to feeding in London at schools such as Cambridge, Oxford and UCL.”
However, the step between universities and their founders is not immediate: the middle stage for many was working at Big Tech corporations that have created a platform aimed at streamlining recruitment.
“Universities are undoubtedly very important in attracting hyperscalers,” Nelis said, citing Facebook/Meta, which established its research labs in Paris early on, in addition to Google, which eventually arrange a similar structure there after already partnering with DeepMind in London and Paris.
“Founder factories” – hyperscale technology corporations – play a big a part of this story
Indeed, while startups may appear to be a crucible for AI development, Big Tech has an essential 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 Meta, Alphabet (DeepMind or Google), Apple, Microsoft or Amazon – let’s call the group MAAMA.
The higher you go, the more clubbing it gets. Among the top 10 startups, as many as 60% of the founders come from one of MAAMA.
In fact, one company – Google – stands out as the clear purveyor of artificial intelligence, even outperforming some of the world’s most prestigious universities when you count people.
MAAMA, baby! This is not great news for outsiders and outliers – although that, too, will likely evolve and expand as the field matures and develops.