Love it or hate it, that’s how artificial intelligence — especially generative AI — is and the technology story of 2024.
With its introduction of viral services like ChatGPT and billions in funding, OpenAI may have swallowed 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 in Europe and Israel looking to make a splash.
Europe and Israel together typically account for around 45% of all venture funding annually, but when you translate that into the specific realm of AI, that share drops to less than half – 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 that we will see a number of interesting developments in the coming months and years as the region catches up.
Investors are now looking 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 news materialized is because of his firm’s efforts to evaluate all the generative AI Startups emerging across the region. Here’s what they learned as they tried to determine what to fund:
London generated the most GenAI startups.
Of the 221 startups analyzed by Dealroom and Accel, approximately 27%, or almost one-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 the development of artificial intelligence, it found itself very much in the middle of the ranking of cities, with 10%.
But those Parisian startups pack a punch.
The most money will be raked in by GenAI startups based in France.
Together, 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 more than Israel. Recent rounds have included Mistral AI, which raised $640 million earlier this month, after more than $500 million; and “H” surprisingly raised a $220 million seed round a few weeks ago. Meanwhile, founding 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, an open-source repository for machine learning models that raised $235 million in August 2023, and a new research organization called Kyutai, armed with hundreds of millions of euros itself. make some waves in open source AI models.
Why do some places do so much better than others?
Combined, France’s $2.29 billion is almost as much as the other three countries combined. The UK saw $1.15 billion in AI startup seed funding (Stable Diffusion Stability AI makers, Synthesia and PolyAI are among the bigger players in the region); Israel saw $1.04 billion thanks to startups including AI21 and Run:ai, which Nvidia recently acquired; and Germany’s haul reached $636 million, with the biggest chunk of that coming from $500 million last year from Aleph Alpha.
In addition, other countries in the region pulled in less than $160 million each — sometimes significantly less, with some countries in Europe seeing total funding in the low seven-figures.
Nelis believes the numbers reflect where some of the strongest educational institutions are located, producing plenty of tech talent, as well as large tech companies building their own operations to tap that talent.
“You can see how important it is that real, long-term investment in education brings many founders in Paris,” Nelis said. “The same goes for London feeding from schools like Cambridge, Oxford and UCL.
However, the step between universities and founders is not immediate: the intermediate stage for many was working at large technology companies that set up shop to improve recruitment.
“Universities are obviously very important to attract hyperscalers,” Nelis said, referring to Facebook/Meta, which soon established its AI research labs in Paris, as well as Google, which eventually established a similar facility there as it had already built an operation with DeepMind. in London and Paris.
“Founder factories” – hyperscaler technology companies – are a big part of the story.
While startups may seem like the crucible of AI development, big tech plays a major role in fueling the flames.
If we look 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 MAAMA group.
The higher you go, the more clubbed it gets. Among the top 10 of these startups, a full 60% of founders come from one of MAAMA.
In fact, one company—Google—stands out as the clear feeder of AI founders, outperforming even some of the world’s most prestigious universities once you count humans.
MAMA mia! It’s not great news for outsiders and outliers—though even that will likely evolve and expand as the field matures and grows.