Europe's Deeptech Triumph: $15 Billion Raised in 2023 Amid Investment Challenges, Fueled by a Robust STEM Talent Pool
Deeptech, vC
In the dynamic landscape of European innovation, deeptech emerges as a beacon of resilience. Despite global challenges, the sector has secured approximately $15 billion year-to-date in 2023, holding its ground compared to the previous year.
The European deeptech scene takes the spotlight in venture capital, notably outshining the fintech sector, which experienced a substantial decline of around 70 percent. It's inspiring to witness the resilience of deeptech startups amid adversity. This resilience isn't just a statistical triumph but a testament to the innovative spirit shaping Europe's technological future.
Deep Tech Defined: Deep Tech marks a revolutionary integration of cutting-edge science and engineering into products and businesses, introducing unprecedented advancements. These groundbreaking technologies have, throughout history, sparked mega-waves of innovation akin to the advent of electricity or the transistor. The unique risk profile of Deep Tech companies, characterized by high technological risk and lower market risk, demands a fresh perspective on investment strategies.
The European Deep Tech Opportunity: Europe possesses the essential elements to ascend as a worldwide center for Deep Tech prowess: Robust foundational research, exemplified by six schools ranking within the global top 20 for computer science; a well-educated talent pool, boasting approximately 1.5 times the number of STEM graduates compared to the United States; unprecedented public support, evident through initiatives such as the European Innovation Council (EIC), a €1 billion NATO fund, SPRIND, and JEDI; and a prevailing positive sentiment among citizens, with a staggering 90% expressing confidence in the overall positive impact of science and technology.
The third annual report, a collaborative effort by Dealroom, Lakestar, and Walden Catalyst, underscores this trend. The EU-27 deeptech market displays a remarkable 6 percent growth in the last 12 months, standing tall against declining investments in other regions. The report unveils a compelling narrative of growth, with European hubs like London, Stockholm, Paris, Munich, Oxford, and Cambridge contributing significantly. It's evident that these cities are becoming crucibles for cutting-edge technologies.
Successful VC-backed companies found across Deep Tech category
In 2023, the top three countries leading in Deeptech funding are the UK, France, and Sweden, each securing substantial investments, further solidifying Europe's position as a tech powerhouse. The ranking of these countries not only reflects financial prowess but also highlights the collaborative nature of European innovation. It's a collective journey toward technological excellence.
Educational Empowerment: The Backbone of Deeptech Success
Europe's deeptech sector thrives on a robust educational foundation. Boasting six of the top 20 global universities for computer science and a talent pool with 1.5 times more STEM graduates than the US, Europe is strategically positioned.
Chemical engineer developing clean energy storage solutions for a sustainable future. Photo: unsplash.com
Initiatives like the $1 billion NATO fund, SPRIND, and JEDI underscore the continent's commitment to fostering technological advancements. It's heartening to see the synergy between the educational sector and the thriving deeptech ecosystem. The investments in education today sow the seeds for groundbreaking innovations tomorrow.
AI and the Future of Compute: Riding the Wave of Innovation
The 2023 European Deep Tech Report delves into Novel AI, defining it as groundbreaking math and algorithms making their debut in products and companies. Investment in Novel AI startups has surged to $1.3 billion, marking a 50 percent growth compared to the previous year.
The exploration of Novel AI signifies Europe's commitment to staying at the forefront of technological evolution. It's not just about adapting to change; it's about leading the change. Investment in startups shaping the future of compute has seen a remarkable 10 percent increase in 2023.
Novel AI is a subset of AI, referring to fundamentally new maths and algorithms
We have gone through various Novel AI waves over time
For further reading, Air Street Capital’s ‘State of AI Report 2023’ summarises where the current state of the art is and predicts how AI is likely to develop.
Notable contributions include the €100 million Series B funding for quantum computing startup Pasqal and the $120 million Series D funding for AR/VR startup Aledia. The investments in quantum computing and AR/VR underscore Europe's determination to pioneer the technologies that will define our future.
New trends & opportunities emerge to make models safer and more performant
1. https://www.nytimes.com/2023/02/16/technology/bing-chatbot-microsoft-chatgpt.html 2. https://arxiv.org/abs/2211.04325
Paving the Path to Tomorrow's Prosperity
The European Deep Tech landscape in 2023 offers a ripe opportunity for growth. To capitalize on this, it's essential to foster a culture that encourages entrepreneurs to embrace risk. Collaboration between researchers and startups, along with integrated university programs, is crucial for nurturing skilled professionals.
Taking a cue from successful models like Stanford, attracting commercially-savvy operators will enhance competitiveness. Additionally, implementing frameworks to bring talent back to Europe is strategic for 2023. These measures collectively position Europe as a global hub for Deep Tech innovation, ensuring a leadership role in shaping the future of technology.
In Conclusion
The 2023 European Deep Tech report highlights a key shift toward integrating startups into design rights frameworks, emphasizing the importance of corporates treating startups as customers, not just project managers. This approach accelerates innovation and positions corporates at the forefront of technological advancements.
Public institutions also benefit from this collaborative model, gaining access to cutting-edge technologies and fostering a dynamic entrepreneurial ecosystem. The report underscores the superiority of commercial contracts over grants for supporting deeptech ventures, ensuring sustainable and mutually beneficial partnerships.
In summary, active startup involvement in design rights frameworks is essential for unlocking the full potential of European deeptech. Treating startups as customers and prioritizing commercial contracts are strategic imperatives for propelling European deeptech into a new era of innovation and competitiveness.
As AI models grow in complexity, Moore's Law reaches its limits, and societal considerations loom large, a paradigm shift in computing infrastructure becomes imperative. The future of compute lies in inventing architectures and technologies that will propel innovation and usher in a new era of prosperity for all.
In this transformative era, Europe stands on the brink of shaping the next wave of innovation, armed with the tools and resilience needed for the journey ahead. Time is of the essence, and the call to action echoes loud and clear.
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