GP Bullhound: AI Pivotal in European Tech Investment Drive

the report highlights that is still around 50% higher than pre-pandemic levels in 2019
GP Bullhound has released a report that states Europe's tech ecosystem is placed for unprecedented growth, driven by the growth in AI

Tech advisory and investment firm GP Bullhound has released a report that states Europe's tech ecosystem is placed for unprecedented growth, driven by the growth in AI.

The report, now in its tenth year, underscores the resilience and burgeoning potential of Europe's tech sector, setting the stage for a future where AI-powered solutions reshape industries and propel the continent to the forefront of global innovation.

"After a decade of issuing our Titans of Tech report, we have witnessed the highs and lows of the European tech ecosystem," said Manish Madhvani, Managing Partner at GP Bullhound. "Today, against the backdrop of negative headlines, we have cemented the building blocks for the next wave of innovation."

Manish Madhvani, Managing Partner and Co-founder at GP Bullhound

Europe's growing ecosystem

Despite the funding frenzy of 2021-2022 subsiding, the report states that funding levels for European tech companies have stabilised at around €15bn (US$16.2bn) per quarter.

This petered out thanks to growing inflation and interest rates, which meant borrowing was more expensive and companies were more focused on cutbacks than investment.

Yet, the report highlights that is still around 50% higher than pre-pandemic levels in 2019. 

At the heart of this transformative era lies the rapid advancement of AI technologies. European AI companies received over €11 billion in funding last year, with a staggering 36% of new unicorns emerging from the AI/ML sector.

This comes as the world is gripped in the explosion of AI. OpenAI’s chatGPT, which really caught steam at the end of 2023, prompted a wave of cross-industry interest in AI. 

The proliferation of GenAI chatbots, from startup Anthropic creating Claude, to tech giant Google giving birth to Gemini, show organisations big and small are cashing in on the abundance of AI interest. 

Currently, the UK is the third largest AI market in the world after the US and China.

A UK startup this year secured Europe’s biggest-ever AI investment - US$1.05bn in funding - to develop its solutions for autonomous cars.

This is reflected in the fact UK and France lead the startup arena with three unicorns each. The UK's unicorns are valued at US$3.4bnn, with significant contributions from AI leaders Synthesia and Builder.ai.; France's trio reached a collective valuation of US$7bn, highlighted by innovators like Mistral AI. 

This steady influx of capital has fuelled the growth of the ecosystem, with its total valuation soaring to US$1.2tn, representing an 11-fold increase in the number of billion-dollar companies and a 14-fold increase in aggregate valuation since GP Bullhound's inaugural report in 2014.

"With Europe's maturing base of engineering talent and the world's fascination in its potential productivity gains, artificial intelligence offers a unique opportunity to create global leaders in record time," Madhvani emphasised.

Access to capital

Access to capital rounds exceeding $50 million has tightened, but investors remain interested in supporting innovators. The deal count dropped 68% over the last two years due to a focus on profitability and conservative planning.

Only 17% of European unicorns raised capital in 2023, as 93% had already raised funds during the 2021-2022 bull market.

Furthermore, Europe's burgeoning talent pool of skilled engineers and entrepreneurs presents a unique opportunity to capitalise on the AI revolution.

"There is no shortage of funding for the best entrepreneurs and companies, as evidenced by the record $220 million seed round for Paris-based H announced this week," Madhvani noted, underscoring the diverse range of investors, from strategic partners to household names and leading venture capitalists, who are backing Europe's AI ambitions.

"Looking ahead, we expect the next few years to represent an era of unprecedented innovation in the European ecosystem," Madhvani declared. "Innovation is flowing, vast amounts of capital are available for the strong, and the talent pool is expanding. No more excuses, Europe!"

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