Deep Tech: Europe’s Path to US Autonomy
- Amid geopolitical tensions and volatile markets, the question of Europe’s ability to weather the storms ahead is looming large.
- Europe's deep tech sector is gaining momentum and is poised to become a cornerstone of the continent's security,defense,and future independence,particularly in relation to the U.S.
- Venture investments in European deep tech ventures reached €15 billion ($16.3 billion) in 2024.
Europe’s Deep Tech Sector: A Rising force in Global Innovation
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Amid geopolitical tensions and volatile markets, the question of Europe’s ability to weather the storms ahead is looming large. A new report suggests deep tech could be the key.
Europe’s deep tech sector is gaining momentum and is poised to become a cornerstone of the continent’s security,defense,and future independence,particularly in relation to the U.S.
Deep Tech investment surges in Europe
Venture investments in European deep tech ventures reached €15 billion ($16.3 billion) in 2024. This is according to a extensive 184-page report by Lakestar, Walden Catalyst, Dealroom, and the Hello Tomorrow deep tech conference. The report highlights that nearly a third of all venture capital invested in Europe is now directed towards deep tech initiatives.
Mergers and Acquisitions
Mergers and Acquisitions (M&A) within the deep tech space saw an increase to $12.2 billion last year. Though, the report indicates that European deep tech startups still heavily depend on the U.S. for accomplished exits. moreover, 50% of the growth capital secured by these startups originates from outside of Europe.
The report suggests that deep tech could serve as a buffer against standard “momentum investing” practices among venture capitalists.
Europe’s Deep Tech Potential: A Key to Resilience
Lukas Leitner, a deep tech investor at Lakestar and co-author of the report, stated that while geopolitical tensions present considerable challenges, Europe must seize the current possibility. He believes that deep tech could be the key to unlocking future resilience for the continent.
Europe needs to embrace the moment, and deep tech could be the key that unlocks future resilience for the continent.
Challenges and Opportunities
The path forward is not without its obstacles. Leitner pointed out that the U.S. benefits from a “flywheel effect” in deep tech, while europe’s ecosystem is still developing.
we have a flywheel in the ‘shallow’ tech scene. You see a lot of second-time founders, coming out of Revolut and so on, building great companies. But not yet from deep tech companies.
He emphasized the need for policy changes to cultivate a risk-tolerant environment, noting:
Europe has strong research institutions, engineering talent, and supportive public sentiment for deep tech, but there need to be policy changes to foster a culture that supports taking risks.
Europe’s Strengths in AI and Photonics
Arnaud de la Tour,CEO of Hello Tomorrow,challenged the notion that Europe would always lag in AI due to limited computing resources,citing the emergence of open-source DeepSeek.
It’s a huge opportunity for Europe, as we have great AI talent … Manny are looking to come back to Europe because of the geopolitical landscape. But we definitely need to have the right policy framework in order to unlock the kind of potential that we have.
Leitner highlighted Europe’s strength in photonics computing, which offers significant advantages in speed and efficiency, offsetting its relative weakness in general computing power.
we’re realy good in Europe with photonics, as we have good laser systems, and we have good fundamental research on the photonic side.
Capitalizing on Global Talent
De la Tour suggested that Europe could capitalize on a potential brain drain from the U.S., driven by funding cuts to scientific research.
The National Science Foundation, which is the biggest supporter of founder-applied research in the U.S. has had its budget cut by half. A lot of those great scientists don’t have a job anymore, and many could come to Europe.
Europe’s deep tech sector is at a pivotal moment, with the potential to drive significant economic and strategic advantages. By addressing existing challenges and leveraging its strengths, Europe can solidify its position as a global leader in deep tech innovation.
Europe’s Deep Tech Sector: A Rising Force in Global Innovation – Q&A
This article explores the burgeoning deep tech sector in Europe, examining its investment trends, potential for resilience, key strengths, and the challenges it faces.
Q: What is deep tech, and why is it crucial for Europe?
A: Deep tech refers to companies and startups built around basic scientific or engineering breakthroughs. These technologies frequently enough require meaningful R&D and capital investment and aim to solve complex global challenges.For Europe, deep tech represents a strategic prospect to bolster its security, defense capabilities, and future independence, especially in relation to the U.S. The sector could act as a keystone for the continent’s resilience amid geopolitical tensions and volatile markets.
Q: How much investment is flowing into european deep tech ventures?
A: Venture investments in European deep tech ventures reached €15 billion ($16.3 billion) in 2024. This significant influx means that nearly a third of all venture capital invested in Europe is now directed towards deep tech initiatives.
Q: How does Europe compare to the US and Asia in deep tech investment?
A: While specific total investment figures for 2024 for the US are not available within this document, other sources indicate that in previous years, the US led in deep tech investment, mainly driven by AI and machine learning. Though, Europe is rapidly catching up. Asia is also a significant player wiht substantial investments. In 2024, the European deep tech saw investments of $16.3 billion, compared to $13 billion invested in Asia
Q: What is driving the growth of deep tech in europe?
A: Several factors contribute to the growth:
Increased Investment: Venture capital is increasingly being directed toward European deep tech initiatives.
Strategic Importance: deep tech is seen as vital for Europe’s security,defense,and independence.
Strong talent Pool: Europe boasts strong research institutions and engineering talent.
Supportive Public Sentiment: There is generally positive public support for deep tech initiatives in Europe.
Government Support: The EIF (European Investment Fund) is a main LP that provides nearly 40% of the capital allocation for European Deep Tech funds.
Q: What are some of the challenges facing the European deep tech sector?
A: Despite its potential, the European deep tech sector faces challenges:
US Flywheel Effect: The U.S. benefits from a more mature deep tech ecosystem and a “flywheel effect” where triumphant companies lead to more founders and investment.
Dependence on US for Exits: European deep tech startups still heavily depend on the U.S. for successful exits via acquisitions.
Funding from Outside Europe: 50% of the growth capital secured by these startups originates from outside of Europe.
Need for Risk Tolerance: A more risk-tolerant environment is needed to encourage investment and innovation.
Q: What policy changes are needed to support deep tech in Europe?
A: To foster a thriving deep tech ecosystem,Europe needs policy changes to:
Cultivate a Risk-Tolerant Environment: Encourage investment in high-risk,high-reward deep tech ventures.
Attract and Retain Talent: Implement policies that draw skilled researchers and engineers to Europe, potentially capitalizing on talent migration from the U.S.
Q: What are europe’s strengths in deep tech?
A: Europe has particular strengths in:
AI: Emerging open-source AI initiatives, like DeepSeek, showcase Europe’s AI talent.
* Photonics: Europe excels inphotonics computing, with its advantages in speed and efficiency.
Q: How can Europe capitalize on potential talent migration from the U.S.?
A: With funding cuts to scientific research in the U.S. causing potential job losses, Europe could strategically attract talented scientists and researchers by offering opportunities and support within its growing deep tech ecosystem.
Q: What was the exit value for European Deep Tech in 2021?
A: The European Deep Tech saw an unprecedented nearly $100B in exit value in 2021, spurred by a wave of IPO & SPACs, such as UiPath, Arrival, Roivant Sciences, Oxford Nanopore and Lilium.
Q: What role do Mergers and Acquisitions play in European Deep Tech?
A: Mergers and Acquisitions (M&A) within the deep tech space saw an increase to $12.2 billion in the past year.