In Case You Missed It: Europe tries to persuade its scaleups to avoid the lure of the US, while countries across the continent look again at AI investment
Welcome to ICYMI – a weekly snapshot of European news stories that have given me pause for thought. ICYMI is a chance for you to go beyond the front-page headlines and find out what other stories may be worthy of your attention.
In recent years, a growing number of European startups, including UiPath, Spotify and BioNTech, have chosen to IPO not in their home markets but in the US.
So is this becoming a problem for the continent’s tech ecosphere? A group of European stock exchanges and startup associations thinks so. Sifted reports that they have penned an open letter to European finance ministers and the European Commission that calls for strengthening the EU’s capital market union.
The group is also advocating new policy measures that they argue would make public listing and investing in Europe less burdensome.
The letter comes at a time when several high profile European scaleups — such as Klarna, Vinted, Northvolt and Bolt — are actively preparing for an IPO and waiting for more favourable market conditions to go public.
“Europe could produce the best startups in the world — and in many sectors it already does — but without the right capital and potential exit markets, we’ll never reach our full potential,” says Clark Parsons, ESN’s CEO.
“Too many founders move their startups to the US, or go public on a US-based stock exchange, because of the ease of access to deep pools of capital. This makes it much harder to establish a flywheel, since the brains and the gains end up elsewhere, causing Europe to miss much of the later benefits, even including higher pension returns.”
The open letter suggests that, in 2021 alone, there were more tech IPOs in the US than in Europe over the entire period from 2015 to 2023; it also says that 50 European-founded companies have filed for an IPO in the US since 2018. It is clear that the European tech industry, and especially its AI wing, is undergoing a stage of transition and working out how best to compete with the startups from Silicon Valley.
Europe in an AI quandary
The discussion around the future of European scale ups comes at a time when the governments of several of the continent’s largest economies are trying to forge their own innovation strategies. These are however created in an economic climate where governments are also looking to make savings.
The UK has for a long time been the leading European nation in Artificial intelligence research, investment and business. However, as Reuters points out the country’s newly elected Labour government is drawing up a new, cost-cutting artificial intelligence strategy ahead of a crunch autumn budget – prioritising public sector adoption of the technology over direct investment into industry. It has already scrapped a planned 1.3 billion pounds’ ($1.72 billion) worth of investment in related technologies.
One person not impressed by the cuts is ex Labour PM Tony Blair. At the launch of a report by the Tony Blair Foundation (TBI) on AI the ex-PM said “There is only one game changer in our view, [and] that is harnessing … the 21st century technological revolution. Britain must grasp full opportunity of governing in the age of artificial intelligence. In this new world, companies and nations will either rise or fall.”
Controversially the TBI has claimed that integrating AI into the heart of government could save up to £40 billion annually and shed one million civil servants. Although these figures have been disputed by academics and other politicians.
If the UK does not take the European lead on AI, its rival from across the channel will. As Reuters points out, France, which is building a reputation as a European hub for generative AI, recently committed 2.5 billion euros ($2.77 billion) to invest in developing the technology domestically.
Tyto’s Europe-wide approach
It will be fascinating to see how AI develops in Europe in the coming months and years. It is likely to be shaped not only by private investment and entrepreneurship, but also by changes in the political landscape. Regulations, academic research, and public funding will all play a role in the determining where the successful startups of tomorrow emanate from.
It is worth noting too that while the UK, France and Germany lead the way in AI development in Europe, history has repeatedly shown us that sometimes the continent’s most innovative startups have developed from countries where the state does not necessarily have the deepest pockets.
At Tyto we have a team of media experts that operate in many different countries in Europe who are highly knowledgeable about their local markets. We are well-versed in creating media strategies around funding rounds and IPOs. For it is about working with the client to tell the right story and showcase a company’s best attributes no matter where they are located and what markets they operate in.
