France leads in financing generative artificial intelligence in Europe, London has 3 times as many GenAI startups

I like or I hate thisartificial intelligence – especially generative AI – is the technology story of 2024.

OpenAI, because of the implementation of viral services such as ChatGPT and multi-billion-dollar funding, has been in a position to absorb the lion’s share of attention and money up to now. But based on a brand new report from leading VC Accel and analysts at Dealroom, there may be now a wave of up-and-coming players poised to make their mark in Europe and Israel.

Europe and Israel typically together account for around 45% of all enterprise funding annually, but for those who translate this into the particular sphere of AI, the share drops to lower than half that quantity (and generative AI even less). This might be considered a signal that Europe and Israel are lagging behind in the market. On a more optimistic note, this implies we’ll see quite a lot of interesting developments in the approaching months and years as the region catches up.

Investors are currently trying to find the following big thing, potentially at prices less inflated than in the US. Interestingly, Accel partner Harry Nelis told me that considered one of the explanations this report was produced in any respect was because his firm was working hard to guage all of the generative AI startups emerging across the region, to search out out what to speculate in. So watch this space.

Meanwhile, listed below are a few of the most interesting data from the report:

London is the town that “generated” essentially the most GenAI startups.

Of the 221 Dealroom and Accel startups analyzed, around 27%, or almost a 3rd of the group, were founded in London. Tel Aviv got here second with 13%; Berlin 12%; and Amsterdam 5%. Interestingly, although Paris is a city that everybody has been talking about for a while as a hotbed for the event of artificial intelligence, it was very much in the center of the town rankings, with a rating of 10%.

But these startups have power.

French startups GenAI earn essentially the most money

In total, French startups that describe themselves as working in the sector of generative artificial intelligence have raised $2.29 billion up to now, essentially the most of any country in Europe and greater than Israel. Recent rounds have included Mistral AI raising $640 million earlier this month (on top of about $500 million earlier), “H” raised $220 million in a SEED round a couple of weeks ago, and Poolside can also be reportedly in the means of raising a large 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 brand new research organization called Kyutai, which itself is armed with tons of of hundreds of thousands of euros to make waves in open-source AI models.

Why is it that some places achieve this significantly better than others?

Nelis believes the predominant reason is an ideal storm of strong educational institutions that aren’t only educating loads of tech talent, but in addition attracting large tech corporations to develop their very own operations to leverage that talent.

(*3*) Nelis said. “The same applies to feeding in London by schools such as Cambridge, Oxford and UCL.” However, the step between universities and their founders just isn’t immediate: the center stage for many was working at large technology corporations which have created a platform to streamline recruitment.

“Universities are clearly very important in attracting hyperscale people,” Nelis said, citing the proven fact that Facebook/Meta established their research labs in Paris early on, as well as Google, which eventually arrange an analogous structure there after already partnering with DeepMind each in London and Paris.

“Founder factories” – hyperscale technology corporations – play a giant a part of this story

Indeed, while startups may appear to be the crucible of AI development, big tech corporations have a very important role to play in fanning those flames. Looking on 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 them MAAMA). The higher you go, the more clubbing it gets. Among the highest 10 startups, as many as 60% of the founders come from considered one of MAAMA.

In fact, one company in particular stands out as a transparent supplier of AI founders:

This is not great news for those outside this group, although that too will likely evolve and expand as the sector matures and grows.