Like that or I hate itArtificial intelligence – especially generative AI – is the The technology story of 2024

OpenAI, with its introduction of viral services like ChatGPT and its billions in funding, has probably captured the lion’s share of attention and money so far. But according to a new report from VC major Accel and analysts at Dealroom, there is a wave of hopefuls in Europe and Israel emerging to make their mark.

Europe and Israel together account for about 45% of total project funding annually, but when you translate that to the specific field of AI, the proportion drops to less than half that percentage – and generative AI is even less than that. You can take this as a sign that Europe and Israel are lagging behind in the market. Or more optimistically, it means that we will see a number of interesting developments in the coming months and years as the region catches up.

Investors are now looking for the next big thing, perhaps at less inflated prices than in the United States. Interestingly, Harry Nellis, a partner at Accel, told me that one of the reasons this report appeared was because of his company’s efforts to evaluate all generating factors. AI startups emerging across the region. Here’s what they learned while trying to decide what to fund:

London produced the largest number of GenAI startups.

Of the 221 startups analyzed by Dealroom and Accel, about 27%, nearly a third of the group, were founded in London.

Tel Aviv ranked second with 13%; Berlin 12%; and Amsterdam 5%. Interestingly, though, Paris is a city for everyone It’s been talked about for a while As a hotbed of AI development, it finds itself in the middle of the city rankings, at 10%.

Image credits: dealroom/accel (Opens in a new window) Under license.

But these Parisian startups have a big advantage.

GenAI startups founded in France receive the most money.

Collectively, French startups that describe themselves as working in generative AI have raised $2.29 billion to date, the most raised by any country in all of Europe, and more than Israel. The last rounds have been included Artificial intelligence company Mistral raises $640 million Earlier this month, on more than $500 million before; And “H” raises $220 million The seed round was, surprisingly, a few weeks ago. Meanwhile, founding company Poolside, which moved its headquarters from the US to Paris last August, is also said to be in the midst of raising a mega round.

Other notable activities include an AI startup in Paris Face huggingthe open source repository for machine learning models, which raised $235 million in August 2023, and a new research-focused organization called Kyotaiwhich has been armed with hundreds of millions of euros to make some waves in open source AI models.

Why do some places perform so much better than others?

In total, the $2.29 billion provided by France is roughly equivalent to the amount raised by the next three countries combined. UK saw $1.15 billion in production funding for AI startups (Stable Diffusionmaker Stability AI, SynthesisAnd Bolyai It is among the largest players in the region); Israel saw $1.04 billion, thanks to startups including AI21 And Run: you haveWhich was recently acquired by Nvidia; Germany’s revenues amounted to $636 million Alpha’s $500 million round last year This represents the largest portion of this amount.

Furthermore, other countries in the region raised less than $160 million each – sometimes much less, with some countries in Europe seeing total funding at lows (seven figures).

Nellis believes the numbers reflect the locations of some of the strongest educational institutions that produce a lot of tech talent, as well as the large technology companies that are building their own operations to take advantage of that talent.

“You can see the importance of real long-term investment in education, which is what brought a lot of founders to life in Paris,” Nellis said. “The same applies to nutrition in London from schools such as Cambridge, Oxford and University College London.”

However, the step between universities and founders is not immediate: the middle stage, for many, was working at big tech companies, which set up shop to improve recruitment.

“Universities are obviously very important to attract hyperscalers,” Nellis said, citing Facebook/Meta’s establishment of AI research laboratories in Paris early on, as well as Google’s eventual establishment of an AI research center. Similar setup therehaving already established an operation with DeepMind in both London and Paris.

“Enterprise factories” — hyper-scale technology companies — are a big part of the story.

In fact, while startups may seem like the crucible for AI development, big tech companies play a key role in fueling the fire.

Looking at the tail end of startups in GenAI, about 25% of them have founders who previously worked at Alphabet (DeepMind or Google), Apple, Amazon, Meta, or Microsoft (let’s call the group MAAMA). It gets more frequented the higher you go. Among the top 10 startups, 60% of founders come from a MAAMA university.

In fact, one company in particular – Google – stands out as a clear feeder for AI founders, surpassing even some of the world’s most prestigious universities just by counting people.

Image credits: Deal room (Opens in a new window) Under license.

Mama Mia! It’s not a great message for outsiders and extremists, although this too is likely to evolve and expand as the field matures and grows.

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