If you follow the global AI race, you would be forgiven for thinking that there are only two nations fighting for leadership. But China and the United States are far from the only technology markets with developed start-up and established cohorts, strong venture capital activities, and capital markets capable of translating early-stage ideas into public companies.
The AI race is part of a larger deep technology competition that includes things like chip manufacturing, another flashpoint often discussed as an issue between the US and China. The reality is that many countries are betting on deep technology – what The Exchange sees as an investment in complex technology that may not have immediate commercial application, or is aimed at laying the groundwork for other more market-friendly products.
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We are curious to see if Europe can form a third, independent center or group of hubs for investment in deep technology, IP and business development, separate from China and the United States.
We approach the question in two parts: Today we analyze Angular Ventures’ report on VC investments in enterprise and deep tech in Europe and Israel. Then, early next week, we’ll be collecting demand commentary from leading European investors and founders to better understand the real-world perspective.
A few caveats to start with. The Angular Ventures report includes data from Israel, an active deep tech market. And what the venture company has put together includes some corporate investments (SaaS, fintech, e-commerce, and so on). So we’ll have to do a bit of parsing, but no dataset is perfect, and what Angular has published is very useful.
The first data point to consider is focus. Angular divides venture capital activities into two segments that are useful for broad comparisons. Looking at Europe’s venture capital market from an entrepreneurial and deep tech versus consumer perspective, data indicates that the continent has radically changed its investment focus from equilibrium to a predominance of non-consumer work.
For example, from 2014 to 2017, the two broad categories were roughly aligned, with each holding approximately 50% of the venture business in Europe. But in 2018 through today, that parity shifted to a split of roughly two-thirds/one-third, with European investment in deep tech and enterprise accounting for the bulk of the deal flow.
That recent and sharp divergence in venture focus on Europe helps explain why our question is more than vain. Europe has moved from a market that was fairly evenly split between consumer and non-consumer investment to one that is heavily biased in favor of back-end technology over consumer-facing products.