In 2024, synthetic intelligence is persistently front-page information. From Nvidia hitting a trillion-dollar market cap to the rising power utilization of information centres, it’s the most mentioned expertise of our time. And it’s a expertise that the US dominates, with three of essentially the most useful AI start-ups, Anthropic, OpenAI and xAI, primarily based there.
However right here’s the confounding factor — the worldwide race to construct synthetic normal intelligence was initiated by a London-based start-up, DeepMind, based in 2010 — properly earlier than Anthropic or OpenAI existed.
How did Europe lose its lead? And the way can it cease that from taking place once more?
It’s a query that sits inside a broader pattern of the US changing into extra globally dominant in expertise, regardless of the EU having a bigger inhabitants. There are solely seven examples of trillion-dollar tech firms on this planet — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla. All are American. None are European. Going a degree down, Europe has 4 $100bn-plus tech firms in contrast with the US’s 33, and from Mario Draghi to Emmanuel Macron there may be growing recognition from European leaders that one thing has stalled.
I share this view and, after 17 years spent founding and investing in start-ups, I consider that the expansion of the expertise business in Europe is core to making a extra affluent and resilient society. You solely want to have a look at the UK’s financial stagnation since 2008 to see why.
Whenever you’re drifting sideways in fog it may be laborious to get your bearings, but when the whole financial impact of 14 years of sluggish development — a 28 per cent drop in GDP vs pattern — had occurred in a single single drop in a single day it could be a historic financial shock on the dimensions of a pandemic or warfare within the lifetime of the typical Briton. It will splash each entrance web page for months, not simply fade into the background.
In the meantime, over the identical interval within the US, GDP didn’t stagnate, considerably due to expertise firms’ contribution to financial development. Over a 13-year interval, the mixed market cap of Apple, Google, Amazon, Microsoft, Tesla, Nvidia and Meta has elevated by 1,620 per cent. Put merely, the financial advantages, to not point out nationwide safety and geopolitical advantages, of those firms are extraordinary — they’re a wealth engine to pay for different issues a rustic may need to do.
However there are causes for Europeans to be hopeful. Applied sciences that would remodel our world for the higher are being constructed within the continent — be it in robotics, nuclear fusion or quantum computer systems — and in the present day it stands a significantly better probability of commercialising its scientific excellence.
To keep away from repeating previous errors, and make sure that the subsequent period of innovation may be constructed to ship the continent’s first trillion-dollar firm, one factor is essential: Europe must rejoice and assist skilled founders who’re constructing and investing within the highest-risk, highest-reward concepts.
The worth of repeat founders
The DeepMind story began when co-founders Demis Hassabis and Shane Legg met on the Gatsby Computational Neuroscience Unit at College School London — a novel educational establishment the place neuroscientists and machine studying researchers come collectively to collaborate.
Hassabis is many issues — a Nobel-winning scientist, a visionary AI researcher — however I consider at the least as importantly he was one thing else: an skilled founder. Twelve years previous to DeepMind, he based Elixir Studios, a London-based video games studio that shut down after seven years.
You possibly can really feel the heartache in Hassabis’s quote from a press launch as the corporate wound down: “Plainly in the present day’s video games business now not has room for small impartial builders eager to work on progressive and unique concepts . . . this was the only goal of establishing Elixir and one thing we might by no means compromise on.”
Know-how start-ups are a comparatively new space of the financial system and there may be nonetheless restricted understanding of what precisely drives success. A standard clarification for why Europe lags the US is extreme regulation, and it’s definitely true that founders in Europe face extra bureaucratic drag in contrast with their US friends.
As only one instance, in Germany the notary course of provides enormous overhead for founders elevating funding, particularly from angel traders, and in my view is clearly damaging for the start-up ecosystem. One other apparent downside throughout Europe is the excessive fairness stakes taken by some universities within the commercialisation of mental property, which may make it virtually inconceivable for outdoor traders to return in.
However I consider it’s the position of founders that has the most important influence. Once I take into consideration the hardest-charging founders I do know in Germany, similar to Hélène Huby of The Exploration Firm or Francesco Sciortino of Proxima Fusion, they blast via this paperwork and it’s actually not the core factor holding them again. Particularly, repeat entrepreneurs similar to Hassabis are a type of important keystone species that massively have an effect on the general well being of a continent’s expertise ecosystem.
The primary and most blatant motive for that is that like every occupation, being a tech start-up founder is a type of craft — and the longer you do it, the extra you refine the craft. So when it got here time for Hassabis to lift his first spherical of funding for DeepMind in 2010, he knew higher than to waste time on conservative European traders and headed straight to Silicon Valley the place he was in a position to elevate funding from skilled founders similar to Peter Thiel and Elon Musk.
That is the second motive that skilled founders are so necessary — for his or her second or third firm they may usually deal with tougher challenges. Musk is the quintessential instance of this — his first firm in 1995, Zip2, was an web metropolis information, his second in 1999 was a web based financial institution, and his third in 2002 was an area exploration firm.
What explains this ramp in ambition? I think the deepest motive is that having based a start-up, you understand how laborious it may be — so in case you’re going to attempt once more, you’re much more dedicated to tackling a mission that’s inspiring sufficient to justify the lows that you recognize will inevitably come. There’s additionally a type of pure choice at play — the tougher the mission, the higher the ability degree required and the much less seemingly a first-time founder will make it.
Audacious capital
As traders, skilled founders are additionally usually a supply of essentially the most audacious capital, funding start-ups with the next degree of danger or an extended gestation interval earlier than they begin to work and make cash. The sport Civilisation launched the idea of the “tech tree” — the concept progress in expertise may be visualised as a tree during which new branches of expertise sprout from the principle trunk after which permit for a community of subsequent branches to develop. For instance, semiconductors have been wanted to allow private computer systems.
Skilled founders are sometimes most definitely to fund new branches of the tech tree. In Silicon Valley, greater than 60 per cent of the companions at high enterprise capital funds have been beforehand founders and chief executives; in Europe, in contrast, the determine stands at a dismal 8 per cent.
Issues are starting to maneuver in the proper route. My very own fund, Plural, is run 100 per cent by skilled founders and chief executives. We’re right here for the subsequent Hassabis, to attempt to meet their ambition.
This brings us again to the story of DeepMind, which in 2014 was acquired by Google for simply £400mn solely 4 years after launching. Hassabis now runs everything of Google’s AI efforts from London and has delivered breakthrough after breakthrough, from AlphaGo to AlphaFold. I first wrote about the fee to the UK of DeepMind being acquired again in 2018 in an essay “AI Nationalism”, however in 2024 this appears much more stark.
What occurred? I might argue that there was merely not sufficient audacious capital obtainable for Hassabis to pursue his mission and as an alternative an skilled founder — on this case Larry Web page with all of the sources of Google — was in a position to present the billions in long-term high-risk funding that he wanted.
The identical is true in self-driving automobiles or quantum computing, the place Google has invested billions in expertise that would take a decade earlier than it makes cash. Take into account how various things might be in the present day if somebody in Europe had the audacity to be a real companion to Hassabis and funded him to remain impartial.
In the meantime in Silicon Valley, a bunch of skilled founders, most notably Sam Altman and Musk, have been considering laborious about how necessary AI might be and methods to compete with DeepMind as they based OpenAI. In 2015 Altman emailed Musk saying: “Been considering loads about whether or not it’s attainable to cease humanity from growing AI. I believe the reply is sort of positively not. If it’s going to occur anyway, it looks like it could be good for somebody aside from Google to do it first”.
Musk then grew to become the biggest donor to the brand new non-profit OpenAI. The purpose was very explicitly to meet up with DeepMind. In emails launched as a part of a court docket case, Musk wrote to the co-founders in 2016: “DeepMind is inflicting me excessive psychological stress.” And in 2018: “My chance evaluation of OpenAI being related to DeepMind/Google with out a dramatic change in execution and sources is 0 per cent. Not 1 per cent . . . I want it have been in any other case . . . Sadly, humanity’s future is within the arms of [name redacted by lawyers].”
Quick-forward in the present day and OpenAI is now valued at greater than $150bn, Anthropic, based in 2021 by OpenAI alumni, is reportedly valued at $40bn and xAI, based by Musk in 2023, is already valued at $50bn. A set of well-resourced founders — Web page, Musk and Altman — tilted historical past and now Silicon Valley, not London, is the worldwide centre of gravity for AI.
Subsequent-generation expertise
However, whereas Europe might need fallen behind in that story, AI remains to be younger and far is but to be written. And past AI, there are doubtlessly world-changing applied sciences being inbuilt Europe that urgently want daring capital to develop.
One instance is nuclear fusion. Fusion might be the last word answer for zero-carbon, low-cost, baseload power. For Europe it might be a supply of power safety in addition to a possibility to construct an enormous new business. A start-up that builds fusion reactors in the way in which that SpaceX builds rockets might be the subsequent trillion-dollar firm.
This needs to be an space the place Europe is positioned to guide — it has invested extra public funding in fusion analysis than the US and has a bigger base of fusion scientists. European governments have led the way in which with the Joint European Torus, the tokamak with the document for fusion energy within the UK, and the Wendelstein 7-X in Germany, the world’s most superior stellarator. Europe needs to be poised to win.
Nevertheless, while you take a look at non-public start-ups in fusion, 4 within the US have raised greater than $500mn, in contrast with just one in China and 0 in Europe. And once more it comes again to audacious founder-led capital, with the best-funded US fusion start-ups elevating their early rounds of funding from Altman, Vinod Khosla or Invoice Gates. Skilled founders are those in a position to optimistically embrace these sorts of high-risk tasks that outline the subsequent department of the tech tree.
We’re seeing glimpses of how this will work in Europe. In 2021, Spotify founder Daniel Ek invested €100mn in AI defence start-up Helsing when there was no different investor standing within the wings — he was the one individual prepared to take this degree of danger. Helsing is an instance of a very progressive European firm that has now secured a sequence of main authorities navy contracts. That early funding considerably de-risked the enterprise, permitting Helsing to lift greater than $830mn from enterprise capitalists over the next three years. It was a catalytic occasion of a form that doesn’t occur sufficient in Europe.
Don’t promote
One more reason I name skilled founders a keystone species is that, together with founding and investing in additional bold start-ups, additionally they assist the subsequent technology of founders in additional nuanced methods.
Skilled founders can lend their scar tissue to a brand new founder and assist them keep away from the errors they made. Take into account how Sean Parker, co-founder of Napster, took the expertise of being fired from his earlier start-up and used it to assist Mark Zuckerberg retain full-board management of Meta, one thing that grew to become important in July 2006 when Yahoo made Fb a suggestion to amass it for $1bn. With full management of the board, Zuckerberg might choose to reject the supply, regardless of recommendation from board members to take the deal. Quick-forward to in the present day and Meta is a kind of trillion-dollar US firms.
Ek was a second-time founder when he began Spotify and, regardless of a reported billion-dollar supply to promote to Google in 2009, remained impartial; the corporate now has a market cap of $95bn. The plain level is that to finally be price $1tn, you have to not promote earlier for a quantity smaller than that.
This story illustrates the significance of a mission-focused founder, however not promoting may also be resulting from sheer incompetence from an acquirer. In 1998, Google’s founders tried to promote their firm to Yahoo for $1mn, Yahoo refused they usually saved constructing. Later, in 2002, Yahoo realised the worth of Google, provided $3bn, Google stated they’d promote for $5bn, Yahoo balked once more and 22 years later Alphabet is price greater than $2tn and owns DeepMind.
Dutch funds firm Adyen didn’t promote and is now price $46bn, Sensible is now price $11.4bn and Arm Holdings is the UK’s most precious expertise firm, price $143bn, however solely as a result of an tried acquisition by Nvidia in 2020 was blocked. Are you able to even think about the extent of dominance Nvidia would have in the present day if it owned Arm too?
Nice firms take time. ASML, the Dutch chip tools maker, is now price over $275bn, however has been persistently tackling its mission since 1984. Nvidia is a $3.4tn firm in the present day, however in 2010, when it was 17 years previous, it was valued at lower than $10bn. If Europe needs a real tech big, it should require steely dedication from founders and traders to not promote and hold constructing.
Europe, get up tall
Whereas Europe is but to provide its first trillion-dollar tech firm, that’s not the primary intention of the sport. To provide itself the perfect probability of making a kind of actually iconic firms, it should create as many $100bn firms similar to Spotify as attainable.
Issues must occur urgently as time is operating out to remain within the race. Europe should now construct these outstanding automobiles of scientific progress and financial development — not solely to develop the tech business, however to energy its nations to be extra affluent as a complete. If it does, we might quickly be residing in a world powered by European-built nuclear fusion energy vegetation or fixing a few of science’s most advanced issues with quantum computer systems which were developed in London or Munich.
This isn’t nearly rising the tech business for people who work in it: it’s about making a extra affluent and resilient society with extra wealth to pay for Europe’s public companies.
The following branches of the tech tree have the potential to actually profit humanity and there’s no motive they will’t be grown in Europe. Regulation isn’t the core downside — the hot button is to cherish the position of skilled founders, rejoice once they fund the riskiest and most necessary tech, cease promoting essentially the most valuable firms to US acquirers and switch an already highly effective innovation engine right into a harder-edged ambition to maintain scaling in Europe.
It’s time for Europe to face up tall.
Ian Hogarth is a founding companion on the enterprise capital fund Plural and chair of the UK’s AI Security Institute. He has spent his profession founding and investing in expertise start-ups
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