AI, especially creative AI, is the big story in technology in 2024, whether you like it or not.
With the billions of dollars it has raised and the popularity of its services like ChatGPT, OpenAI may have gotten most of the notice and money so far. But a new study from top VC Accel and the analysts at Dealroom says that a new wave of people who want to make their mark is coming up in Europe and Israel.
Europe and Israel together usually bring in about 45% of all venture capital funding each year. But when it comes to AI, that number drops to less than half, and for creative AI it drops even more. That’s a sign that Europe and Israel are behind the times in the market. To put it another way, it means that as the region comes up, there will be a lot of interesting things happen in the coming months and years.
People are now looking for the next big thing, and costs might not be as high as they are in the U.S. It’s interesting that Accel partner Harry Nelis told me that his company’s work to evaluate all the new generative AI startups in the region helped make this study possible. When they were trying to decide what to pay, they learned the following:
The Most GenAI Startups Have Been Founded In London
Out of the 221 startups that Dealroom and Accel looked at, 27%, or almost one-third of the group, were founded in London.
With 13%, Tel Aviv came in second, Berlin came in third, and Amsterdam came in fifth. It’s interesting that Paris, which has been talked about for a while as a place where AI is being developed quickly, came in right in the middle of the rankings, at 10%.
However, those Parisian companies are very strong.
GenAI Startups That Were Started In France Are Making The Most Money
To date, French startups that say they work in the field of creative AI have raised $2.29 billion. This is more than any other country in Europe and more than Israel. Mistral AI raised $640 million earlier this month, on top of more than $500 million it had raised before that. A few weeks ago, “H” raised an amazing $220 million in a seed round. At the same time, Poolside, one of the original players, is said to be in the middle of raising a large round. The company moved its offices from the U.S. to Paris last August.
Hugging Face, an open-source repository for machine learning models, raised $235 million in August 2023 and is still going strong. Another interesting AI startup in Paris is Kyutai, a new research organization with hundreds of millions of euros to make waves in open-source AI models.
What Makes Some Places Do So Much Better Than Others?
France has raised $2.29 billion, which is almost as much as the next three countries put together. The U.K. has raised $1.15 billion for generative AI startups, with Stability AI, Synthesia, and PolyAI being some of the biggest names in the area. Israel has raised $1.04 billion, with startups like AI21 and Run:ai, which Nvidia recently bought, getting most of that money. And Germany has raised $636 million, with Aleph Alpha’s $500 million round last year making up most of that total.
After that, other countries in the region have received less than $160 million each, and sometimes much less. For example, some European countries have received total funding in the low seven-figure range.
According to Nelis, the numbers show where some of the best schools are located. These schools produce a lot of technical ability, and big tech companies build their own operations to hire these people.
Nelis said, “You can see how important real, long-term investment in education is by seeing how many founders you get in Paris.” “The same is true for schools like Cambridge, Oxford, and UCL that send kids to London.”
But the step from universities to owners isn’t a quick one. For many, the middle stage has been working in big tech companies, which set up shop to make hiring easier.
Nelis said, “Universities are clearly very important for attracting hyperscalers.” He used the example of Facebook/Meta opening AI research labs in Paris early on and Google later doing the same thing, having already built up an operation with DeepMind in both London and Paris.
A Big Part Of The Story Is “Founder Factories,” Which Are Large Tech Companies.
While startups may seem like the most important places for AI research, big tech is really what keeps the fires going.
Looking at the very end of the GenAI startup list, about a quarter of them were started by people who used to work at Alphabet (DeepMind or Google), Apple, Amazon, Meta, or Microsoft. Let’s call this group MAAMA.
The farther up you go, the clubby it gets. 60% of the founders of the top 10 startups are from one of the MAAMAs.
As a matter of fact, Google stands out as a clear AI startup feeder, with more people working there than at some of the world’s best universities put together.
Also Read: Generative Ai is Coming to Healthcare, but Not Everyone is Happy About It
Hello, ma’am! It’s not a great message for strangers and anomalies, but that too is likely to change and grow as the field matures and grows.
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