Europe can’t succeed in IT without overcoming its low self-confidence

As relations between the US and Europe escalate, there is increasing talk every day about how Europe can build an impactful tech industry on its own and reduce its dependence on the US, both in the short and long term.

The discussions actually began after the Draghi report and cover everything from policy initiatives to concrete projects, large and small, to strengthen the European tech ecosystem, which is almost unanimously condemned as more or less hopeless.

One example is Project Europe, launched last week, in which 120 European tech entrepreneurs have joined forces to help young entrepreneurs between the ages of 18 and 25. The size of the fund is still quite modest, €10 million, but the idea is good because access to early capital is something that is highlighted as an obstacle by, among others, the European Investment Bank.

And of course there is a lot to do — not least on the regulatory front — for the EU to become a tech engine to be reckoned with.

But another thing Europe also needs to do is to overcome its extremely low self-confidence and remember that innovation and talent are also created here. We must identify what we have actually done and are doing well and then put some effort into trying to ensure that European technology and expertise stay here.

A clear example, and something that all of Europe has forgotten or refuses to acknowledge, is that the entire AI rally started in the EU. It was DeepMind that made the first breakthroughs that set the entire industry on fire — the founders even received the Nobel Prize — and DeepMind was started in London by British founders. This was pre-Brexit, so within the EU! 

What prevents DeepMind, which is still based in London, from being hailed as a European success story is of course that it took only four years before DeepMind was acquired by Google and it was with the US giant’s resources that the really big steps were taken.

That’s a big part of the problem here: Europe doesn’t really have the companies or finances to pick up and secure these kinds of super companies and genius founders.

Because who in Europe would have bought DeepMind? SAP? Ericsson? Some telecom operator, which are the closest “tech giants” we get here? We also have lots of large IT consulting companies, but they hardly have the know-how for something like that.

It is no coincidence that the Finnish AI hope Silo AI was bought by the American company AMD. There are few natural exit routes for startups and their investors in Europe other than being sold to the US or listed (preferably in the US). Do you even remember Peltarion, which was the first Swedish “AI company” to get hyped? They were bought by King, the company that makes Candy Crush. That’s a bit of the level we have to work with here.

I have met my fair share of enthusiastic entrepreneurs over the years and although many are truly passionate about their product and their companies, I would say that the common thread is that they want to build, grow, and make money. Preferably a lot of money. There is nothing strange about that, but if that development journey is not really offered in the local market, it’s clear that you secure yourself somewhere else, and the US has been the first choice. 

For example, look at two Swedes who are reaping success in the US right now, Ali Ghodsi whose Databricks is now valued at over US$62 billion, and Arvid Lunnemark whose Cursor has now reportedly reached a valuation of US$10 billion in a short time. What would have made these gentlemen stay and build their successful companies in Europe instead? Would it have been impossible?

It will be exciting to see if French Mistral AI sticks to the idea that it is not for sale and can continue its journey on its own (with the help of an IPO). It will also be interesting to keep an eye on the developments of Sana Labs and Lovable, to name two Swedish AI companies in different stages of growth.

A thriving tech ecosystem doesn’t happen overnight, but with deliberate policy changes and strengthened market conditions, it is certainly possible to get there in the future. In the short term, if we want to keep European companies and technology out of the hands of American giants, part of the solution will be to use government money or government-led initiatives to do so. We will see more strategic, tightly targeted support and proper investments, earmarked to secure important technologies and promising companies in Europe. 

There is money, both at the EU level and in individual EU countries; huge investments have been announced, although it is not yet clear exactly how the money will be used. But an interesting example of how it can be done is Canada’s decision to invest CA$240 million in AI gold nugget Cohere’s new data center construction to secure “Canada’s AI advantage” and AI services that are “Made-in-Canada.” 

It may not prevent a takeover, but it puts a clear hook on Cohere, anchored on Canadian soil.

[ See also: The IT sector is bringing down Europe all on its own ]