Niklas Zennström, one of Europe’s most successful tech entrepreneurs and investors, believes the continent’s start-ups can still succeed in artificial intelligence despite their huge funding gap with US rivals.
European start-ups can thrive by developing applications that are built on top of AI platforms run by US-based companies such as OpenAI or Google, Zennström told the Financial Times.
“Think what happened with mobile and the cloud: there are a few cloud providers in the world, they enable thousands and thousands of businesses,” he said in an interview. “It’s not like everyone needs to be a large language model . . . You can create value as an application provider.”
The comments from a leading industry voice come as European policymakers and investors grow anxious that the US is pulling ahead of the region in AI.
Many worry that Europe once again risks being left behind by deep-pocketed groups in Silicon Valley in a transformational new technology, with huge implications for the region’s competitiveness and national security.
The European tech industry has created hundreds of “unicorns” — private companies valued at more than $1bn — and narrowed the gap in early-stage funding with the US “regardless of whether Europe has a lot of critical [tech] infrastructure that is European”, the Skype co-founder told the FT.
“European companies can build on top of [AI platforms] whether they are from France or from the US,” he said.
Confidence among Europe’s entrepreneurs in the region’s tech prospects hit a new low in 2024, according to the State of European Tech report by Atomico, the venture firm founded by the Swedish entrepreneur in 2006. Its latest survey found that 40 per cent of founders felt “less optimistic” about the future of European tech than the year before.
Yet while conceding 2024 has been “very hard” for start-ups and investors, with capital invested in European tech expected to fall for a third successive year, Zennström believes pessimism about the region’s prospects is exaggerated.
“It’s a European problem to [just] talk about the problem,” he said. “There is so much exciting data that shows we are actually catching up [with the US], we are doing pretty well.”
Despite that progress in the European tech industry at large, the transatlantic investment gap in AI start-ups in particular is stark.
A report by venture firm Accel, published in October, found that US investment into generative AI reached almost $48bn in 2023 and 2024 combined, more than five times as much as in Europe and Israel, where funding in the sector totalled about $9bn.
Much of the US total is driven by start-ups developing so-called “foundation” models, the costly and complex AI systems underpinning general-purpose chatbots and media creation services, such as OpenAI’s GPT.
Europe has a handful of start-ups working on foundation models, including Paris-based Mistral and Germany’s Black Forest Labs.
However, US-based OpenAI, Anthropic and xAI, have together raised tens of billions of dollars more than their European rivals, while Big Tech groups Microsoft, Google, Amazon and Meta are also investing heavily in their own large language models.
Atomico, which raised $1.24bn in new funds in 2024, has backed European AI start-ups that are building more specialised models around particular applications, including Corti, a Danish maker of digital assistants for healthcare, and Germany’s DeepL, which offers machine translation tools.
“It’s not just all about five LLM companies,” Zennström said. “There’s also so much else that’s being created in terms of value.”
But he admitted the “jury is still out” on whether Europe can build competitive general-purpose LLMs in the long term.
“What you need for AI is, you need a lot of money, you need a lot of data and you need distribution. So it’s a natural thing that the Big Tech companies have a competitive advantage,” Zennström said. “The reality is the rich get richer.”
