As Europe faces a series of geopolitical challenges, including rising tariffs and shifting global markets, the continent is increasingly looking toward innovative solutions to bolster its security and autonomy. Among these, deeptech—the advanced technologies that include AI, photonics, and quantum computing—emerges as a critical tool for ensuring Europe’s resilience against external pressures, particularly from the United States. A recent comprehensive report underscores the potential of deeptech to play a central role in Europe’s future, highlighting its growing importance in the region’s strategic landscape.
Investment Trends in Deeptech
In 2024, deeptech companies in Europe attracted approximately €15 billion ($16.3 billion) in venture capital investments, according to a report from leading venture capital firms, including Lakestar and Walden Catalyst, in collaboration with Dealroom and the deeptech conference, Hello Tomorrow. This marks a significant milestone, as deeptech now accounts for nearly one-third of all venture capital funding in Europe.
The sector has also seen a surge in mergers and acquisitions (M&A) activities, totaling $12.2 billion in 2024. However, European deeptech startups continue to face challenges, particularly their reliance on U.S. markets for successful exits. Nearly half of the growth capital raised by European deeptech firms comes from outside the region, underscoring the need for stronger local investment ecosystems.
Navigating Challenges and Opportunities
Despite these challenges, Lukas Leitner, a deeptech investor at Lakestar and co-author of the report, sees significant opportunities for Europe to capitalize on its strengths. He emphasized that deeptech could play a pivotal role in building long-term resilience for the region by fostering innovation and reducing dependence on external powers.
Leitner also pointed out that while the United States benefits from a robust “flywheel effect” in deeptech, Europe is still in the early stages of developing its ecosystem in this space. While there have been notable successes in tech sectors outside of deeptech, similar success stories within the deeptech field remain limited. This presents both an opportunity and a challenge for Europe, as it looks to nurture its emerging deeptech industry.
Recommendations for Policy Change
To unlock the full potential of deeptech, Leitner advocates for policy changes that encourage risk-taking and foster a culture of innovation within Europe. While the continent boasts world-class research institutions and a strong engineering workforce, he argues that more systemic advancements are needed to support the growth of deeptech companies.
Key to this growth will be policies that enable deeptech startups to thrive in Europe, such as better access to funding, support for commercializing research, and incentives to keep talent within the region. Without these critical policy changes, Europe risks falling behind in the global race for technological leadership.
AI and the Deeptech Landscape
Arnaud de la Tour, CEO of Hello Tomorrow, also emphasized the need for strategic frameworks to support the development of AI within deeptech. He pointed to the success of open-source platforms like DeepSeek as evidence that Europe has the potential to challenge global perceptions of its AI capabilities. With geopolitical shifts prompting many talented individuals to return to Europe, de la Tour believes that the right policies could enable the continent to harness this growing pool of talent.
Leitner also highlighted Europe’s strengths in photonics computing, a field that excels in both speed and energy efficiency. “We’re really good in Europe with photonics,” he stated, referencing the region’s expertise in foundational research. While Europe may face limitations in computing power compared to global competitors, its strength in photonics offers a unique advantage in the deeptech race.
Capitalizing on Shifts in the U.S. Scientific Community
De la Tour noted another opportunity for Europe in the current geopolitical landscape: the defunding of scientific initiatives in the United States. With significant budget cuts to the National Science Foundation, many U.S.-based scientists may seek new opportunities abroad. Europe, with its strong academic institutions and innovation-friendly environment, could be well-positioned to attract this talent, further bolstering its deeptech sector.
Conclusion
The integration of deeptech into Europe’s strategic framework holds the potential to enhance not only the continent’s technological competitiveness but also its resilience to external pressures. By investing in supportive policies and capitalizing on existing talent, Europe can solidify its position as a global leader in the next wave of technological advancements. Deeptech offers a promising path forward, ensuring Europe’s autonomy, fostering innovation, and helping the region remain competitive in a rapidly evolving global landscape.
