2023 European Deep Tech Report

Great excitement has been generated by quantum computing, the first glimpse of an artificial general intelligence, or new protein design solutions. Artificial Intelligence alone could add another $13 trillion to the global economy over the next decade, according to McKinsey & Company.

Meanwhile, there’s also scepticism, not about these innovations, but about the term ‘Deep Tech’. Firstly, it’s rather vague. Secondly, it implies a too narrow focus on cool technologies for their own sake, while losing sight of commercialisation & competitiveness.

The EU is heavily investing in strengthening Europe’s Deep Tech ecosystem. But there is a worry that this effort is insufficiently supported by efforts to make Europe more competitive and entrepreneurial.

This report aims to better establish:

- What Deep Tech actually is

- How Europe’s ecosystem works

- What it’s lacking

- How it can compete and what desirable policy goals might be.

Europe is home to many iconic consumer tech companies – Skype, Spotify and Klarna to name a few. But only a handful of Deep Tech global category leaders have emerged from Europe so far (...). We believe the European ecosystem contains many of the ingredients required to create the next generation of global category leaders in Deep Tech: namely, world class academia and technical talent, a growing number of experienced operators, smart early-stage funding, and strong public support. To make it happen, more late-stage, Deep Tech focused capital should be directed to this asset class. We are fully committed to playing our part in the growth of the European Deep Tech ecosystem and could not be more excited about the potential ahead.
Young Sohn, Founding Managing Partner WCV.

Deep Tech currently stands out as one of the most resilient categories in venture capital, with approximately $15 billion year-to-date in 2023, nearly on par with 2022 figures, in stark contrast to the -70% decline observed in the Fintech sector.

Deep tech destinations

The report from data provider Dealroom, and VC investors Lakestar and Walden Catalyst, shows that emerging Deep Tech hubs are beginning to surface in Europe. Between 2018 and 2023, London attracted $12.8 billion, Stockholm secured $10.3 billion (largely propelled by megarounds), Paris accumulated $7.7 billion, Munich obtained $4.9 billion, and Oxford & Cambridge jointly garnered $9 billion. These hubs carry the potential to transform into centers of excellence and innovation powerhouses for Europe. Deep Tech companies in these focal points are poised to be more globally competitive.

In 2023, The UK ($3.4bn), France ($3.2bn), and Sweden ($3.2bn) have received most Deep Tech funding across Europe. 

Strong fundamentals for European deep tech

Europe is particular well-positioned to capitalize on these future technologies. Europe is home to 6 of the top 20 universities globally for computer science, well-educated talent (~1.5x the number of STEM graduates vs. the US), and large-scale government and public support (e.g. $1bn NATO fund, SPRIND, JEDI).

Artificial Intelligence & the future of computing

Investment into Novel Artificial Intelligence startups in Europe has grown +50% compared to 2022, to a record $1.3B in 2023. 

Investment into startups working on the Future of Compute is up 10% in 2023 compared to 2022. Again bucking a significant counter trend in global venture capital. This included largest rounds for AR/VR startup Aledia ($120m Series D) & quantum startup Pasqal (100m Series B).

2023 also saw a notable European computing exit for chipmaker ARM, a ~$54B IPO.

Yoram Wijngaarde, Founder & CEO of Dealroom said: “Over the last decade Europe has been emerging as a major international startup ecosystem. But right now the deck is being reshuffled on global entrepreneurship, due to the rise of deep tech and AI. It has been a watershed year for innovation. Europe has the tools to lead in the next wave of innovation, but there is no time to lose.”

Nicolas Autret, Partner at Walden Catalyst said:  “With AI models getting bigger, Moore’s Law coming to an end, and pressing societal considerations, a paradigm shift is needed in the way computing infrastructure is designed, built and operated. This is what the Future of Compute is all about: inventing the architectures and technologies of tomorrow that will continue to drive innovation and bring a new era of prosperity to the masses.”

Steven Jacobs, Partner and CPO at Lakestar: “Now is the time for Europe to cultivate its technology epicentres, where pioneers converge, collide, and catalyse the future of technology born from Europe.”

Please download the full report to deep dive into the European deep tech landscape.