As geopolitical tensions and market volatility continue to pose significant challenges to Europe's economy, a new report suggests that deeptech could be the key to unlocking the continent's future autonomy. According to the 184-page report by venture firms Lakestar, Walden Catalyst, Dealroom, and the deeptech conference, Hello Tomorrow, deeptech is poised to become a critical pillar of Europe's security, defense, and future autonomy, particularly in relation to the US.

The report reveals that deeptech attracted €15 billion ($16.3 billion) in venture investments in 2024, with nearly one-third of all venture capital invested in Europe now going to deep tech. This significant investment is a testament to the growing importance of deeptech in Europe's innovation landscape. Furthermore, M&A activity in the space increased to $12.2 billion last year, indicating a strong appetite for deeptech startups.

However, the report also highlights some challenges facing European deeptech startups. Despite the growth in investments, European deeptech startups still rely heavily on the US for exits, with 50% of the growth capital raised coming from outside the continent. This reliance on US investments raises concerns about Europe's ability to maintain autonomy in the deeptech sector.

Lukas Leitner, co-author of the report and deeptech investor at Lakestar, believes that deeptech could be a hedge against normal "momentum investing" amongst venture capitalists. He emphasized that Europe needs to embrace the moment and recognize the potential of deeptech to drive future resilience for the continent. However, Leitner also acknowledged that the US has a "flywheel effect" in deeptech, which Europe's ecosystem is still struggling to replicate.

Arnaud de la Tour, CEO of Hello Tomorrow, pointed out that Europe has strong research institutions, engineering talent, and supportive public sentiment for deeptech. However, he emphasized that policy changes are necessary to foster a culture that supports taking risks and encourages innovation. De la Tour cited the example of open-source DeepSeek, which challenges the notion that compute-poor Europe would always lag in AI.

Leitner highlighted Europe's relative weakness in computing power, but noted that the continent has strengths in photonics computing, which offers major advantages in speed and efficiency. He emphasized that Europe is well-positioned to take advantage of its strengths in photonics, particularly in laser systems and fundamental research.

De la Tour also suggested that Europe could benefit from a brain-drain in the US, as science is defunded by the Trump administration. He noted that the National Science Foundation, which is the biggest supporter of founder-applied research in the US, has had its budget cut by half, leaving many scientists without jobs. This could present an opportunity for Europe to attract top talent and drive innovation in the deeptech sector.

In conclusion, the report highlights the significant potential of deeptech to drive Europe's future autonomy, despite the challenges and reliance on US investments. As geopolitical tensions continue to shape the global economy, it is clear that deeptech will play a critical role in shaping Europe's security, defense, and innovation landscape. With the right policy framework and support for innovation, Europe can unlock the full potential of deeptech and emerge as a leader in this critical sector.