Despite a flat year for venture funding in Europe, AI startups are bucking the trend, attracting billions of dollars in investment. According to VC firm Balderton Capital and Dealroom, 25% of VC funding into the region – approximately $13.7 billion – went to AI startups this year, compared to 15% four years ago.

This significant increase in funding has led to the creation of several new unicorns, such as Poolside and Wayve, and has resulted in European AI companies doubling in value in just four years, reaching $508 billion. This category now represents nearly 15% of the entire tech sector in value, up from 12% three years ago.

For Balderton Capital general partner James Wise, this trend counters what he sees as a "relatively negative narrative" around Europe. "You can raise hundreds of millions of euros, even billions of euros, as a very early-stage AI company if you've got a breakthrough technology in Europe, just as you can in the U.S.," Wise said.

Wise believes that there's funding available to AI startups, whether at early or later stages, although it may not always come from Europe itself. American AI companies also see Europe as a talent pool to tap into. "We're still probably a derivative of the U.S. market, we're still reliant on it, but it's not like nothing's happening here. It's actually a really buoyant ecosystem," Wise told TechCrunch.

The growth of European AI startups is not limited to funding. Dealroom's findings show that 349,000 people were employed by AI companies in Europe this year, a 168% increase since 2020. This may sound surprising, as many AI teams are on the smaller side; but for Wise, this is in line with the thesis of his recent book, "Startup Century: Why we're all becoming entrepreneurs."

Wise believes that the rise of AI companies will lead to a rise in hundreds of small, very productive companies, rather than one large, medium productive company. Additionally, there's a snowball effect, as AI companies make others more productive. "In our CTO survey, 93% of the companies we work with have said that generative AI tools have significantly changed their workflow in the last year," Wise said.

Among these, some said their engineering teams are now twice as productive, while others see an impact on other functions – averaging out to 20% savings in operating costs. This increased productivity will likely lead to further adoption of AI, which Wise believes will continue to increase.

However, Wise and his colleagues now think that "there's no longer an AI sector." This would potentially make similar data pointless next year. Despite this, the growth of European AI startups is a promising trend, and one that will likely continue to shape the tech industry in the years to come.

In conclusion, the thriving AI startup ecosystem in Europe is a bright spot in an otherwise flat year for venture funding. With billions of dollars in investment and hundreds of thousands of people employed, European AI startups are defying the trend and proving that there's still plenty of innovation happening in the region.