As Europe faces a myriad of geopolitical challenges, such as rising tariffs and fluctuating markets, the continent is exploring innovative solutions for bolstering its security and autonomy from external influences, particularly the United States. An in-depth report highlights the potential of deeptech to play a critical role in ensuring Europe’s resilience.

Investment Trends in Deeptech

In 2024, deeptech companies in Europe attracted approximately €15 billion (or $16.3 billion) in venture capital investments, according to a comprehensive report produced by notable venture capital firms including Lakestar and Walden Catalyst, alongside data from Dealroom and the deeptech conference, Hello Tomorrow. Remarkably, deeptech now accounts for nearly one-third of all venture capital funding in Europe.

Although mergers and acquisitions (M&A) activities within this sector surged to $12.2 billion last year, European startups face challenges, particularly in their reliance on U.S. markets for successful exits. Moreover, around 50% of growth capital raised by these startups originates from outside Europe.

Navigating Challenges and Opportunities

Lukas Leitner, a co-author of the report and deeptech investor at Lakestar, emphasized that despite the existing geopolitical hurdles, Europe has a unique opportunity to capitalize on its strengths. He noted that deeptech could be instrumental in building long-term resilience for the region.

Leitner also pointed out that while the United States displays a robust “flywheel effect” in deeptech, Europe is still developing its ecosystem in this space. He remarked on the noticeable success of second-time founders emerging from other tech sectors, yet similar success stories are not yet prevalent in deeptech.

Recommendations for Policy Change

To harness the potential of deeptech, Leitner calls for changes in policy that promote a culture of risk-taking within Europe. He believes that while the continent showcases excellent research institutions and a strong engineering workforce, systemic advancements are necessary to foster innovation.

AI and the Deeptech Landscape

Arnaud de la Tour, CEO of Hello Tomorrow, highlighted the need for strategic frameworks to support the development of AI within deeptech. He mentioned the emergence of open-source platforms like DeepSeek as evidence that Europe can challenge perceptions of its capabilities in AI. With a wealth of available talent looking to return to Europe amidst ongoing geopolitical shifts, the right policies could unlock significant potential.

In terms of technological advantages, however, Leitner pointed out that Europe’s limitations in computing power can be complemented by its expertise in photonics computing, which excels in both speed and efficiency. “We’re really good in Europe with photonics,” he stated, underscoring the continent’s strengths in foundational research in this area.

Capitalizing on Shifts in the U.S. Scientific Community

De la Tour also noted that ongoing defunding of scientific initiatives in the United States poses an opportunity for Europe. With significant cuts to the National Science Foundation’s budget, many talented scientists may find themselves seeking opportunities abroad, particularly in Europe, where their contributions could be highly valued.