Deep Tech and European Autonomy: A Path Forward?

Europe's Pursuit of Autonomy Through Deep Tech

Current geopolitical instability and fluctuating market conditions have brought into focus Europe’s capacity to navigate upcoming challenges. Concerns are particularly heightened given the potential for increased tariffs from the United States under President Trump’s administration.

However, a comprehensive new report suggests that advancements in deep tech are strategically positioned to become a crucial foundation for Europe’s security, defense capabilities, and long-term independence, specifically from the U.S.

Investment and Growth in European Deep Tech

In 2024, deep tech ventures attracted €15 billion (equivalent to $16.3 billion) in venture capital investments. This data is based on a 184-page report collaboratively produced by Lakestar, Walden Catalyst, Dealroom, and the Hello Tomorrow deep tech conference.

The report further revealed that approximately one-third of all venture capital currently invested within Europe is now directed towards deep tech initiatives.

Mergers and acquisitions within this sector saw a substantial increase, reaching $12.2 billion last year. Despite this growth, the report highlights a continued reliance of European deep tech startups on the U.S. market for successful exits.

Moreover, 50% of the growth capital secured by these startups originates from sources outside of the European continent.

Deep Tech as a Stabilizing Force

The report also posits that deep tech investments can serve as a counterbalance to more speculative “momentum investing” trends commonly observed among venture capitalists.

Lukas Leitner, a deep tech investor at Lakestar and co-author of the report, explained to TechCrunch that while geopolitical tensions present considerable obstacles, Europe must proactively seize the opportunity. He believes deep tech holds the potential to unlock future resilience for the continent.

Challenges and Opportunities

Despite the promising outlook, significant hurdles remain. Leitner noted that the U.S. benefits from a strong “flywheel effect” within the deep tech landscape, while Europe’s ecosystem is still developing.

“A robust flywheel effect exists within the broader ‘shallow’ tech sector in Europe, evidenced by numerous repeat founders emerging from companies like Revolut. However, this momentum hasn’t yet fully translated to the deep tech space,” he stated.

He further emphasized that while Europe possesses strong research institutions, skilled engineering talent, and favorable public opinion towards deep tech, policy adjustments are necessary to cultivate a risk-tolerant environment.

Leveraging Talent and Innovation

Arnaud de la Tour, CEO of Hello Tomorrow, challenged the perception that Europe would perpetually lag behind in AI due to limited computing resources. He cited the emergence of open-source DeepSeek as a significant opportunity for the continent.

“Europe boasts exceptional AI talent, and many are considering returning due to the evolving geopolitical climate. However, a supportive policy framework is essential to fully realize this potential,” de la Tour explained.

Leitner highlighted Europe’s strength in photonics computing, which offers substantial advantages in terms of speed and efficiency, as a counterbalance to its relative weakness in overall computing power.

“Europe excels in photonics due to its advanced laser systems and strong foundational research in this field,” he added.

Potential Gains from U.S. Science Funding Cuts

De la Tour also suggested that Europe could benefit from a potential “brain drain” from the U.S., resulting from budget cuts to scientific funding under the Trump administration.

“The National Science Foundation, a primary funder of applied research in the U.S., has experienced a 50% budget reduction. Consequently, many talented scientists are facing job losses and may seek opportunities in Europe,” he concluded.