Mauro swapped Sardinia for Eindhoven and has been an IO+ editor for 3 years. As a GREEN+ expert, he covers the energy transition with data-driven stories.
OpenAI, Anthropic, and Google’s Gemini: the main AI players are all American. Yet Europe can still stand a chance in the race for novel AI, as the limits of large language models (LLMs) are starting to emerge.
Novel AI is an umbrella term for new approaches to AI that go beyond classic machine learning paradigms, such as empowering robots. Among these newcomers is Paris’ AMI Labs, which raised $1 billion for its real-world-oriented AI a few weeks ago.
In 2025, too, novel AI reached a new record in VC funding, according to Dealroom.co’s fifth edition of its European Deep Tech Report. The paper, produced in collaboration with venture capital (VC) firms Lakestar and Walden Catalyst, zooms in on European trends in deeptech—technology based on engineering or scientific breakthroughs.
The race is still on for the new wave of AI
Novel AI captured $3.4 billion in investments. Half of this money was invested in Mistral AI, a French AI company working on a general-purpose model that rivals OpenAI and Anthropic.
At the same time, there was a lot of activity in AI-driven engineering and world models, including the $300 million raised by image and video generation company Black Forest Labs. “The past few months saw an acceleration in this segment,” explained Dealroom.co’s head of research, Lorenzo Chiavarini, while presenting the report. In light of AMI Lab’s record-breaking fundraiser, the trend continues in 2026 as well.
According to the analysts, having European newcomers in the next wave of AI is critical. These new technologies move beyond chatbots and general-purpose use, targeting applications such as robotics and engineering.
London is home to the majority of the most active European companies active in Novel AI, including voice synthesis giant ElevenLabs, AI driving software company Wayve, and video generation platform Synthesia.
Europe has hopes for the future of computing
In parallel with AI, the report highlights “Future of Compute” as another emerging deeptech domain. This area, including quantum computing, photonic chips, and edge computing, saw funding double in 2025, reaching $2.5 billion.
Quantum computing companies, whether working on hardware, software, or the full stack, drove this funding surge. The $800 million raised by the British Quantinuum was the largest investment in this space in 2025.
At the time being, Europe is well-positioned in quantum computing, according to the report. Even when it comes to the ever-recurring comparison with the United States and China, the Old Continent has top researchers and controls a large share of the supply chain. Nevertheless, Jan Goetz, CEO of Finnish quantum computer manufacturer IQM, underlined the necessity to scale the best European companies in the segment with significant investments.
London and Paris are the future of compute hotspots, with 14 and 12 of the top startups active in the segment, respectively. In third place, it is an ex-aequo between Grenoble, Oxford, and Eindhoven. The Brainport capital is represented by Axelera AI, SMART Photonics, ONWARD Medical, EFFECT Photonics, SCIL Nanoimprint Solutions, and Morphotonics.
Deeptech as a flywheel
AI is undoubtedly the trend reshaping deeptech as a whole. Overall, “AI x deeptech” investments accounted for 50% of total deeptech funding in 2025, topping $10.2 billion. On the flip side, this sum is 12 times less than what US companies active in the segment received in 2025.
The report, as it happened in last year’s edition, sees deeptech as a key sector for the future of Europe. “All the raw ingredients—capital, market opportunity, and talent—are there to build the next-gen, successful deeptech companies,” said Chiavarini.
Clearly, deeptech companies face significant challenges by their nature. Proving the validity of a new technology is a long process, which might not even go as planned. Going through this journey means having money available to test that breakthrough.
Nevertheless, deeptech companies are the ones finding new solutions to the problems of our times, underlines Dealroom.co, either with more efficient computing tools or more sustainable energy storage solutions.
The great barrier of capital
Deeptech saw a 20% growth in VC funding last year, 4% shy of the 2021 peak. The sector now accounts for a third of all VC investment in Europe. While these signs are encouraging, capital remains one of the main barriers to address, according to the analysts.
While many opportunities to raise early-stage capital now exist, the real gap is for growth-stage capital—beyond $20 million. In fact, non-European investors, particularly from the US, are the ones stepping in to provide mega rounds. Consequently, when an exit occurs—when a company is acquired or goes public—American investors retain the most value.
To this end, the analysts urge action to strengthen Europe-based growth-stage capital to reduce dependence on foreign investors. The European Innovation Council (EIC) Scaleup Europe Fund, expected to be active in the coming months, is a step in this direction. Yet more is needed.
Analysts also suggested supporting hardware-heavy deeptech ventures with alternative financing tools. Relying solely on equity isn’t optimal for these businesses, which could benefit from early-stage credit products. Dedicated public-private facilities, with the European Investment Bank joining in, would be beneficial.
In addition, the paper calls for expanding the base of institutional investors, such as pension funds and insurance companies, to invest in deeptech. Strengthening public markets by proceeding with the long-awaited Capital Markets Union is another recommendation.
It is time to act
World-class researchers are here—the report also notes that 30% of the top universities in deeptech are European, and that there is a crop of emerging companies as well. It is now time to live up to the ambitions and invest more in deeptech. The question is whether Europe's institutions will move fast enough to keep pace with it.
The Commission’s flagship initiative for startups, the EU Inc., has been met with criticism by founders. Although some steps in the right direction have been made, the current proposal doesn’t address the fragmentation of the 27 member states, a drawback for European startups compared to American ones, for instance.
Europe can’t afford to waste another chance in tech.