Europe can still win in artificial intelligence despite US dominance, says Niklas Zennström

Niklas Zennström, one of Europe’s most successful tech entrepreneurs and investors, believes that start-ups on this continent can still succeed in artificial intelligence despite a huge lack of funding compared to American competitors.

European start-ups can thrive by developing applications that are built on artificial intelligence platforms led by American companies such as OpenAI or Google, Zennström he told the Financial Times.

“Think about what happened with mobile and the cloud: there are several cloud providers in the world, they enable thousands and thousands of businesses,” he said in an interview. “It’s not like everyone needs to be a great linguistic role model. . . You can create value as an application provider.”

The industry’s leading voice’s comments come as European policymakers and investors grow concerned that the US is pulling ahead of the region in AI.

Many worry that Europe risks once again being left behind by deep-pocketed Silicon Valley groups in transformative new technology, with huge implications for the region’s competitiveness and national security.

Europe’s tech industry has created hundreds of “unicorns” — private companies valued at more than $1 billion — and narrowed the early-stage funding gap with the U.S., “regardless of whether Europe has many critical [tech] infrastructure that is European,” the Skype co-founder told the FT.

“European companies can build on top [AI platforms] whether they are from France or the US,” he said.

Confidence among European entrepreneurs in the region’s tech prospects fell to a new low in 2024, according to The state of European technology report by Atomic, a venture company founded by a Swedish entrepreneur in 2006. The latest survey found that 40 percent of founders feel “less optimistic” about the future of European technology than a year ago.

Still, while admitting that 2024 was “very tough” for start-ups and investors, with capital invested in European tech expected to fall for the third year in a row, Zennström believes pessimism about the region’s outlook is overblown.

“It is a European problem [just] talk about the problem,” he said. “There’s so much exciting data that shows we’re actually catching up [with the US]we’re doing pretty well.”

Despite these advances in Europe’s tech industry in general, the transatlantic investment gap in AI startups is huge.

AND report venture firm Accel, published in October, showed that US investment in generative artificial intelligence reached nearly $48 billion in 2023 and 2024 combined, more than five times that of Europe and Israel, where funding in the sector was a total of about 9 billion dollars.

Much of the US total is driven by start-ups developing so-called “foundational” models, the expensive and complex AI systems that underpin general-purpose chatbots and media creation services such as OpenAI GPT.

Europe has a handful of start-ups working on foundational models, including those based in Paris mistral and Germany’s Black Forest Labs.

However, US OpenAI, Anthropic and xAI have collectively raised tens of billions of dollars more than their European rivals, while Big Tech groups Microsoft, Google, Amazon and Meta have also investing heavily in their own large language models.

Atomico, which has raised $1.24 billion in new funding in 2024, has backed European AI start-ups that build more specialized models around specific applications, including Corti, a Danish maker of digital health assistants, and Germany’s DeepL, which offers machine tools translation.

“It’s not just five LLM companies,” said Zennström. “There’s also so much that’s being created in terms of value.”

But he admitted that “the jury is still out” on whether Europe can build competitive general-purpose LLMs in the long term.

“What you need for artificial intelligence is, you need a lot of money, you need a lot of data and you need distribution. So it’s natural for big tech companies to have a competitive advantage,” said Zennström. “The reality is that the rich are getting richer.”