Can Deeptech Propel Europe Towards Independence from US Influence?

In the face of geopolitical tensions and unpredictable markets, Europe is at a critical juncture regarding its economic resilience, particularly as former President Trump continues to impose tariffs on the continent. A recent report suggests that deeptech may emerge as a vital component of Europe’s security, defense, and autonomy from the United States.

Deeptech Investment Growth in Europe

According to a comprehensive 184-page report by venture firms Lakestar, Walden Catalyst, Dealroom, and the deeptech conference Hello Tomorrow, deeptech attracted €15 billion (approximately $16.3 billion) in venture investments in 2024. Notably, nearly one-third of all venture capital investments in Europe are now funneled into deeptech.

Mergers and Acquisitions Trends

The report highlights a significant increase in M&A activity within the deeptech sector, which reached $12.2 billion last year. However, it also reveals that many European deeptech startups continue to depend on the U.S. for successful exits, with 50% of the growth capital raised coming from outside the continent.

Deeptech as a Strategic Hedge

Despite the challenges, deeptech is increasingly viewed as a strategic alternative to traditional “momentum investing” among venture capitalists. Lukas Leitner, co-author of the report and deeptech investor at Lakestar, emphasized the importance of embracing the moment to foster resilience in Europe.

Challenges and Opportunities Ahead

Leitner identifies several obstacles, including the U.S.’s established “flywheel effect” in deeptech, while noting that Europe’s ecosystem remains relatively immature. He stated:

• Europe has strong research institutions and engineering talent.
• Supportive public sentiment exists for deeptech initiatives.
• Policy changes are necessary to encourage risk-taking and innovation.

AI and Photonics Computing in Europe

Arnaud de la Tour, CEO of Hello Tomorrow, addressed the misconception that Europe is lagging in AI due to limited computational resources. He pointed to the emergence of open-source platforms like DeepSeek as significant opportunities for Europe:

“We have great AI talent, and many are looking to return to Europe because of the current geopolitical landscape. However, a supportive policy framework is essential to unlock our potential.”

Strengths in Photonics Computing

Leitner also highlighted Europe’s advantages in photonics computing, which offers exceptional speed and efficiency. He remarked:

“We excel in photonics due to our advanced laser systems and robust fundamental research in this area.”

Capitalizing on the U.S. Brain Drain

De la Tour noted that Europe could benefit from a potential brain drain in the U.S. due to cuts in science funding by the previous administration. He mentioned:

“The National Science Foundation, a key supporter of applied research in the U.S., has seen its budget slashed by half. Many talented scientists are now seeking opportunities abroad, and Europe stands to gain from this shift.”

For more insights on venture investments and deeptech trends, visit Dealroom or explore our deep tech innovation page.