The global AI landscape is rapidly evolving, with distinct trends emerging in different areas. While the United States maintains a clear lead in developing large-scale artificial intelligence models, Europe is gaining significant ground in building innovative applications powered by these models.
This nuanced picture emerges from Accel’s 2025 Globalscape report, which examines the burgeoning AI and cloud market. Accel, a venture capital firm with investments in both European startups Lovable (a “vibe-coding” platform) and Synthesia (an enterprise video creation tool powered by AI), highlights this shift in its analysis.
European and Israeli companies developing cloud and AI applications have secured 66 cents for every dollar raised by their American counterparts so far in 2023. This represents a dramatic increase compared to a decade ago when European funding trailed the U.S. significantly.
Philippe Botteri, an Accel partner, attributes this surge to the flourishing ecosystem of tech-savvy founders and investors in Europe. Over the past ten years, they’ve cultivated a robust environment for building successful software companies, creating a positive feedback loop that drives further innovation.
Jonathan Userovici, a general partner at Paris-based venture capital firm Headline, echoes Botteri’s observation. He points out that European and Israeli entrepreneurs aren’t just contributing to the talent pool of large tech AI labs; they are also forging their own paths by establishing cutting-edge startups across diverse sectors like healthcare, legal services, manufacturing, and marketing.
Headline’s “AI Europe 100” report further supports this trend, identifying promising AI-native application startups in Europe with the potential to become industry leaders due to their rapid growth, strong teams, and advanced technology.
A key differentiator in this AI wave compared to previous ones is the accelerated pace of growth. These new AI-native applications are achieving $100 million in annual recurring revenue within a matter of years – a feat that traditionally took decades for software companies.
Botteri emphasizes their exceptional efficiency, noting that revenue per employee is at an unprecedented high point for software companies globally. While acknowledging this dynamic shift, he stresses that existing cloud software giants aren’t fading away. They are actively integrating AI capabilities into their products, blurring the lines between traditional and AI-powered offerings.
Doctolib, a company in Accel’s portfolio, exemplifies this integration by incorporating AI so deeply that it can be considered an AI-native business, even though it wasn’t initially built as one.
Despite Europe’s strides in applications, there are fewer homegrown contenders competing with large foundation models like those developed in the U.S. While Botteri doesn’t completely rule out future breakthroughs from smaller European model companies, he suggests this area might not be ripe for major disruptions at present.
However, a fierce competition is unfolding for investment opportunities in the AI application layer, despite lingering questions about market defensibility. Accel maintains that building product-centric offerings with rapid adoption still holds significant defensibility potential.
Lotan Levkowitz, managing partner at Israeli VC firm Grove Ventures, highlights another often overlooked area: data. He argues that companies specializing in proprietary data and creating sustainable data “flywheels” represent a compelling investment opportunity, as this aspect of AI is currently undervalued.
In essence, the global AI race has taken on a multi-faceted form. While large models remain firmly within the U.S. sphere of influence, Europe is carving its own path by excelling in the application layer and building innovative solutions across diverse industries. This dynamic landscape underscores the distributed nature of AI development, with different regions contributing unique strengths and shaping the future of this transformative technology.
