As geopolitical tensions rise and market volatility persists, questions about Europe’s economic resilience continue to dominate discussions. With President Trump’s potential tariff policies looming over the continent, Europe is seeking new ways to strengthen its security, defense, and technological independence. A new 184-page report by venture firms Lakestar, Walden Catalyst, Dealroom, and deeptech conference Hello Tomorrow suggests that deeptech could be a crucial pillar for Europe’s future. In 2024 alone, deeptech startups secured €15 billion ($16.3 billion) in venture investments, making up nearly one-third of all venture capital investments in Europe.
The report also highlights the increasing mergers and acquisitions (M&A) activity in deeptech, which reached $12.2 billion in 2023. However, despite the sector’s growth, European deeptech startups still rely heavily on the U.S. for exits, and nearly 50% of their growth capital comes from outside Europe.
The report suggests that deeptech could serve as a hedge against short-term momentum investing among venture capitalists. Lukas Leitner, a deeptech investor at Lakestar and co-author of the report, emphasizes that Europe must seize this moment to build resilience through deeptech innovation.
Challenges in Scaling European Deeptech
While Europe boasts world-class research institutions, engineering talent, and strong public support for deeptech, its ecosystem remains underdeveloped compared to the U.S..
Leitner notes that, unlike the shallow tech scene—which benefits from second-time founders from companies like Revolut—deeptech lacks a comparable network of experienced entrepreneurs.
“There’s a flywheel effect in the U.S. deeptech ecosystem, but we don’t have that yet in Europe,” says Leitner. “We need policy changes to support risk-taking and long-term deeptech investment.”
Arnaud de la Tour, CEO of Hello Tomorrow, challenges the belief that Europe will always lag in AI due to its relative lack of computing power. He points to the emergence of open-source AI models like DeepSeek, which have reshaped industry expectations.
“It’s a huge opportunity for Europe because we have incredible AI talent,” de la Tour explains. “Many AI researchers are looking to return to Europe due to shifting geopolitical dynamics. However, we need the right policy framework to fully capitalize on this trend.”
Leitner adds that while Europe may not lead in general computing power, it excels in photonics computing, an area with significant advantages in speed and energy efficiency. “Europe has world-class photonics research, strong laser systems, and deep expertise in fundamental physics, which can give us a competitive edge in next-generation computing,” he says.
De la Tour also highlights a potential talent influx to Europe as a result of science funding cuts in the U.S. under the Trump administration.
“The National Science Foundation (NSF), the largest U.S. funder of applied research, has seen its budget slashed by 50%,” de la Tour notes. “Many brilliant scientists in the U.S. no longer have funding opportunities and may consider relocating to Europe.”
Europe’s Path to Leadership
The report concludes that deeptech presents an opportunity for Europe to reduce dependence on the U.S. and China, secure technological sovereignty, and drive long-term economic growth. However, achieving this requires:
- Stronger policy incentives to encourage deeptech innovation
- Increased funding from European investors to reduce reliance on foreign capital
- A cultural shift towards risk-taking and deeptech entrepreneurship
With record investment levels and growing global demand for deeptech solutions, Europe stands at a critical juncture. If policymakers and investors align their efforts, deeptech could redefine Europe’s technological future and economic security.
