Is Deeptech Europe's Key to Autonomy from the US?

Is Deeptech Europe’s Answer to Geopolitical Autonomy?

Amidst rising geopolitical tensions and uncertainty in the global markets, Europe is at a crossroads where its future autonomy, especially from U.S. influences, could hinge on deeptech innovation. A new report has illuminated how deeptech—technological advancements rooted in substantial scientific and engineering challenges—can bolster Europe's security and economic resilience.

Deep Investment Fueled by Ambition

According to a recent report co-authored by top venture firms including Lakestar and Walden Catalyst, deeptech attracted an impressive €15 billion (about $16.3 billion) in venture funding in 2024. This amount represents approximately one-third of all venture capital invested in Europe, highlighting a significant shift towards deeptech as a priority sector. Furthermore, mergers and acquisitions (M&A) activities within deeptech saw a jump to $12.2 billion in the past year.

Challenges in Achieving True Autonomy

Despite these positive changes, Europe's deeptech landscape remains dependent on U.S. markets for exits, as noted by Lukas Leitner, a co-author of the report. Over half of the growth capital funneled into these European startups comes from external sources. While Europe enjoys robust research infrastructure and engineering talent, a cultural shift towards risk-taking in investment is necessary to cultivate a thriving deeptech ecosystem.

Opportunities to Leverage AI and Computing Strengths

The potential for Europe to pivot from a reliance on superficial tech solutions to deeptech alternatives is currently embodied in innovations such as the open-source AI tool DeepSeek. As Arnaud de la Tour from Hello Tomorrow emphasized, Europe’s AI talent pool remains strong, especially as many talented individuals are considering relocating back to Europe in light of shifting political landscapes. However, critical policy frameworks must be established to unlock this potential fully.

Photonics Computing: A European Advantage?

Leitner suggested that Europe’s challenges with computing power can be counterbalanced by advancements in photonic computing, an area where Europe boasts significant expertise. This technology offers superior speed and efficiency, which could propel Europe ahead in the global tech race.

The Brain Drain: Could It Be Europe’s Gain?

De la Tour further noted that the current defunding of scientific research in the U.S. presents a unique opportunity for Europe. The National Science Foundation (NSF) has seen its budget slashed, disenfranchising many scientists who are now seeking new opportunities. If Europe can develop the right environments and structures, they could harness this brain drain to fortify their deeptech initiatives.

Measuring the Impact: Deeptech Investment Returns

Beyond mere importance for strategic autonomy, deeptech investments are proving to be financially fruitful. The McKinsey report reveals that since 2003, deeptech has consistently outperformed traditional tech sectors, achieving a superior net internal rate of return (IRR) of 16 percent compared to 10 percent for conventional tech.

Building a Resilient Ecosystem

For Europe to capture the benefits of deeptech fully, a multifaceted approach is required. This involves enhancing collaboration between VCs, corporations, universities, and government entities. A clear strategy and a supportive policy framework that encourages high-risk ventures will be pivotal in shaping Europe's deeptech narrative.

As Europe collectively redefines its industry priorities amidst geopolitical shifts, the transition to a robust deeptech sector may well serve as a catalyst for independence and innovation. The potential is immense, but it requires unified action and substantial investment in nurturing this emerging sector.

Conclusion: A Call to Action for European Leaders

The call for European leaders is clear: to recognize the immense potential of deeptech in not only driving economic growth but securing national and regional autonomy. The ongoing investments and innovations in this field present a robust framework for the continent's future. To remain competitive and resilient, steps must be taken now to foster the deeptech ecosystem across Europe.