The brand new EU report Funding the AI Financial system by the StepUp StartUps Consortium explores Europe’s quick increasing AI funding panorama and makes suggestions to strengthen its capital base, company engagement and ecosystem connectivity.
AI applied sciences’ substantial capital wants are redefining the worldwide funding panorama. Over the previous decade, AI has advanced from a distinct segment expertise right into a central focus for world buyers, accounting for practically 50% of whole world VC funding within the first half of 2025.
The EU has made sturdy progress, with AI’s share of whole European enterprise capital rising to 27%, reflecting a rising recognition of AI’s strategic worth and Europe’s sturdy pool of AI expertise.
The brand new report exhibits that Europe’s AI funding ecosystem nonetheless faces main challenges regardless of progress lately. Whereas whole enterprise exercise is increasing, the size, construction, and distribution of AI funding stay fragmented and modest in comparison with key world opponents.
Between 2020 and 2025, the US devoted 34% of its €1.33 trillion in VC funding to AI, whereas Europe allotted 18% of €252 billion, underscoring the necessity to strengthen each its funding base and the share of AI funding inside it.
The dimensions problem
Whereas EU buyers present nearly all of funding for EU AI startups in early funding rounds (beneath €10 million), their participation falls to 26% in AI offers above €25 million.
Most late-stage capital comes from the US and UK. Whereas worldwide funding helps the EU’s AI startups broaden, it additionally raises considerations about Europe’s capacity to retain management and worth over its most precious AI property and be sure that innovation advantages keep within the EU.
Company funding: a chance to be seized
A second problem lies within the restricted AI investments of established European corporates together with their Company Enterprise Capital (CVC) funds. European corporates have a 25% share of VC capital invested within the EU however solely 15% in AI. This hole between Europe’s industrial base and its AI innovators is a chance for European CVC funds to grab.
Enhanced investments of European corporates may additionally speed up the adoption of AI in industrial core sectors – reminiscent of CleanTech, mobility, and superior manufacturing – the place Europe is a world chief. This is able to additionally underpin the EU’s Apply AI technique.
A fragmented ecosystem
Geographically, over two-thirds of AI enterprise capital is captured by simply ten metropolitan hubs, led by Paris (€8 billion between 2020-2025), Stockholm, and Berlin. AI funding can also be reaching rising ecosystems in Central and Jap Europe, together with Poland, Lithuania, and Romania.
However, areas outdoors of capitals and main regional hubs appeal to lower than 1% of EU AI VC investments.
A extra widespread distribution and related panorama would assist be sure that innovation advantages are shared throughout areas and that Europe’s numerous swimming pools and totally different specialisation areas are totally mobilised for AI competitiveness.
Key Suggestions
To spice up competitiveness and safe its function within the world AI economic system, the report highlights three units of strategic actions for Europe:
- Scale up funding capability: Strengthen Europe’s capacity to fund large-scale AI ventures by growing an AI-oriented sub-vehicle within the lately introduced Scaleup Europe Fund and mobilising institutional buyers to assist late-stage progress firms delivering European AI fashions and purposes.
- Join and strengthen ecosystems: Hyperlink Europe’s main AI hubs with rising areas by way of ‘AI corridors’, streamline circumstances for AI startup progress and launch initiatives that appeal to world AI ventures and expertise to the EU.
- Mobilise company capital: Encourage better participation from established European firms by way of incentives, co-investment schemes, and platforms that join corporates and startups.
Learn the total report right here.
This AI funding targeted evaluation might be complemented by the subsequent report within the ‘StepUp StartUps’ collection, Untapped Alternatives for European Enterprise Capital: Pension funds and Sovereign Wealth funds, whose publication is predicted in mid-November 2025.
