photonics-Europe’s core pillars are thriving, according to venture capital (VC) firm Atomico’s newly released State of European Tech Report 2024. Talent, capital, and ambition continue to drive this transformation, with $1B+ companies now a feature of almost every European economy. Funding is driving this shift in a positive direction: $426B has been invested since 2015, a tenfold increase. In 2024 alone, more money was raised than during the decade leading up to 2014.But the report also notes that while these resources encouraged expansive growth, we’ve reached a tipping point where investing is slowing—and it creates a wide funding gap that threatens Europe’s overall tech growth. Atomico notes: “Over the past decade, Europe underfunded its growth companies to the tune of $375B, which still doesn’t come close to the trillions invested in the U.S.” It’s a huge difference.
If you factor in the current economic woes faced by Germany and France and the pending impact of proposed U.S. tariffs, we’re looking at the potential for a significant stall in Europe’s tech market.
Past meets present
If history tells us anything, it’s that the market will rise to the challenge. Reflecting back over the past 10 years, Atomico points out that the most significant tech gains were made by three countries: the United Kingdom, Germany, and France. Combined, these countries brought in the most money, the highest number of billion-dollar companies, and largest number of people working in tech.
Today’s landscape is undergoing changes and smaller powerhouses are emerging across Europe. For instance, according to an analysis of the Atomico report from IO+, the European average compound aggregate growth rate (CAGR) for the past decade is 13%. Smaller countries are significantly outpacing this rate, with Croatia registering a growth rate of 75%, and Czechia 42%. It signifies more growth opportunities, with an increased emphasis on technology across Europe.
Photonics solution
To achieve it, Europe must identify winning technologies that speak to VC funding to continue this momentum and remain competitive. With a vibrant photonics market, Europe has the opportunity to leverage photonics solutions to propel the tech industry forward. Photonics offers opportunities within a wide variety of highly attractive funding areas, including sustainability and artificial intelligence (AI) and machine learning (ML), as well as semiconductors.
In Atomico’s research, when asked with an open-ended unprompted question to name the company they thought was emblematic of Europe’s growth during the past 10 years, survey respondents repeatedly referenced semiconductor firms ASML and Arm, alongside Mistral, an AI firm founded in 2023.
To make photonics a central piece of the funding equation, as I said back in February 2024, Europe needs a new investment strategy to attract and drive photonics R&D as global competition mounts. A just-released report from the European technology platform Photonics21 speaks to this challenge and highlights variances in funding between Europe and the U.S. and its impact. The report notes that R&D spending accounts for 3.4% of the U.S. gross domestic product (GDP), which far exceeds the Organisation for Economic Co-operation and Development’s (an international organization headquartered in Paris) average of 2.7%.
Europe urgently needs a new investment strategy to enhance photonics R&D and stay competitive in the global market. According to a just-released report by Photonics21, there is a significant disparity in funding between Europe and the U.S., with R&D spending accounting for 3.4% of the U.S. GDP, surpassing the OECD average of 2.7%. To bolster Europe’s tech roster, it is crucial to address this funding gap and prioritize photonics innovation.