Deeptech/Analysis/ Europe’s deeptech challenge: turning brilliant brains into breakthrough tech Here are the key questions Europe needs to answer before it can spawn the next wave of innovation that matters. By Marie Mawad in Paris 22 February 2021 \Deeptech This German soldier built a battlefield robot company — while on the army’s payroll By Miriam Partington in Berlin 31 March 2023 Deeptech/Analysis/ Europe’s deeptech challenge: turning brilliant brains into breakthrough tech Here are the key questions Europe needs to answer before it can spawn the next wave of innovation that matters. By Marie Mawad in Paris 22 February 2021 Scale Up Europe In partnership with Scale Up Europe This article is part of Scale Up Europe, an initiative with 150+ innovators brainstorming how Europe can propel its startups to the next level. To frame the debates, Sifted is exploring the region’s most pressing and strategic questions in a series of stories. Read the full report here. Germany, Switzerland, France, and other countries across Europe are spawning some of the world’s most sought-after innovation talent — but that hasn’t translated into the kinds of economic growth the region would like to achieve. Nor has it generated significant strategic advantages and positions of technology leadership on the global stage. That’s not to say Europe hasn’t demonstrated its abilities, and value-creation potential, in the fields of science and technology. Engineering and maths education at Ecole Polytechnique in France, ETH Zurich in Switzerland, or Cambridge in the UK competes with offerings from MIT or Stanford in the US, at the top of global rankings. Paris-Saclay University is on par with Princeton as the world’s best-rated mathematics school, according to the Academic Ranking of World Universities. Graduates from these and other European establishments have gone on to spearhead some of the world’s most advanced research programmes in artificial intelligence, quantum computing and human-machine interactions, as well as developments on the future of health in the field of biotech. That has added to the aura of Europe’s scientists. In turn, behemoths from Facebook to Amazon set up laboratories in Paris, London and other cities to tap local talent pools to research the latest cutting edge developments, in fields from artificial intelligence to drone delivery. Investors meanwhile are increasingly scouting Europe for entrepreneurial opportunities. That includes the region’s deeptech startup ecosystem, and projects emerging out of scientific and engineering challenges. Startups from BioNtech, one of the first to develop a vaccine against Covid-19, to Innovafeed and Ynsect, which are working on insect-based replacements for animal food, and Kalray, which makes a new type of semiconductors, show the array of some of Europe’s successes in recent years. The problem Still, that hasn’t been enough for Europe to come out on top of the technological revolution of the past two decades. The region has fallen behind with the emergence of the digital and data economy. The gap has widened since the financial crisis of 2006 and the global recession that followed. The US’ recovery was both stronger and more stable than the EU’s, leading up to a $5.9tn GDP gap between the two economies by 2020. That was thanks in great part to the success of technology companies — and that’s where Europe lags behind. At about 28% of the top 85% of large and mid cap US stocks (and 27% of the S&P 500), technology is the largest segment of the US’ most valuable companies. None of the UK, France or Germany reach even half of this proportion, with roughly 1%, 7%, and 13% respectively of their 85% largest stocks being tech. What’s most alarming is that Europe has lost some of its previous tech glory. It has dropped out of the mobile phones market altogether, and its semiconductor leaders have been dwarfed in size by global counterparts. For failing to keep up with developing new service offerings for consumers, it has also seen its national telecoms champions turned into dumb pipes for transporting Google and Netflix’s data. And while Europe has had its share of global digital successes carried by a new generation of entrepreneurs —at companies like Spotify, Skype and Criteo to name a few— it is no comparison for the US and China, which have propelled an overwhelming number of technology upstarts into the realm of global mammoths, some of which are now worth trillions of dollars. As further comparison, Dealroom calculated the entire private European deeptech ecosystem is worth some $150bn. Still, it’s encouraging to see the current trend of investments in European innovation and startups, including in the deeptech space. Since 2016, cumulative investment into deeptech companies in Europe has surpassed $36b. It was about $8.9b in 2020, down from $10.2b in 2019, according to Atomico. But while investments have grown significantly over recent years, European deeptech still needs to catch up to the kinds of money that has gone into the US and China. Those two countries combined grabbed about 81% of global private investments going to deep tech companies over the course of the 2015 to 2018 period, according to a report by BCG and Hello Tomorrow. What’s at stake Europe is now faced with admitting defeat in the first battle, but gearing up to win the war. In other words, the region needs to get its assets aligned to fight for its place on the podium for the next generation of breakthrough innovation. Artificial intelligence, quantum computing and cybersecurity are among the fields that governments including France and the UK have listed as priorities for the coming years. Covid-19 has also intensified the spotlight on biotech, while mounting pressure to tackle climate change is also a key target for scientists and innovators. Developments in these fields will be instrumental on several levels: economic, but also political and social. Economically, these technologies translate into already high-growth markets that are gearing up to attract huge investments around the world. Artificial intelligence alone is predicted to create more value by 2030 than the combined yearly GDP of Europe’s three biggest economies, according to analysis by PWC. But beyond even that, new technologies are likely to transform the way we work, live, and interact with each other in tomorrow’s societies. Roles from phone customer service representatives to medical researchers will morph to include fully robotised or technology-supported tasks in the next job market revolution. Additionally, technology’s always growing pervasiveness in the lives of people and companies will make it even more crucial to the sovereignty of governments and the freedoms of citizens. That’s part of what has pushed Europe to implement creative tech regulation in recent years, including on data privacy — and it’s what is likely to drive innovation in the next round. Finally, and perhaps most importantly, entrepreneurs argue deeptech could offer Europe the answers it needs to face some of the biggest challenges of our time: from Covid-19 to climate change. As state money goes to stimulating European economies and billions of euros into shifting to greener societies, deep tech is bound to benefit and, in turn, help governments get the most bang for their buck. That’s what’s at stake for Europe, as it battles to gain an edge in technological innovation. Impact goal As part of the Scale Up Europe initiative, participants will be in charge of defining how European resources, including top-notch local talent, can be reorganised and mobilised to achieve bigger returns for the region. Part of that is ensuring Europe deploys its competitive advantages better — from high quality low cost state education, to university research labs and tax breaks, to the region’s plurality. Another part relates to promoting entrepreneurship in the scientific community, and making investing in deeptech startups more appealing to a broader pool of financiers. Key themes for discussion Here are a few of the themes that will be discussed by participants. Business in science: how to avoid the “science tunnel” and doing science for science’s sake, to turn more fundamental research, homegrown ideas and educated brain power into industrial products and solutions at scale. Science in business: how to better raise awareness about deeptech innovation in the business world and facilitate connections and conversations across different spaces. Diverse groups: how to promote and facilitate entrepreneurship in the scientific community, but also bring a diverse set of profiles together — great scientists, with others who know marketing, finance and business. Deeptech investors: how to expand and grow the deeptech investor pool to attract more financing to this space specifically. Deeptech as an answer to Europe’s big challenges: how Europe can leverage regional and national recovery schemes to further point the deeptech ecosystem in the direction of environmental, societal and industrial challenges. European coordination and synergies: how to better coordinate efforts across Europe to take on major scientific and technological challenges together. What is Scale Up Europe? Scale-Up Europe gathers a select group of 150+ of Europe’s leading tech founders, investors, researchers, corporate CEOs and government officials around the same goal: accelerate the rise of global tech leaders born in Europe, in the service of both progress and technological sovereignty. Initiated by President Emmanuel Macron, the Scale-Up Europe initiative focuses on four key drivers: talent, investment, startup-corporate collaboration and deeptech. The founding members will kick off a collective debate on these themes on the 4th of March and continue the discussion in the coming months through workshops and open consultation. Together, the tech community will define an actionable strategy and roadmap to be presented to European heads of state later this year on scaling the tech ecosystem to the next level. Ecosystem partners for this initiative include Sifted, as well as La French Tech, Viva Technology, Hello Tomorrow and Station F. Further resources For more on Scale Up Europe, read our introduction and visit the event page. For more on deeptech, read Sifted’s European deeptech coverage. For in-depth analysis about European startups, read the latest Sifted Intelligence report, focused on the French tech ecosystem. Related Articles How to handle a pivot By Ofri Ben-Porat Click here to read more Heart Aerospace hopes to build a plane even Greta Thunberg would fly on By Mimi Billing Click here to read more A better way to test for Covid-19? 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