Europe❤️Startups: Why Politicians should spend more time with AI and Blockchain entrepreneurs

February 16, 2019

Europe is a policy innovator, especially when it comes to new technologies. When doing so, it is important to consider where these new technologies come from. For deep tech, such as AI or Blockchain, startups often are the birthplace of the latest trends. By creating an Intergroup on Startups and Scaleups, the European Parliament and entrepreneurs can work together to shape Europe’s innovative future.

The birth of applications leveraging Blockchain and Artificial Intelligence (AI) have taken Europe by storm. With new applications popping up daily, the only certainty we have is that there is no certainty about which role exactly these technologies will play in the future. Blockchain applications are already reshaping sectors, from banking over energy, transport and healthcare, establishing a new layer of trust online.

Similarly, AI is rapidly transforming matters of everyday life, from simple translations to driving assistants or medical diagnosis. According to PwC, AI will contribute up to $15.7 trillion to the global economy in 2030, with a $2.5 trillion gain in Europe. With strong global competition, how can policy makers boost AI in Europe? Which role do startups play? Can they be the driving force of the old continent to lead in new technologies?

How startups are pushing ‘AI made in Europe’

Europe has a growing and thriving AI startup scene. Dealroom counts 1.150 European companies with proprietary AI technology. A number that tripled in less than a year. Furthermore, around 2.000 startups in Europe are using AI in the EU, according to crunchbase. London is a hotspot for AI startups, but all over Europe startups are the early adopters and drivers of deep tech.

Machine Learning and AI are the most popular deep tech applications among Polish startups. Over one third of startups there are developing a product using at least one form of deep tech. In Germany, almost 60% of startups’ business models have been influenced by AI. In Austria, AI and Big Data are considered the top technologies of the future within the startup scene. Startup communities overwhelmingly invite policy makers to get involved: the majority wishes for policy makers to better understand their needs. Like no other area AI risks to be an underestimated trend, concludes the Austrian Startup Monitor.

Furthermore, AI “continues to dominate the deep tech landscape in terms of capital invested” with almost $2 billion invested in 2018, according to the State of European Tech report. In December 2018, Bristol-based AI chipmaker Graphcore reached unicorn status. Other startups like Bloomsbury or Spektral, achieved big exits, continuing the proven trend that companies acquire AI knowledge through startups. Importantly, these exits help to foster a new generation of startups and entrepreneurs building more innovative ecosystems.

Moreover, Europe is leading in AI research. Yet, according to a recent study by Elsevier, its position is being challenged by China’s rapid growth. Talent is not the only aspect but usually the main driver of AI success. For many startups it may be the biggest bottleneck all together. Europe “appears to be losing academic AI talent” while China currently enjoys a “positive migratory inflow of AI researchers.” What are the incentives for talented AI researchers to move?

Blockchain startups are transforming the world from Europe

When it comes to Blockchain, the distributed ledger technology behind it has the unique opportunity to provide trust online. So much so, that it has even been dubbed “the trust machine” by The Economist. “I see blockchain as a game changer and I want Europe to be at the forefront of its development”, Mariya Gabriel, Commissioner for the Digital Economy, said in early 2018. Emma McClarkin, rapporteur on a recently passed report on Blockchain in international trade, said: “Startups bring new technologies such as blockchain forward and Europe can immensely profit from their progress.” One of the reasons why she’s of the opinion a close dialogue between the European Union should have a closer dialogue with startup founders. “I support an intergroup on startups and scaleups so we have a platform to discuss how regulators could best support blockchain startups.”

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The EU Blockchain Observatory and Forum found an “extremely vibrant blockchain startup scene” in Europe. It’s this startup scene that is turning Lithuania into a ‘Blockchain nation’. In 2017, Blockchain startups in Lithuania attracted €500 million in funding through initial coin offerings (ICOs), which is an indicator of investment in blockchain. This puts Lithuania in the 3rd spot worldwide, passed only by the US and China. Lithuania’s ‘open arms’ approach to regulation is often cited as a reason for that.

Lithuanian MEP Antanas Guoga, a serial entrepreneur, Blockchain expert and the founder of Blockchain Centre Vilnius, is convinced that blockchain is a driving force behind Lithuania’s progress in tech: “Blockchain is here to stay. Let’s not stop it. It depends on us, how we want to use the potential of opportunities that DLT technologies offer in Europe. Let’s be open to innovation and new solutions. Let’s talk to the startups that are creating Blockchain technology in Europe. That is why I also support an intergroup in the next EP term.”

Nearby, Estonia is also making big waves as a global Blockchain hub. The country’s e-Estonia initiative and attractive regulatory environment make it a go-to location for Blockchain startups. Why are smaller countries like Lithuania, Estonia or Malta leading the technological change? The answer may be lying in the countries’ attitude which can be compared to a startup: ‘Smaller countries are generally more agile and nimble, have shorter feedback loops between startups and regulators, and changes can be implemented quicker than in larger countries’, says Kristjan Kangro, CEO of Change Bank.

Giving the startup attitude access to European politics

What works on a national level, could bring success to the European level. Having a closer dialogue between startups and European politicians would be another step towards Europe’s ambitious goals to be at the forefront of tech developments. Early adopters, such as MEPs Emma McClarkin and Antanas Gouga support the idea of creating an Intergroup on Startups and Scaleups in the European Parliament and hope that others follow their lead.

2019 will be a decisive moment in mapping the future of these technologies in Europe. Innovators are developing new and groundbreaking ideas every day. Considering the reach of Blockchain and AI, policy makers need to ensure that regulation stays relevant without stifling ideas. With thousands of startups in the space, regulators need to look here first. An Intergroup on Startups and Scaleups in the European Parliament can make sure visionary innovators have a seat at the table.