Welcome to a new episode of the EUVC podcast, where our good friend Dan Bowyer from SuperSeed in a discussion with Andrew J. Scott, Founding Partner at 7percent Ventures, and Lomax Ward, General Partner at Outsized Ventures, to cover recent news and movements in the European tech landscape. 💬
Watch it here or add it to your episodes on Apple or Spotify 🎧 chapters for easy navigation available on the Spotify/Apple episode.
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✍️ Show notes
Impact of US Halting Aid to Ukraine on European Venture and the Startup Ecosystem
The potential halting of US aid to Ukraine could significantly reshape Europe's defense spending, with defense budgets expected to rise sharply in the coming years. The EU and UK defense budgets, currently around €400 billion, are set to increase to €500-600 billion. This shift will likely benefit startups working in defense-related industries, such as Helsing and other companies focused on dual-use technologies, including aerospace, robotics, health tech, and space. Furthermore, Turkey, with its large defense budget and strategic location, may become increasingly vital for European defense collaboration, potentially fostering growth in related startup and technology sectors.
Private capital is expected to flow into defense technology ventures, as defense-focused ETFs have seen substantial growth. This may lead to the emergence of new defense tech funds and an increase in government innovation grants aimed at bolstering this sector. As defense technology gains prominence, questions arise about its impact on other investment sectors like fintech, healthtech, and AI. With defense poised to become one of the major areas of venture capital, the landscape for European startups could see a shift towards these industries, offering new opportunities for innovation and investment.
Europe’s Rising Defense Spending and Its Impact on the Startup Ecosystem
Europe is set to significantly boost its defense spending, with projections indicating an increase to over €500 billion (including the UK). Germany's recent decision to lift its debt ceiling cap opens the door for more investment in defense, benefiting startups focused on defense technologies and dual-use innovations, such as aerospace, robotics, and health tech. Additionally, the European Union holds over €200 billion in frozen Russian assets, which could be redirected toward defense innovation. This creates an opportunity for defense startups to thrive in sectors like drone warfare and military procurement, as Europe seeks to close gaps in capabilities such as hypersonic missiles and independent satellite systems.
The defense sector’s long procurement cycles and limited number of buyers differentiate it from traditional startups, posing challenges but also opportunities for those focused on improving procurement efficiency and transparency. The European Defense Fund (EDF), with a budget of €8 billion for 2021-2027, and the increasing involvement of private funds in defense—investing over €5 billion last year—indicates a growing interest in this area. As NATO countries, especially those bordering Russia, contribute significantly to defense spending, startups in these regions could see increased investment opportunities. The growing defense sector, including ventures supported by figures like Eric Schmidt, presents a promising avenue for innovation and capital influx in Europe’s venture ecosystem.
Impact of Tariffs on European Venture and the Startup Ecosystem
The imposition of 25% tariffs on European products and services, especially targeting sectors like automotive, could significantly disrupt the European venture and startup ecosystem. If long-term and substantial, these tariffs would likely lead to inflation, higher interest rates, and increased market volatility, making equity investments and private markets less attractive. For many European startups, the US is a vital market, and these tariffs could make it more difficult to sell into the States. Consequently, some European startups may be forced to either relocate to the US or focus on local markets, which could present both challenges and opportunities for innovation and growth within Europe.
The US trade deficit with the EU, particularly in sectors such as aircraft, medical, and tech imports, exacerbates the tension, leading to potential supply chain disruptions and market shocks. While this creates challenges, it could also open up opportunities for European startups to capitalize on local demand or shift focus to the US despite the new barriers. For the UK, there's speculation around whether it will be exempt from these tariffs, potentially offering a "Brexit dividend" for UK startups, though this would depend on the broader political and economic context. The overall impact of these tariffs will not only affect European startups but also US startups and LPs investing in Europe, adding complexity to cross-border trade and investments.
Discovery of a New Part of the Immune System and Its Potential Impact on Antibiotics
Scientists have recently identified a new component of the immune system, which could have significant implications for combating communicable diseases and antibiotic resistance. This discovery opens up the potential for developing new antibiotics, which is crucial given the growing global concern over antibiotic-resistant infections. The newfound immune system mechanism could lead to innovative treatments and therapies, offering a fresh approach in the battle against diseases that are increasingly difficult to treat with existing antibiotics.
This breakthrough could pave the way for more targeted and effective treatments, potentially revolutionizing how infections are managed. For the health sector, particularly in the context of antibiotic resistance, the discovery represents a major step forward in finding sustainable solutions. The potential to unlock new antibiotics from this discovery could have profound implications for healthcare globally, highlighting the importance of ongoing research and development in immunology and infectious disease treatment.
AI-Enhanced Proteomics for Disease Treatment: A New Frontier in Medicine
A new collaborative initiative between the UK Biobank and 14 pharmaceutical companies is utilizing AI in proteomics to deepen our understanding of disease mechanisms and develop more precise treatments. By analyzing the protein data of 500,000 individuals, this project aims to connect protein levels with disease progression, opening doors for enhanced disease prediction and personalized medicine. The large-scale study could significantly advance our ability to tailor treatments to individuals based on their unique protein profiles, offering a new wave of possibilities in precision medicine.
This initiative builds on the advances made in genomics, which were driven by the dramatic reduction in sequencing costs over the past two decades. As we move from understanding the human genome to exploring the proteome—comprising 100,000 to 400,000 proteins—the next frontier in personalized treatment is emerging. Startups in this space, like Portal Biotech, are leading the way in applying AI to proteomics, potentially revolutionizing disease treatment. However, challenges remain, including the cost and scalability of measuring proteomics in blood, the integration of AI models, and the role of the NHS in implementing these advances. The UK has an opportunity to lead this transformation, supporting startups and leveraging its scientific infrastructure.
European Health Tech Investment Soars with AI Driving Growth
In 2024, European AI startups raised approximately $8 billion, representing 20% of all VC funding in the region. A significant portion of this investment is directed toward health tech, where AI’s transformative potential is becoming increasingly evident. Notable startups such as Neko Health, co-founded by Spotify's Daniel Ek, secured substantial funding, such as the $260 million Series B for its AI body scanning technology. This highlights the growing importance of AI in healthcare, as it promises to disrupt traditional methods of diagnosis, treatment, and care delivery. Overall, health tech funding in Europe reached a record high, with around $7 billion invested, marking a dramatic increase in the past decade.
Europe’s health tech landscape is showing impressive growth, driven by innovations that challenge established paradigms, such as tackling the rising costs of healthcare (often referred to as Eroom’s law). While companies like Babylon struggled, others like Basecamp Research and Ochre Bio are emerging as potential leaders. With a seven-fold growth in health tech investment over the past ten years, compared to the US's four-fold increase, Europe is positioning itself as a strong player in the global health tech market. As AI continues to unlock new capabilities, Europe needs to become more ambitious in fostering its health tech leaders to maintain this momentum and ensure long-term success in the space.
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