Good morning there,

You may remember a couple of weeks ago I asked readers to weigh in on the idea of a new European Silicon Valley. It’s a label that governments and investors have long been slapping on various cities or countries, eager to compare themselves to the California tech hub’s prominence — and it’s had a bit of a resurgence in the headlines recently. Today, I dig deeper into why the idea of a “European Silicon Valley” is problematic and sells the continent short. Read on for that (with a lot of reader comments). 

On that front, I loved hearing from you this time around — keep those insights coming, and feel free to reach out with any other musings, hot takes, rants or ideas. You can always reach me here. 

Elsewhere today, we take a look at fresh funding for French quantum VC Quantonation, General Catalyst’s latest European investment and how founders can get started with WhatsApp Marketing.

— Anne Sraders, senior reporter

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‘Outdated’, ‘Terrible comparison’ and ‘painfully cringe’: The issue with a ‘European Silicon Valley’

Nothing quite riles tech people up over here like saying some city or country in Europe is “the next Silicon Valley” — as I learned through the flood in my inbox over the last couple of weeks. After asking readers to share their thoughts on the comparison we often make on this side of the Atlantic to the Californian tech hub, a few words and phrases kept popping up: “outdated,” “terrible comparison,” and “painfully cringe”. 

While that may sound a tad dramatic, the reasoning behind why there is no European Silicon Valley — or, perhaps, why there shouldn’t be one — is pretty compelling. It sets the continent up for failure, while overlooking the European tech ecosystem’s strong points.  

As the European tech scene develops, it does feel like I’m hearing or reading the Silicon Valley comparison more these days. Recent articles claim Europe is ready to take on the tech hub, and government officials have been quick to tack on the Silicon Valley label. Bavaria minister president Markus Söder dubbed the region as the “California of Europe” earlier this year, while UK Chancellor Jeremy Hunt wishfully declared the UK is “on track to become the next Silicon Valley” last month. 

But this marketing ploy isn’t apt. Europe is still far behind the US in terms of funding, while most of the biggest and best-known tech companies in the world — including those leading the AI race like OpenAI — got their start in the Valley. “The obvious policy route is to encourage UK tech to exploit its own specialisms rather than be the next SV – because that simply can’t work,” argues Des Beattie, a UK-based tech consultant. “It’s a fool’s errand to attempt to be the next Google, so why is this [the] government’s policy position?” 

Silicon Valley has a unique set of components that’s helped it develop over decades into the world’s tech epicentre — including the establishment of Stanford University as a pipeline for tech founders, the prominence of semiconductor companies and research and new wealth moving into the area long ago. Although Europe boasts rising university spinout hubs like the Technical University of Munich in Germany and startup hubs like SETsquared in the UK, these are far newer and far more distributed around the continent. 

There’s also a cultural element that’s impossible to ignore. As an American having lived and breathed US work culture, I can certainly say there’s a different mentality — a constant (and dare I say, toxic) grind mentality — that Europe cannot, and should not, try to mimic. William Ramstein, VC associate at the corporate VC arm of Romande Energie, puts it well: “People always seem to focus on the peripheral view that the good is isolated from the bad — that the greatness of Silicon Valley comes at no cost. This is a huge fallacy. If we want to bring the culture I grew up in [in San Francisco to] Europe, we would then need to import everything bad too.”

The Silicon Valley label is not only inappropriate but also unhelpful — and it perhaps shouldn’t be something Europeans strive for. 

“The UK and Europe shouldn’t try to emulate Silicon Valley, but start to become more self-confident in unlocking our own ecosystem strengths and building our European Valley,” Rob Lacher, founding partner of German VC Visionaries Club, said in an email. He points out that as we’re in a bigger shift from consumer internet to B2B companies, "this is the time for Europe to take a leading role in shaping global category leaders in B2B. The DNA of Europe's economy are industrial world market leaders, most of them built on legacy technology with the potential to be either disrupted or enabled by new digital technologies.”

Andreas Schmidt, cofounder and managing director of Berlin-based angel investing group Springboard Health Angels, points out that the German ecosystem has unique advantages: “Munich has been good in adding a unique flavour of tradition and deeptech; Berlin’s ‘poor but sexy’ appeal catches the lifestyle of digital startup entrepreneurs. We have what it takes in Germany to build ‘uniquely German entrepreneurship rooted in Germany and build for the world’,” he says. “Let's ban the ‘Silicon Valley of XYZ term’ forever.” Meanwhile, Matthias Friese, founding partner of German logistics company builder XPRESS Ventures, points to the “untapped potential” of established family-owned companies with expertise in sectors like material science, manufacturing, chemistry, pharma and process engineering. And Lacher notes that Munich and Paris are good examples of strong "high-tech clusters" with local big startups like Celonis, Personio and Mistral.

The European tech ecosystem is growing fast, and a handful of big startups are getting huge US VC cheques — from France’s AI hotshot Mistral to defence tech Helsing in Germany. Meanwhile, a (controversial) report covered by Sifted last year revealed that European VC has been outperforming US venture in recent years. European startups are also becoming more global: “We are now witnessing comparable ‘Silicon Valley’-style startups in Europe, and it's a positive development,” Guillaume Meulle, managing partner at French VC XAnge, notes. “A genuine European ecosystem is forming with bridges between major hubs.” 

In areas like climate, where Europe's positioned itself as a leader in the energy transition, “supportive policy from governments and a general consumer awareness across Europe are a unique strength of our region,” argues Abhishek Lahoti, head of platform at Geneva and London-based investment firm Highland Europe. That allows startups and investors “to be leaders and draw the comparisons from others, removing the need to ‘recreate’ the Valley,” he says.

Overall, I think Mauro Battellini, cofounder of startup PR firm Black Unicorn PR, puts it well: “Deep down, everyone knows becoming Silicon Valley won't happen. But the idea of one day achieving its impact, at least in one dimension or level, [becoming] the best ecosystem at one of the verticals, can propel the ecosystem to punch higher than [it] otherwise would.” 

And there I wonder: what should the European tech ecosystem look like in an ideal world? If it’s not a new Silicon Valley, what is it? 

Readers, I’d love to hear your take and what you’d add to the conversation. How will Europe achieve its full potential? What positives or negatives do you see about the tech ecosystem or work culture in Europe? What’s missing? Send me a line.

— Anne Sraders, senior reporter

💸 Revolut and Spotify-backer Lakestar has closed $600m (€552m) to invest in European companies in deeptech, AI, healthcare, digitalisation and fintech. 

• The capital will be split across two funds: $280m for an early-stage fund for seed and Series A investments and $320m for Series B rounds and above. The early-stage fund is the VC’s fourth, while the growth fund is the firm’s second. 

• Lakestar, which has offices in Berlin, Zurich and London, last raised in 2020 when it secured $735m to invest across an early stage and growth stage fund, and the strategy — of backing European founders from seed to post-Series B — is the same this time. 

🇪🇸 Spanish HR platform Factorial has signed an "isolated" debt deal with US VC firm General Catalyst (GC), which will see the investor pump €80m into the business — the company’s CEO says this isn’t a “funding round”, and represents a new way for later-stage companies to finance their growth.

💰 French quantum VC Quantonation has closed the first €70m of a new €200m fund dedicated to early-stage startups building applications in quantum computing, sensing and communications. The investor, which has backed some notable European quantum computing startups like Pasqal, Quandela and Multiverse Computing, will target companies at pre-seed and seed stages in Europe, North America and Asia, with tickets ranging from €200k-€4m.

• As the quantum computing sector matures, the new fund is expected to back fewer startups building hardware and focus instead on businesses developing industrial applications for the technology. 
• These are likely to include molecular simulation in pharmaceuticals and chemistry, optimisation in finance or logistics and the acceleration of machine learning.

📞 How to get started with WhatsApp Marketing.

🔥 AI race heats up as OpenAI, Google and Mistral release new models (The Guardian)

🇫🇷 Why France’s one-time $15bn tech champion needs state aid. (Bloomberg)

Looking for UK and Ireland’s top startups?

We’ve ranked the fastest-growing companies across both the UK and Irish ecosystems reinventing medicine, finance, autonomous driving, data analysis and more. Who’s leading the charge? 

Copenhagen-based Reshape Biotech, which helps R&D teams automate lab experiments that require visual inspections with its vertically-integrated lab robots, raised $20m in Series A funding. Astanor Ventures led the round and was joined by investors including Y Combinator, R7, ACME and 21stBio.

Munich, Germany-based Proxima Fusion, which is developing fusion power plants using stellarator fusion reactors, raised €20m in seed funding. Redalpine led the round and was joined by investors including DeepTech & Climate Fonds, Bayern Kapital, the Max Planck Foundation, Plural, UVC Partners, High-Tech Gründerfonds, Wilbe and Visionaries Club.

London-based Pactio, a private equity deal management platform, raised $14m in Series A funding. EQT Ventures led the round. Madrid-based TaxDown, which automates income tax filings by calculating regional deductions owed to users, raised €5m in funding. 4Founders Capital led the round and was joined by investors including Base10, JME Ventures, Abac Nest, and ENISA.

Amsterdam-based Kepler Vision Technologies, which uses computer vision and AI software that supports patient care and monitoring in healthcare settings, raised €1.5m in funding from ROM InWest.

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