The U.S. may still lead in large AI models, but Europe and Israel are closing the gap when it comes to AI applications. According to Accel’s 2025 Globalscape report, the regions have attracted 66% as much private funding as their U.S. counterparts this year, a sharp rise from a decade ago when Europe represented just one-tenth of American investment.
Accel partner Philippe Botteri credited this progress to the growing ecosystem of experienced founders and investors across Europe. “They really understand how to build great software companies, and that flywheel has been running for 10 years,” he said.
Jonathan Userovici, a general partner at Headline in Paris, echoed the sentiment, noting that European and Israeli founders are now blending top-tier technical skills with strong market expertise across industries like healthcare, manufacturing, and marketing.
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Headline’s AI Europe 100 report, released earlier this year, also highlighted startups showing exceptional growth velocity, team strength, and technological advancement, indicators of Europe’s potential to produce the next generation of AI leaders.
Accel’s findings reveal that today’s AI-native companies are scaling faster than ever, some reaching $100 million in annual recurring revenue within just a few years. “They’re growing faster than anything we’ve seen in the past,” Botteri said, emphasizing the unprecedented efficiency of these startups.
While established cloud players remain strong, with Accel’s Public Cloud Index up 25% year-over-year, many are evolving by adding agentic AI capabilities. Botteri cited Accel-backed Doctolib as an example of a company transitioning rapidly into the AI-native category.
However, Accel’s outlook for European foundation model developers, such as Mistral AI, remains cautious. Botteri noted that while opportunities still exist for smaller models, the space isn’t “a very target-rich environment.”
Meanwhile, competition among investors for promising AI application startups continues to heat up. Botteri believes defensibility still lies in creating product-driven solutions with rapid user adoption.
Lotan Levkowitz, managing partner at Grove Ventures in Israel, added that the true untapped opportunity might lie in data. “Most of the market today is chasing models, compute, and actions,” he said. “We strongly believe that companies focused on proprietary data and data flywheels are indeed very lucrative.”
