The global race to level AI applications continues

The US is well ahead of Europe in the race for big AI models — but the picture is different for the application layer, with emerging top-tiers like Lovable and Synthesia. This is the conclusion of the global VC firm Accel 2025 Globalscape report, which focuses on the AI ​​and cloud market.

Surprisingly, cloud and AI applications in Europe and Israel have attracted 66% equal private funding than their US counterparts in 2025 so far. “When we started this report 10 years ago, Europe was one-tenth of the US,” Accel partner Philippe Botteri told TechCrunch.

For Botteri, the ratio has grown because the region has developed an ecosystem of founders and investors “who really understand how to build great software companies, and that flywheel has been going for 10 years.”

It’s also a reminder that Europeans and Israelis can staff more Big Tech AI labs — an observation shared by Jonathan Userovici, Headline’s Paris-based general partner. “In every industry, from legal and healthcare to manufacturing and marketing, we see founders who combine world-class technical talent with deep market expertise,” Userovici told TechCrunch.

This is in line with his findings AI Europe 100 Report It was published by Headline earlier this year, in which it curated AI startups across Europe that it believes have “the potential to become Europe’s winners of tomorrow” thanks to a combination of development speed, team and technological advancement.

Development speed is also one of the key differences Accel sees between this wave of AI and previous ones. A new line of native AI applications reached $100 million in annual recurring revenue within a few years, a feat that took decades.

“They’re growing faster than anything we’ve seen before, and they’re doing so with an incredible level of efficiency, which means revenue per person is the highest we’ve ever seen for software companies. And that’s on both sides of the [Atlantic] ocean,” Botteri said.

However, he noted that “the existing cloud software companies will not go away.” Accel’s Public Cloud index is up 25% year-over-year, and these players are “adding all the agent capabilities to their products.” As for private companies, some are incorporating AI so quickly that they can be considered native to AI, he argued, naming Accel’s holding company Doctolib as an example.

While Europe has held out high hopes for domestic model companies like Mistral AI, Accel’s outlook for European model companies is less sunny. But Botteri didn’t dismiss the space entirely as a place for future leaders to emerge, as could still happen for smaller models. He only said, “it’s not a very target-rich environment.”

Instead, VCs are actively competing for investment opportunities at the AI ​​application level, despite repeated questions about defensibility. For Botteri, there is still defensible potential in building a product-centric offering with rapid adoption.

Another false dichotomy is thinking that there is no place outside of models and applications. “We see that most of the market today is chasing models, calculations and actions, and we believe that data is undervalued right now,” said Lotan Levkowitz, managing director at Israeli VC firm Grove Ventures. “We strongly believe that companies that focus on proprietary data and data shuttles are very profitable indeed.”