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If you track the global AI race, you’d be forgiven for thinking that there are only two nations fighting for leadership. But China and the United States are far from the only technology markets with developed startup and incumbent cohorts, strong venture capital activity, and capital markets able to translate early-stage ideas into public companies.

The AI race is part of a larger deep technology competition that includes things like chip fabrication, another flashpoint often discussed as a U.S-China issue. The reality is that many countries are betting on deep tech — what The Exchange considers investment into complex technology that may lack immediate commercial application, or is focused on laying the groundwork for other, more market-friendly products.

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We’re curious if Europe can form a third, independent center or group of hubs for deep tech investment, IP and company creation that’s separate from China and the United States.

We’re approaching the question in two parts: Today, we’re analyzing Angular Ventures’ report on VC investment into enterprise and deep tech in Europe and Israel. Then, early next week, we’ll collect commentary on the question from leading European investors and founders to better understand the on-the-ground perspective.

Rising totals

To start, a few caveats. The Angular Ventures report includes data from Israel, an active deep tech market. And what the venture firm has put together is inclusive of some enterprise investment (SaaS, fintech, e-commerce and so forth). So we’re going to need to do some parsing, but no data set is perfect, and what Angular published is very useful.

The first data point that we need to consider is focus. Angular divides venture capital activity into two buckets that are useful for broad comparisons. If we observe the venture capital market of Europe from an enterprise and deep tech versus consumer perspective, data indicate that the continent has radically changed its investment focus from balance to a preponderance of non-consumer work.

From 2014 through 2017, for example, the two broad categories were roughly matched, each holding around 50% of venture activity in Europe. But in 2018 through today, that parity shifted to a roughly two-thirds/one-third split, with European deep tech and enterprise investment taking the majority of deal flow.

That recent and sharp divergence in venture focus on Europe helps explain why our question is more than idle. Europe has evolved from a market that was pretty evenly split between consumer and non-consumer investments toward one that is heavily biased in favor of back-end tech over consumer-facing products.