Since AI became mainstream, comparisons between Europe’s innovation hubs and Silicon Valley have become ever-present. In 2026, the EU was still debating domestic cloud capacity, Big Tech dependence, and the energy demands of new data centres. As investors, we keep hearing the same question from European founders: should they build
Andrew Gershfeld
Since AI became mainstream, comparisons between Europe’s innovation hubs and Silicon Valley have become ever-present.
In 2026, the EU was still debating domestic cloud capacity, Big Tech dependence, and the energy demands of new data centres.
As investors, we keep hearing the same question from European founders: should they build from Europe, move closer to the US market, or try to do both? Europe’s opportunity is selective ambition. It should understand where the AI infrastructure race rewards US scale and focus on the layers where it already has an advantage.
The AI infrastructure reality
Before AI, a talented software team could build a large product with modest infrastructure. AI changed that. Frontier model companies compete for GPUs, data-centre capacity, energy access, research talent, and large pools of capital. Balance sheets, supply chains, and infrastructure partnerships matter as much as product.
European founders have to price this into strategy. Energy costs, slow data-centre permitting and fragmented capital markets may improve, but not at the speed of the current AI infrastructure cycle.
That makes specialisation more important: the strongest AI companies from Europe may sit where domain expertise, customer access, regulation and workflow ownership matter more than compute.
Why many European startups still look west
The attractiveness of the American technology market remains strong. Capital, customers, acquirers, and commercial talent still concentrate there. Seed and Series A capital in Europe is now more achievable than a decade ago, but growth rounds often require a stronger US connection.
Opening a US office is simple compared to the commercial work that follows. Enterprise software companies need people who understand US procurement and know how to create urgency inside large organisations. Europe has no shortage of talented operators.
The constraint is narrower: the region has produced fewer enterprise software companies that repeatedly sold into large US customers at scale, so the pool of executives with that specific go-to-market experience is still limited.
This is where valuation expectations become dangerous. A European company cannot claim US-style multiples because its deck lists American competitors. If revenue is still European, most investors will usually continue to see the company as European. The US valuation story becomes credible when American customers represent a meaningful part of the business.
For instance, we once saw a profitable Eastern European business open a New York office and hire talent from competitors. Yet, the firm still struggled, because the founding team had not spent enough time inside the market.
The first 18 to 24 months in the US are not really expansion yet. They are the time founders need to learn how the market works: how buyers frame the problem, how sales conversations move, how competitors position themselves.
Where Europe genuinely wins
The right strategy depends on what a company is building. Defence and security technology are good examples. Yes, the American market is larger, but when you consider procurement rules, nationality questions, compliance requirements, and cap-table concerns, successfully entering can be much harder than expected.
Sometimes, the barrier sits in procurement and compliance rather than product quality. A startup with investors from politically sensitive geographies may find US government or defence customers difficult to approach until the cap table is cleaned up. For that company, a Europe-first path, or a different international route, can be better than forcing a Silicon Valley narrative.
Industrial software is another area where Europe has an advantage that is difficult to copy. A startup building in this space benefits from proximity to factories, procurement teams, and technical buyers.
Applied AI can follow the same logic. A company building AI for logistics, manufacturing, energy, compliance, healthcare operations, or industrial maintenance may gain more from expert customers than from proximity to the largest venture funds. In those markets, the moat often comes from workflow knowledge, proprietary customer context, and trust.
The signs we look for
When a European founder comes with a US expansion question, the conversation usually starts with three practical checks: who they need to sell to, who can sell it, and whether the company has enough US proof to support its fundraising story.
If the next constraint is product depth, domain knowledge, regulated customer access, manufacturing proximity, or defence procurement, Europe may remain the right centre of gravity.
If it is growth capital, enterprise sales velocity, senior go-to-market hiring, or access to acquirers, the company probably needs a stronger US presence. The signal is practical: European customer concentration points to Europe; US buyers asking for local references or growth investors requiring proof of US demand point to America.
What Europe needs to get right
Europe’s challenge is not international expansion. Great companies go where customers, capital, and talent are. The task is making Europe attractive for companies that have a reason to stay.
That starts by removing barriers that hinder founders from scaling. One example is taxing paper wealth. A founder can raise a round at a high valuation and look wealthy on paper while still holding illiquid shares and putting every available resource back into the company.
If the system treats that mark-up as liquid wealth, a fundraising milestone can become a personal cash problem.
Hiring is another example. We have seen a company find a strong C-level candidate in Spain and decide not to hire him because the employment framework made a high-risk senior hire too hard to unwind if the fit was wrong.
Here, Europe lost more than one role; it lost a chance to turn a local executive into someone inside a global technology company. These are the frictions Europe needs to reduce.
The continent does not need to win every layer of the AI stack. It needs to win the layers where customer intimacy, regulatory understanding, engineering depth, industrial know-how, and trust matter more than raw compute.
There is a large market in that space, and European founders are better positioned to capture it than they are often given credit for.
