Why do we need to support blockchain and AI in Europe?

It’s clear that technologies such as blockchain and artificial intelligence (AI) will change our lives. What is less well-known, however, is just how much of this technology is being innovated in Europe. From Maastricht to Berlin to Tallinn, throughout our universities, our research centres and our start-up businesses, some of the brightest minds are inventing products that promise to change everything from medical science to defence, to how we store information.

Why is this important?

Well, Europe is spending a lot of money on it. Western Europe is expected to remain the second-largest region in the world for blockchain spending in 2019 ($674m), coming after the United States ($1.1bn), but ahead of China ($319 m), according to the International Data Corporation. For AI, the figures are expected to hit $5.2bn this year.

Despite the sums, much of the funding is directed at the research and proof-of-concept stage. When it comes to funding development on a larger scale, we just don’t do so much of it in Europe.

Only a handful of closed venture capital funds deploy into the blockchain or other distributed ledger technology (DLT) space in Europe, compared to more than fifty such funds in the US, (including Paradigm, USV, Polychain, DHVC and Kindred). For AI, the UK only counted $18.24m of investment in 2018, just 1% of the total $1.74bn Fintech venture capital investment, according to Innovate Finance’s 2018 FinTech report.

Developers and entrepreneurs wanting to grow their businesses ultimately end up recipients of US financing, working for US companies, and the job opportunities and economic growth these technologies bring head elsewhere.

So what can be done to change this?

The European Investment Fund (EIF) supports innovative technologies. For years, we have taken cornerstone investments in venture capital funds supporting ICT and life sciences, we’ve supported fintech, space and cybersecurity. The blockchain and AI ‘financing gap’ in Europe presents an opportunity for the EIF to support these new technologies through its existing and future venture capital networks.

With the European Commission, we are launching a dedicated investment scheme that will make EUR 100m available to venture capital funds or other investors that support AI and blockchain-based products and services. Because these are cornerstone investments, we expect a total of EUR 300m to be generated for AI and blockchain from other private investors ‘crowding in’.

The scheme will also allow co-investments with national promotional banks, which will increase the capital even further. The process will start from 2020.

Why is this exciting?

Because this is only the beginning. Investing in a portfolio of innovative AI and blockchain companies will help develop a dynamic EU-wide investors community on AI and blockchain. By involving national promotional banks, we can scale up the volume of investments at a national level.

The EC and the EIF’s participation in the market could be a powerful force for setting regulatory and legal precedents, driving a clarity of language and easing the path to regulation on both AI and blockchain in Europe.

Imagine a world where waste is trimmed from supply chains, cutting costs and maximising efficiency, thanks to the transparent nature of blockchain. Or enhancing your natural abilities through AI technology. AI and blockchain can only change lives if they can be commercialised and used. We’re looking forward to making that happen.

European Investment Fund (EIF)

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Europe's leading provider of risk financing for SMEs. Cornerstone investor in VC and PE funds. Making debt financing more affordable for entrepreneurs.

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