As the world grapples with escalating geopolitical tensions and market volatility, concerns surrounding Europe’s ability to withstand the impending challenges, particularly in light of President Trump’s pursuit of tariffs from the continent, are growing increasingly prominent.

However, a comprehensive new report suggests that deeptech is on the cusp of becoming a crucial pillar of Europe’s security, defense, and future autonomy, particularly in relation to reducing its dependence on the U.S.

According to a 184-page report compiled by venture firms Lakestar, Walden Catalyst, Dealroom, and the deeptech conference Hello Tomorrow, deeptech attracted a substantial €15 billion ($16.3 billion) in venture investments in 2024. Furthermore, the report reveals that nearly one-third of all venture capital invested in Europe is now being channeled into deep tech.

The report also notes that M&A activity in the deeptech space increased to $12.2 billion last year. Nevertheless, it highlights that European deeptech startups still heavily rely on the U.S. for exit opportunities, with 50% of the growth capital raised by deeptech startups originating from outside the continent.

Despite this, deeptech could potentially serve as a safeguard against conventional “momentum investing” among venture capitalists, as suggested by the report.

Lukas Leitner, co-author of the report and a deeptech investor at Lakestar, shared his insights with TechCrunch, emphasizing that while geopolitical tensions pose significant challenges, Europe must seize the moment and recognize that deeptech could hold the key to unlocking the continent’s future resilience.

However, the path forward is not without its challenges. According to Leitner, the U.S. has a “flywheel effect” in deeptech, whereas Europe’s ecosystem remains in its early stages. “We have a flywheel in the ‘shallow’ tech scene, with numerous second-time founders emerging from companies like Revolut and building successful ventures. However, this is not yet the case for deeptech companies.”

Leitner emphasized that Europe boasts strong research institutions, talented engineers, and public support for deeptech, but policy changes are necessary to foster a culture that encourages risk-taking. ” Europe needs to implement policy changes to support a culture of risk-taking and entrepreneurship in deeptech,” he added.

Arnaud de la Tour, CEO of Hello Tomorrow, noted that the notion that Europe would always lag behind in AI due to its limited computing power was recently disputed by the emergence of open-source DeepSeek. “This presents a significant opportunity for Europe, as we possess exceptional AI talent. Many professionals are considering returning to Europe due to the current geopolitical landscape. Nonetheless, we must establish the right policy framework to unlock our full potential.”

Leitner highlighted that Europe’s relative weakness in computing power is compensated by its strengths in photonics computing, which offers substantial advantages in terms of speed and efficiency. “Europe excels in photonics, thanks to our advanced laser systems and fundamental research in the field,” he explained.

De la Tour also suggested that Europe could capitalize on the brain drain in the U.S. caused by the Trump administration’s defunding of science. “The National Science Foundation, which is the primary supporter of founder-applied research in the U.S., has had its budget cut in half. As a result, many talented scientists are no longer employed, and some may consider relocating to Europe,” he said.