The AI application race isn't as one-sided as everyone thought. Accel's latest 2025 Globalscape report drops some surprising numbers: Europe and Israel have pulled in 66% of the private funding that American AI application companies received this year. That's a massive leap from just one-tenth a decade ago, signaling that while the US dominates foundation models, the application layer tells a completely different story.
The numbers coming out of Accel's annual deep dive into global AI funding patterns are reshaping how we think about the transatlantic tech divide. While OpenAI, Google, and other American giants continue their expensive race for AI model supremacy, European and Israeli startups are quietly building the applications that actually put AI to work.
"When we started this report 10 years ago, Europe was one tenth of the U.S.," Accel partner Philippe Botteri told TechCrunch. The dramatic shift to 66% funding parity reflects what Botteri calls a mature ecosystem where regional founders and investors "really understand how to build great software companies, and that flywheel has been running for 10 years."
Companies like UK-based Synthesia and Denmark's Lovable aren't just keeping pace - they're defining entirely new categories. These AI-native applications are reaching $100 million in annual recurring revenue in mere years, a milestone that traditionally took software companies decades to achieve. More importantly, they're doing it with unprecedented efficiency.
"They're growing faster than anything we've seen in the past, and they're doing this with an incredible level of efficiency, meaning that revenue per head count is the highest we've ever seen for software companies," Botteri explained to TechCrunch. "And that's happening on both sides of the [Atlantic] ocean."
The trend gets validation from other European VCs. Jonathan Userovici, a Paris-based general partner at Headline, sees founders across verticals "who combine world-class technical talent with a deep market expertise." His firm's AI Europe 100 report earlier this year curated AI-native startups with what Headline calls "the potential to become tomorrow's winners in Europe."
But here's where the story gets interesting - this isn't just about startups. Existing cloud software companies aren't disappearing; they're adapting fast. 's Public Cloud Index jumped 25% year-over-year as established players add what the industry calls "agentic capabilities" to their products. Some are integrating AI so aggressively they've become AI-native by default. Botteri points to Accel portfolio company Doctolib as a prime example.
