Good Morning Vanagon Community,
the (tech-)world is spinning faster than ever. Powerful new AI models drop one day, Anthropic's Mythos and Fable 5 among them, and US export controls cut Europe off the next day. SpaceX completed the largest IPO in history. German startup Neura Robotics, which builds “cognitive” robots, announced a monster $1.4B Series C round.
The global tech scene sits somewhere between mesmerized and shocked, and the feeling that it is impossible to keep our footing and at the same time oversee what’s happening around us. Especially in Europe, which overtook the US in the total number of deep tech funding rounds in 2025, a signal of real momentum. More on that below.
Sometimes the best response is to board a plane, switch to bird perspective, and look for the bigger picture. That is exactly what I did when I traveled to San Francisco to connect with fellow investors, founders, and the US deep tech ecosystem, following an invitation from our Anchor LP to meet fellow VCs in the SF ecosystem. It was the perfect chance to re-connect in person and have my calendar filled with coffee talks to "exchange notes:"
What I did and whom I talked to
How US investors see innovation coming from Europe
What I learned and how it helps us tell signal from noise
1. What I did and whom I talked to when traveling to the source of Venture Capital
From the Allocator One Americas Summit to Stanford University's Frontier Research Club, I mingled with minds from Obvious Ventures, APG Wealth, Carlyle Family, GPs from emerging Bay Area funds and PhD researches trying to unlock “the Age of Self Compounding Tech.”
As an investor from Munich, this trip felt different from others. You aren’t just flying to a startup ecosystem of another city but to the very source of the industry we work in.
Much of what defines venture capital today originated here: the mechanisms, the terminology, the culture of risk. And inevitably, the question arises: Could it look like this in Europe, too? Not out of self-doubt, but as a genuine, open question. For example Munich has set its sights high. The Technical University of Munich aims to become the Stanford of Europe. That is no modest goal.
Our answer is: Europe should not try to be like Bay Area. The odds are different, not better or worse. 35% of global VC investment lands in the Bay Area. But right now, Bay Area investors are hunting for something only Europe has. And this is the historical advantage we are building our thesis on.
2. How US investors see innovation coming from Europe
The narrative we heard repeatedly was consistent and it surprised us in its directness. US investors are not looking at Europe out of courtesy. They are looking because the next wave of value creation requires something they cannot easily build at home.
The thesis, stated plainly by multiple funds:
"AI applied to the physical world, production, infrastructure, defense, materials, is a different game. And there, Europe has structural advantages that cannot be replicated."
The numbers support the shift. While the Bay Area still commands one third of global VC investment, Europe overtook the United States in the total number of deep tech funding rounds in 2025: driven by a dense layer of smaller rounds up to $4M. More bets, earlier, on harder problems.
Europe's industrial heritage, long framed as a liability, too slow, too capital-intensive, too regulated, is being reframed as the most valuable training ground on earth for the AI era. Decades of expertise in complex physical systems, precision manufacturing, and critical infrastructure are suddenly the exact foundation needed to deploy AI where it matters most.
Industrial data may be Europe's most undervalued asset. While other regions race to catch up in hardware and foundational models, European companies sit on proprietary datasets from industries that took generations to build.
Munich in particular is performing among the Top 3 European cities in core DeepTech categories Robotics, Defense and Space.
A concern we hear often: when US investors enter European companies, does that mean the companies will leave?
The honest answer is: not automatically. What follows strong seed rounds and finding product market fit is rising more capital and this, in some cases, can mean relocation. Building truly transformative companies costs more than European funds alone can or should carry. US capital entering the picture is a signal that the company has moved up a weight class.
In Europe we have already more than 40,000 funded tech companies. Around 4,000 firms with over $25M in annual revenue. More than 1,200 companies with either $100M in revenue or a billion-dollar valuation. 413 European unicorns. 4.6 million people working in tech. An ecosystem valued at $3.8 trillion — and more than 27,000 new founders in 2025 alone.
Europe is no longer a continent that produces great research and lets others harvest the returns. At least not entirely. There is a visible European top tier that competes globally, in software, fintech, infrastructure, climate tech, and increasingly in deep tech-adjacent fields.
Europe's problem is not the absence of substance. It is that it has not yet learned to translate that substance into scale fast enough. Therefore the question is not whether we want to prevent US capital flow into the next wave of European AI disruption. The question is whether we are early enough in “our” startups to still matter after it happened.
3. What I learned and how we incorporate it: the Vanagon Take
Despite the recent turmoil around “the US” shutting Europe off from the best AI models on the market, we still believe in the lever of cooperation between the hotspot of the next wave of AI innovation, Europe, and the experience, farsight and capital of the Bay Area. We therefore will continue to tighten our bonds for shared dealflow, insights and events, because Deep Tech winners increasingly require capabilities that no single ecosystem possesses.
The key takeaway from this letter:
AI transformed software. Software was US’ home game. The global software industry is worth $5.5T and already crowded: dominated by Big Tech and a new generation of decacorns.
The next wave will transform everything else, and that game is played in the physical world. Manufacturing, a $16T market. Its physical engineering slice, aerospace, robotics, automotive, remains largely untouched. Gen AI adoption is so far minimal - and Europe can win big.
That is exactly where we play and that is exactly what our portfolio companies Holy Technologies, Bench AI, 36Zero Vision or Ewigbyte are doing.
We are therefore quite bullish on the future of Europe.
Holy Technologies just celebrated its 1500m² factory opening in Hamburg, Germany.
Yours,
Axel, Susanne and Sandro
