Europe's artificial intelligence sector is falling further behind the United States and China because the continent can't provide the venture capital and computing power that frontier AI companies need to compete, according to Robin Rombach, CEO of German AI image generation specialist Black Forest Labs. The 33-year-old entrepreneur, speaking in Freiburg im Breisgau, said Europe's mindset needs to shift from risk and fear to optimism and opportunity — even as warnings about AI's dangers grow.
The Financing Gap
Rombach said that when Black Forest Labs was founded in 2024, there was no real startup ecosystem in Europe, particularly for frontier deep tech. He said that if you want to build a frontier model in a very competitive space, you need to do this quickly, and that certain ingredients are needed for success, such as a lot of capital and computing power. The company, now in its second year, has just over 100 staff and is valued at around $3.25 billion. It secured early backing from Silicon Valley venture capital firm Andreessen Horowitz and maintains a second headquarters in San Francisco.
Zach Meyers of CERRE, a Brussels-based think tank, echoed Rombach's concerns. He said the biggest barrier to AI growth and innovation in Europe was access to capital. Most European companies rely on financing from banks, which are traditionally more cautious than venture capital investors about backing businesses that may take years to become profitable. Meyers said that is not how technology markets work, particularly with a really nascent technology like AI.
From Research to Industry
Rombach helped develop latent diffusion, a breakthrough that underpins many of today's AI image-generation systems. He and a group of fellow computer scientists founded the Freiburg-based AI lab in 2024. Black Forest Labs has emerged as a prominent developer of AI image-generation models. Its FLUX models generate still and moving images from text, and the company is now also expanding into physical AI. Its latest model has been tested at carmaker Audi as part of a project aimed at enabling robots to perform production-line tasks.
The startup recently drew headlines when it announced US director Martin Scorsese as an advisor, prompting an angry response from some in Hollywood concerned about AI taking production jobs.
The Safety Debate
Rombach said the debate has shifted to safety in recent weeks after security lapses sparked calls from some industry leaders for development of the technology to be slowed down. But he argued his company's focus on open-weight AI models, some of which can be downloaded by researchers and developers, increases transparency and increases safety. He called for an open approach to AI development, warning it would be fundamentally wrong for such a crucial technology to be controlled by a few companies, rendering oversight more difficult. He said the main thing that can wipe out humanity is stupidity.
Europe lags behind the United States and China in cutting-edge AI models, and policymakers and firms have been scrambling to find ways to make up lost ground.
Why This Matters:
Europe's inability to match American and Chinese venture capital is forcing its most promising AI startups to seek funding in Silicon Valley, reinforcing the continent's dependence on foreign tech ecosystems. The gap isn't just about money — it's about speed. Frontier AI development requires massive computing infrastructure and risk capital that European banks won't provide. If Europe can't build its own AI champions, it'll remain a regulatory power without industrial muscle. That means European firms will licence American models, European workers will use Chinese tools, and Brussels will write rules for technologies it doesn't control. The competitiveness gap is widening while policymakers debate safety frameworks.