The balance of power in AI looks different depending on which layer you examine. America remains far ahead on large foundation models, but when you zoom into applications, Europe and Israel are catching up fast, according to venture firm Accel’s newly released 2025 Globalscape analysis. Accel flags companies such as Lovable (vibe-coding) and Synthesia (enterprise AI video) as examples of rising app-layer champions outside the U.S. (Accel holds stakes in both). TechCrunch
By the numbers, European and Israeli AI/cloud application startups have raised 66 cents for every U.S. dollar so far in 2025. That’s a dramatic turn from a decade ago, when funding stood at roughly one-tenth of U.S. levels, Accel partner Philippe Botteri told TechCrunch. He attributes the shift to a durable flywheel of experienced founders and investors who understand how to build and finance global software companies. TechCrunch
Headline VC’s AI Europe 100 study lands on a similar conclusion, highlighting a pipeline of AI-native apps pairing strong technical teams with domain depth across verticals such as legal, healthcare, manufacturing and marketing. The standout trait this cycle, Accel argues, is velocity and efficiency: some AI applications are reaching $100M ARR within years, with unusually high revenue per employee compared with prior software waves—on both sides of the Atlantic. TechCrunch
This doesn’t mean incumbents fade away. Accel notes that public cloud software names are up year-over-year and are steadily adding agentic capabilities. Privately held players integrating AI deeply can already be treated as AI-native (Accel cites Doctolib). Meanwhile, hopes for European foundation-model winners persist—especially around smaller, specialized models—but Accel is more cautious about that segment’s near-term opportunity set. TechCrunch
Another takeaway: it’s a mistake to frame the market as models vs. apps only. Grove Ventures argues the data layer is undervalued, with proprietary datasets and compounding data flywheels poised to create highly lucrative businesses as competition intensifies in compute and model development. In short, the app race is still very much alive, and Europe–Israel are now meaningful contenders—not just talent pools for Big Tech labs. TechCrunch
Source: TechCrunch, “The global race for the AI app layer is still on,” Nov 11, 2025.
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