How Southern Europe can win in the AI era

Tim Smith, News editor at Sifted

It’s no secret that the last year in tech has been dominated by a single theme: artificial intelligence (AI). Ever since ChatGPT launched on 30 November 2022 — the investment world has gone wild for generative AI — the kinds of models that power OpenAI’s famous chatbot, and also automatic image generators like Midjourney.

But there’s an uncomfortable truth for some tech entrepreneurs watching this once-in-a-generation tech story unfold. The vast majority of big companies cashing in on generative AI are based in the US while the biggest European success stories are coming out of established hubs like the UK, France and Germany.

So how should founders and investors in Southern European countries like Spain assess where opportunities lie in this new era of AI, and how should they pick their battles and place their bets to ensure their budding tech economies don’t get left behind?

Don’t get sucked too much into GenAI hype

It’s easy to see why investors have got so sucked into the potential of generative AI. There’s a magical quality to technology that can create visual art better than many human creators can, or write complicated emails and university essays at the touch of a button, based on a simple prompt.

And the fact that non-technical types can now interact with powerful AI systems without having to learn a line of code has got a whole new class of entrepreneur believing they can build an “AI startup.” But if Southern Europe is going to win in this new AI era, investors and founders need to remember there are a lot of promising companies and great talent working in other, more established AI fields in the region.

Some examples include Idoven, a Madrid-based company that uses AI to detect anomalies and irregularities in heartbeat data from wearables like smartwatches, to diagnose cardiovascular conditions early and save lives. The company has already signed up some big partners like pharma company AstraZeneca, and all-star investors including basketball and football legends Pau Gasol and Iker Casillas.

Another example working in the health industry is Valencia-based QUIBIM, which uses AI to spot patterns and anomalies in medical images like radiology scans, to more accurately identify cancers. It’s being used in more than 125 healthcare facilities around the world and — like Idoven — is an example of more traditional AI techniques being used to solve tangible problems where people will pay for a solution.

Investors and founders in Southern Europe would do well to remember there’s AI talent out there beyond the worlds of language models and image generators as they decide where to direct their energies and Euros.

Build great products

This isn’t to say that the Southern European tech community should totally turn their back on generative AI. There’s no doubt that the technology will find its way into all sorts of applications and products in the coming years.

But one key thing to remember is that the best AI companies will be built with a product-first mindset, rather than a technical-first mindset. One of the clearest examples I always use for a great European business that’s using generative AI to build a genuinely useful product is a Parisian startup called Nabla, which uses the technology powered by OpenAI’s GPT-4 to speed up patient admin for doctors.

While it’s not a Southern European company, I believe it serves as a great example of how you can build a useful product with GenAI without needing to build your own AI system from the ground up. And one thing Southern European founders do know how to do it’s build great products.

Take Wallapop: the Spanish company has been able to win more of its home market share than US giant EBay. Glovo, meanwhile, is the market leader in delivery in more than 20 countries. Stories like this show that it’s possible to build internationally impactful businesses from Southern Europe by solving problems in lesser-served markets.

The potential for generative AI to disrupt bureaucratic workflows and create value through efficiency savings (as demonstrated by Nabla) will be even bigger in countries like Spain where many processes in the public and private sector are ripe for digitisation. With a growing crop of talent from the region’s ever-growing number of tech scaleups, I expect to see an explosion of new companies using AI in Southern Europe, founded by entrepreneurs with serious experience of building and scaling top products.

Language

Another big factor to consider in a world that’s being upended by generative AI is the power of language. One AI expert who built the technology behind Amazon Alexa recently described this to me by saying “language is the substrate of intelligence,” describing how large language models (LLMs) — the technology that powers ChatGPT — can seem so intelligent from their understanding of language alone.

And there’s one AI area where US companies are still remarkably asleep at the wheel – building powerful AI systems which work well in other languages apart from English.

ChatGPT has been shown by researchers to struggle when it comes to translating into other languages, prompting a number of actors including French startup Mistral and the Spanish government to begin training LLMs in other tongues.

This matters because LLM applications built for non-English use cases will need to be supplemented with high-quality proprietary data written in other languages. Southern European companies that are already operating in their local markets with big networks will have much easier access to that data than overseas rivals.

Spanish and Portuguese entrepreneurs, via success stories like open finance platform Belvo, have already proven that linguistic and cultural ties to Latin America can translate into big success for Iberian companies. With a new, powerful technology where language is more important than ever before, these kinds of advantages will only get bigger.

So, as we enter a new tech economy which many say present as big a change to the way we do business as the internet, Southern Europe has the right ingredients to transform its own economies with AI. Founders in these lesser-funded regions are known to be able to do more with less, and all of that ingenuity will come in handy now more than ever.