European tech startups are challenging the long-held formula that they must move to Silicon Valley to grow. Business Insider reported on May 25 that the spread of AI, improved access to capital and ecosystem effects from established success stories such as Spotify and Klarna are combining to shift the direction of Europe’s technology market.

Specific examples are also emerging. Swedish AI legal startup Legora said it secured 20 percent of the top 100 U.S. law firms by revenue as customers, competing against U.S.-headquartered rival Harvey. It also passed a major revenue milestone last month. Swedish startup Lovable was valued at $6.6 billion, and recurring revenue rose 33 percent over the past month. It is also pursuing acquisitions.

People in the field see this as a structural change rather than a temporary mood. Lovable CEO Anton Osika (안톤 오시카) said Europe has long produced deep technical talent but has been seen as weak at scaling companies to a global level. He said the very reasons companies had to move to the United States are changing.

European startups have often moved to the United States after growing to a certain size. DeepMind and Darktrace are cited as representative examples. But the weaknesses have not disappeared. Douglas Bryon (더글러스 브리온) of London manufacturing startup Matta said early fundraising remains strong, but late-stage capital is still lacking. U.S. startups raised six times as much funding as Europe last year.

Even so, AI is seen as a factor that can disrupt that gap. It can raise efficiency with fewer people, allowing startups to grow faster with less capital. George Robson (조지 롭슨) of Sequoia said a change that cannot be explained by only the past 12 months of buzz has been building for a long time. He said large language models and related infrastructure have sharply reduced the time needed to turn research ideas into products, aligning with Europe’s research capabilities.

Funding conditions are also showing signs of improvement. According to Atomico, the median size of European venture funds grew to $105 million from $32 million in 2016. AI researcher Yann LeCun (얀 르쿤), who left Meta, announced in March that he raised $1 billion for Paris-based AI startup AMI Labs. He said he would make the new company one of a small number of leading-edge research labs, neither in China nor the United States.

Talent flows are also shifting. Revelio data showed more tech workers moved from the United States to Europe than in the opposite direction. Stockholm is cited as a symbol of the change. Adrian Fallow (에이드리언 팔로우), who recently moved from the United States to Stockholm to join Legora, described the local atmosphere as Silicon Valley with a Scandinavian character.

There are also skeptical views. Y Combinator founder Paul Graham (폴 그레이엄) said this month that while he recognizes Stockholm’s potential, founders with big ambitions should still go to Silicon Valley. Tighter U.S. restrictions on H-1B visas are also cited as a factor spurring moves to Europe. Founders ultimately see the strength of Europe’s ecosystem changes as coming from a virtuous cycle of success that runs from Spotify and Klarna to the next generation.