European AI-Native Startups Surge in Investment and Innovation

A notable trend is emerging in the technology sector as European startups built entirely around artificial intelligence (AI) gain traction. These AI-native companies, unlike traditional firms that retrofit AI into existing workflows, are designed from the ground up to leverage AI’s capabilities. According to Sifted’s B2B SaaS Rising 100 list, released this year, a remarkable 27 companies fall under this new category, occupying the top nine spots in the ranking.

Andreas Weiskam, a partner at Sapphire Ventures, co-sponsors of the report, describes AI-native startups as those with AI at their core. He emphasizes that AI represents a foundational technology, much like the internet and mobile technologies in prior eras. “AI is the next thing,” he states, predicting that it will define future software technology companies.

Mindset Shifts in AI-Native Startups

The implications of being AI-native are significant. Jan Oberhauser, founder and CEO of N8n, a Berlin-based workflow automation platform that ranked fourth on the Rising 100, believes this shift necessitates a fundamental change in how companies approach problem-solving. “For us, being AI-native starts with a belief: that human intelligence should stay at the centre of how we build, decide and work,” he explains.

Oberhauser argues that adopting an AI-native framework allowed his company to unlock new potentials rapidly. “Today, N8n users can create agentic systems visually and handle complex, multi-step AI agents that work with their own data and models,” he says. This capability, he asserts, is unattainable when AI is merely an add-on to traditional systems.

Similarly, André Petry, CEO and founder of Tacto, a Munich-based supply chain and procurement platform ranked seventh, highlights the advantages of starting out as AI-native. “Traditional procurement tools were built around static forms and workflows, so re-engineering them for autonomous agents and real-time data is almost impossible,” he notes. By prioritizing AI, Tacto’s small team can ship features and deliver results significantly faster than larger, established competitors.

In Paris, FlexAI, which ranks third on the Rising 100, has found that being AI-native streamlines growth. Sundar Balasubramaniam, the company’s COO, points out that this foundational approach enables rapid iterations and efficiencies, which enhance both internal operations and customer service.

Investment Climate for AI-Native Startups

The investment landscape is increasingly favorable for AI-native startups. Weiskam notes that these companies present a compelling proposition to investors. “The numbers are an investor’s dream, because the value proposition is often so clear,” he explains. Unlike traditional models that promise incremental improvements, AI-native companies can offer transformative solutions that are significantly superior.

Oberhauser reports that the response from venture capitalists has been overwhelmingly positive. “VCs are definitely keen on AI-native companies, but they’re looking for practical applications, not just hype,” he states. Demonstrating real traction and solving genuine problems are vital for attracting investment in this competitive field.

As the interest in AI-native companies grows, the expectations from investors are evolving. Petry notes that since the surge of hype surrounding AI in 2023, venture capitalists are focusing more on the fundamentals. They seek proprietary technology rather than generic applications and look for clear customer value that leads to sustainable growth.

Startups in this sector recognize their position at the forefront of a significant shift. Balasubramaniam predicts that in the next five years, being AI-native will become essential for success. “AI will become a ubiquitous layer, like databases or microservices are today,” he asserts. Podjarny adds that the transformative power of AI will reshape how organizations operate, creating considerable opportunities for agile startups.

Weiskam concludes that this is just the beginning of a new wave in the tech industry. “I would be surprised if more than half of the companies in the B2B 100 list weren’t AI-native next year,” he says. The stakes are high, as companies that fail to adapt may fall behind. The future landscape will likely be dominated by those organizations that build AI into their foundational structures from the outset.