Survey says AI Act will slow innovation in European AI ecosystem

The “AI Act Impact Survey”, co-initiated by AI Austria in collaboration with the main European AI organizations: KI Bundesverband, Hub France IA, AI Sweden, Initiative appliedAI, the Croatian Association Cro AI, AI Cluster Bulgaria and ai4si for Slovenia warns of the risks of loss of competitiveness and investment for the European AI ecosystem. The authors of the report are Andreas Liebl and Till Klein.

While AI is already a catalyst for US and Chinese economic growth, Europe is seriously lagging behind, which is reflected in investments in AI companies: 53% of these global private investments are made in the States States, 23% in China and only 6% in Europe.

AI can enable innovation in Europe but for this, startups must be supported to be able to compete in the global market. Investigators say they are alarmed by comments from startups and investors over the effects of the current version of the AI ​​law, when it is expected to boost Europe’s ability to innovate in AI. ‘artificial intelligence

The data from the study has been made public and shared with Members of the European Parliament, in the hope that a constructive dialogue will be engaged with AI actors in order to find balanced solutions that would regulate AI without harming the innovation potential in Europe.

The impacts of AI ACT on the innovation and competitiveness of start-ups

During this survey, 113 European high-tech start-ups and 7 venture capital funds were surveyed.

  • 65% of startups were familiar with AI law before the survey: the Netherlands (89%) and Germany (80%) in the lead, Poland in last place;
  • 96% are AI system providers that meet the definition of an AI system under the AI ​​Act;
  • Almost 33% of respondents would classify their AI system as a “high risk” system according to Annex II or III, 15% are hesitant… the impact analysis carried out by the EU was based on 5 to 15 %;
  • 45% of startups surveyed consider their AI system to be GPAI, which puts them under PMIA vendor obligations.

The impacts expected by start-ups

  • 51% of respondents expect their AI development activities to slow down as a result of the AI ​​law;
  • About 12% of startups say they plan to relocate outside the EU or stop working on AI altogether;
  • Nearly 16% expect the AI ​​law to have a positive impact on their business.

The main beneficiaries of AI law in the global AI race are expected to be outside Europe, especially US-based BigTech companies and AI startups outside the EU.

The costs of compliance

  • 50% of start-ups fall within an estimated cost range between 160k – 330k EUR;
  • Around 20% of respondents expect a somewhat or significantly higher cost, 9.5% foresee a cost above 500 K euros.
  • Half of startups do not know if they will be able to afford such an effort.

The venture capital funds of the survey

Participating VCs feature a range of junior VCs planning to invest from less than €10 million up to €500 million. The median participant plans to invest between €10m and €50m.

Some invest only partially in AI startups (10% of their portfolio) while that of other specialized venture capital firms is 100% made up of AI companies.

Of these funds, 60% learned about AI law before the survey, albeit at a superficial level. Additionally, 40% agreed that they needed to learn more about risk categories.

Almost three-quarters of participating venture capitalists expect the AI ​​law to reduce the competitiveness of AI startups in Europe. They plan to:

  • Look to startups outside the EU (+36%);
  • To invest in European start-ups not using AI (42%);
  • To invest even more in EU start-ups (15.8%).

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Survey says AI Act will slow innovation in European AI ecosystem

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