Klarna IPO and ASML's Mistral bet revive Europe's tech dreams

Key Points

• The European tech sector got a boost this week with news that AI firms Mistral and ElevenLabs had both doubled their valuations.
• Meanwhile, Swedish fintech Klarna on Thursday finally debuted on the New York Stock Exchange in its long-awaited IPO.
• The developments have revived hopes that Europe is capable of developing a tech industry that can compete with the U.S. and Asia.

LONDON -- It's been a busy week for the European technology sector.

On Tuesday, London-headquartered artificial intelligence startup ElevenLabs announced it would let employees sell shares in a secondary round that doubles its valuation to $6.6 billion.

Then, Dutch chip firm ASML on Wednesday confirmed it was leading French AI firm Mistral's 1.7 billion-euro Series C funding round at a valuation of 11.7 billion euros ($13.7 billion) -- up from 5.8 billion euros last year. Mistral is considered a competitor to the likes of OpenAI and Anthropic.

To cap it off, Swedish fintech firm Klarna on Thursday debuted on the New York Stock Exchange after a long-awaited initial public offering. Klarna shares ended the day at $45.82, giving it a market value of over $17 billion.

These developments have revived hopes that Europe is capable of developing a tech industry that can compete with the U.S. and Asia. For the past decade, investors have been talking up Europe's potential to build valuable tech firms, rebuffing the idea that Silicon Valley is the only place to create innovative new ventures.

However, dreams of a "golden era" of European tech never quite came to fruition.

A key curveball came in the form of Russia's 2022 invasion of Ukraine, which caused inflation to soar and global central banks to hike interest rates as a result. Higher rates are considered bad for capital-intensive tech firms, which often need to raise cash to grow.

Ironically, that same year, Klarna -- which at one point was valued as much as $45.6 billion in a funding round led by SoftBank -- had its market value slashed 85% to $6.7 billion.

Now, Europe's venture capital investors view the recent buzz around the region's tech firms as less of a renaissance and more of a "growing wave."

"This started 25 years ago when we saw the first signs of a European tech ecosystem inspired by the original dotcom boom that was very much a Silicon Valley affair," Suranga Chandratillake, partner at Balderton Capital, told CNBC.

Balderton has backed a number of notable European tech names including fintech firm Revolut and self-driving vehicle tech developer Wayve.