Why balancing Europe’s AI regulations is a difficult juggling act for start-ups

“The question with quantum is not when but getting to work with it right now,” Marine Xech-Gaspa, chief of staff at the French photonic quantum computing start-up Quandela, told Euronews Next.

The European Commission agrees with her and has ordered the start-ups technology as part of a call for quantum proposals, which will allow researchers on the continent to get the full benefits of the tech, which includes tackling medicines’ toughest questions and being at the forefront of innovation to solve the most pressing industrial and societal challenges.

But “researchers cannot wait for computational capacity to get started to know how quantum works,” Xech-Gaspa warned. 

Quantum, robotics and any technology for the green transition are the top tech trends to watch in Europe, said the head of the European Innovation Council. But access to funding and regulation have made it more difficult for start-ups to excel. 

“It's very promising and very motivating to see that we have researchers, innovators, entrepreneurs in Europe that are working in this area in order to make us more sovereign,” Jean-David Malo, a senior commissioner official told Euronews Next at the Consumer Electronics Show (CES) Unveiled tech conference in Amsterdam this week. 

The new European Commission of President Ursula von der Leyen’s second term is coming together, with the 26 commissioners awaiting approval by the European Parliament.

Malo said that having a unified market across the 27-member bloc and increasing tech talent will be key to the new Commission succeeding, but said there were challenges.

The report by economist and politician Mario Draghi has warned that Europe must stimulate an environment that is favourable to innovation on the continent if it wants to compete globally. 

One of the issues for Quandela has been access to funding, Xech-Gaspa said, adding that it is much easier for start-ups in the United States than in Europe. 

The Draghi report noted that €750 billion to €800 billion of additional investment per year was needed for Europe to meet its key competitiveness and climate targets.  

“This is something which is feasible if the value sectors and not only the public but also the private sectors are ready to do [so],” said Malo. 

“But we also have to work on the regulatory environment in order to give more incentive for investment,” he added. 

Global competition and the challenge from China

Regulation in Europe has become a sticking point, especially when it comes to artificial intelligence (AI).

“We all struggle with high interest rates and slowing economies, but the specific challenges Europeans face is a lot of the government rules discourage innovation,” Gary Shapiro, president of the US-based Consumer Technology Association, which hosts CES, told Euronews Next.

While he welcomed Europe's rules such as the General Data Protection Regulation (GDPR), he said there is concern in the US that other regulations, particularly pertaining to AI, make it “harder for small companies to start a business”.

“I think that's a growing concern,” he added.

Shapiro urged the US and Europe to work closer together on regulation in the global tech race. 

“We are challenged by China now… and they have very little privacy there. They're focused on the same technologies of the future that we're all focused on,” he said.

“So the battle here is not between Europe and the US. It's freedom and liberty and innovation pushing against totalitarianism and violation of individual rights. We have to win that battle not only for economic reasons but because of the future we want for our children and grandchildren”.

Innovation vs. protecting data

The European Union has adopted its AI Act and data privacy laws but neither exist in the US at a federal level. 

This has made it more challenging for AI companies as the technology requires large datasets. 

“The stringent data privacy regulations across the EU, naturally restrict how data can be utilised to train AI systems,” Parya Lotfi, co-founder of the deepfake detection software company DuckDuckGoose. 

“As a deepfake detection company, our core operation relies heavily on processing large datasets. These regulations led us to innovate and adapt, resulting in systems that are now less dependent on large volumes of data. 

“While this adaptation has allowed us to navigate regulatory landscapes successfully, it's worth noting that for AI systems in general, access to substantial data is crucial to achieving high performance,” she added. 

But she said that despite these hurdles, their expansion into larger markets like the US has been promising and that the tech has attracted various global players, “easing the initial trust barriers typically faced by startups”.

‘Europe’s values’

But rather than seeing EU regulation as a hindrance to innovation, one company that is working to build AI chips said it agreed with Europe’s rules. 

Alexandra Pinto Castellanos, who founded the company Hoursec, told Euronews Next that she is originally from Colombia, studied in the US at Stanford and then moved to Switzerland, before settling in The Netherlands. 

“I wanted to do a company back then when I was young. Yes. But at the same time, there were many aspects of entrepreneurship that I didn't like [in the US],” she said.

“I moved to Switzerland where I tried again to get to know the entrepreneurial ecosystem, and I really liked it way more. I really appreciate the values of Europe and [tech regulation]. 

“Contrary to what everybody is complaining about, I think we really need those privacy concerns and rules so that this thing [AI] doesn't get out of control,” she added.