Regulatory hurdles, funding shortages and gaps in workforce skillsets are prompting European startups to consider relocating, risking a mass exit of the region’s most promising new ventures, an Amazon Web Services executive told Reuters on Wednesday.

Europe has struggled to narrow the gap with the US and China in the AI race due to tighter regulations, energy constraints and broader concerns about data privacy. The region has produced few frontier AI models of its own and is instead dependent on the likes of OpenAI and Anthropic.

“European businesses are telling us that they could spend as much as 40 cents to every euro on regulatory compliance instead of technology. Imagine if that was reinvested in technology,” AWS EMEA Managing Director Tanuja Randery said in an interview with the Reuters Global Markets Forum.

Nearly 4 in 10 European startups would consider leaving the region to scale, she said, citing an AWS survey of companies. “Among the fastest-growing, it’s over half.”

“Startups say to us that they’re reconsidering locations because they want funding and support, and they’re not getting enough funding here.”

While more than half the businesses in Europe are using AI, Randery said only one in five are clear about AI strategy, had an AI governance model and were invested in processes that would fundamentally reshape operations.

“I think inferencing is where European businesses need to really go invest,” she added.

AI inference is the process of running trained AI models to generate outputs and is the stage at which models are deployed for real-world use.

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