The explosive growth of data centre startups across Europe has generated many headlines in the digital infrastructure landscape. These innovative companies are at the forefront of addressing the increasing demand for cloud services and high-performance computing solutions in the new AI economy. JSA Europe Media Consultant João Marques Lima explains.
With a focus on cutting-edge technologies like edge computing and liquid cooling, these startups are reshaping the industry while prioritising carbon footprint reduction and renewable energy adoption. One of their biggest assets? No assets. A fresh start, with no baggage allow these new vehicles to innovate with no barriers and no constraints.
European data centre startups are making waves in the market, leveraging their agility to implement AI infrastructure and optimise IT systems. They are challenging established players by offering advanced colocation services and pushing the boundaries of data centre storage and UPS technologies.
As the digital economy continues to expand, these startups are increasingly becoming well-positioned to capitalise on the growing need for robust, efficient, and sustainable data centre solutions across the continent.
The Evolution of Data Centre Infrastructure in Europe
The data centre infrastructure arena in Europe has undergone a deep transformation, driven by technological advancements and changing market demands. This evolution has caused a revolution in how businesses approach their digital infrastructure needs, with a clear shift towards more efficient and sustainable solutions.
The market has experienced a significant move from traditional on-premises infrastructure to cloud-native solutions. This transition has an impact on the way businesses operate and scale their IT resources. Cloud computing technologies now play a strategic role in the global economy, providing essential infrastructure and services for organisations to remain competitive in an increasingly complex digital landscape.
According to Gartner, by the end of 2024, more than 45% of IT spending on system infrastructure, infrastructure software, application software, and business process outsourcing will shift from traditional solutions to cloud. This rush to the cloud has several causes, with the quest for greater efficiency being a primary factor. Companies are now accessing ready-made resources provided by third parties on the cloud, gaining technology with enhanced security, scalability, and high performance.
Edge computing has also caused a revolution in Europe, emphasising the importance of processing data closer to its source. This approach, rooted in pragmatism, highlights the significance of efficiency and autonomy in data processing. The term “thick computing” refers to the integration of high-performance chips into connected objects and systems, enabling them to process complex computational tasks locally. In part, think of IoT evolving to a new phase as the infrastructure can now fully service it.
A recent study by DECISION suggests that edge computing in Europe has significant growth potential, especially in areas of professional IoT where Europe’s industry is strong to compete globally. The European Commission has endorsed the importance of thick computing in Industrial IoT, earmarking €45 million for pilot actions on Digital Platforms for the Cloud-Edge-IoT under its research and innovation programme HORIZON EUROPE.
Furthermore, sustainability has become a key driver of innovation in the European data centre industry. With the urgent need to address climate change and pressure mounting from local communities and governments, the data centre sustainability agenda has gained critical importance.
Many organisations are now targeting significant reductions in carbon emissions from data centre construction and aiming to provide 100% renewable energy to their clients – mostly by 2030, aligning with Europe’s ambitious target of becoming the first climate-neutral continent by 2050.
The industry faces the challenge of decarbonising legacy data centres and addressing end-of-life emissions associated with building materials. To achieve this, significant investment and innovation are required, with a focus on driving energy efficiency while maintaining availability.
Emerging Technologies Driving Data Centre Startups
All this has ignited a startup rush on the continent like we have not seen in years. Data centre startups across Europe are harnessing the power of AI and machine learning to revolutionise the industry. These technologies have an impact on various aspects of data centre operations, from optimising supply chains to enhancing engineering processes.
Transmetrics, for instance, leverages predictive analytics and AI to improve logistics planning and asset management. PhysicsX utilises generative AI to transform engineering across automotive, aerospace, and renewables sectors.
The adoption of AI in European tech startups is significant, with 68% already maximising its benefits and 58% planning to invest in AI in the near future. Startups are using AI for data analysis (67%) and planning to expand its application (53%). This overwhelming interest in AI underscores its perceived value as a critical tool for driving innovation and business growth.
Quantum computing has further exacerbated demand in the European data centre sphere. IBM’s announcement to build its first European quantum data centre in Germany marks a significant milestone. This initiative, along with the European Commission’s €100 million investment in quantum computing development, is setting up a solid quantum infrastructure critical for the future quantum computing ecosystem in Europe.
The IBM European quantum data centre will house multiple quantum computers, each powered by a minimum of 127 qubits. With more than 65 European organisations accessing IBM quantum hardware and software through the cloud, the demand for quantum computing resources is evident.
Consequently, data centre startups are developing innovative cooling solutions to address the increasing power demands and environmental concerns. Liquid cooling technologies have emerged as a popular solution, with almost 40% of data centres employing it in some way. Companies like Deep Green are repurposing waste heat from computers to heat swimming pools, while Infinidium has developed The Vortex Vacuum Chamber, a next-generation cooling and power supply infrastructure.
Immersion cooling is another advanced technique gaining traction. Startups like Asperitas and LiquidStack have developed immersion liquid cooling systems that eliminate the need for air conditioning and IT fans. These solutions not only improve energy efficiency but also reduce the carbon footprint of data centres.
Funding and Growth Strategies for European Data Centre Startups
The European data centre market has an impact on venture capital investment trends. Despite a slowdown in overall venture investment in 2023, AI-related startups raised nearly £39.5 billion, marking a 9% increase from 2022. This surge in AI funding has caused a revolution in the data centre industry, creating both opportunities and challenges. The European AI market is projected to reach £63.8 billion in 2024, with an expected annual growth rate of 15.9% until 2030.
Data centre startups are forming strategic alliances to expand their reach and capabilities. For instance, AtlasEdge, a pan-European Edge data centre provider, has partnered with Inflect, a digital infrastructure marketplace. This collaboration enables AtlasEdge to connect with US enterprises looking to expand into Europe, leveraging Inflect’s online marketplace and research tools. Such partnerships equip startups to respond to the increasing demand for data and build Europe’s next-generation edge platform.
European governments are also offering various incentives to support data centre development, especially to ensure the sustainability of these facilities. For example, Ireland provides tax relief for investors through the Employment and Investment Incentive Scheme whilst Denmark offers grants for research and development in clean technologies. Over in Germany, Berlin provides tax benefits for companies investing in energy-efficient technologies, and upper north in Sweden, its “Drive Sweden” initiative offers grants and loans for sustainable technology investments. The UK’s Enhanced Capital Allowances scheme allows accelerated tax relief on energy-saving technologies.
Additionally, over 100 data centre operators and trade associations have committed to the European Green Deal, aiming to make data centres climate neutral by 2030. This initiative includes targets for renewable energy use, energy efficiency, and material recycling, aligning with Europe’s goal of becoming climate neutral by 2050.
As the digital economy continues to expand, European data centre startups are well-positioned to capitalise on the increasing demand for robust and sustainable solutions. The evolution from traditional to cloud-native infrastructure, coupled with the impact of edge computing and sustainability-driven innovation, has set the stage for these startups to thrive.
With strong support from venture capital, strategic partnerships, and government initiatives, these companies are poised to play a crucial role in shaping the future of Europe’s digital infrastructure landscape.
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