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Morning,
Welcome to Sunday CET.
Lots of great vibes and ambition emerging from London these days, but are those at par with what’s going on in San Francisco? Let’s have a look.
Enjoy,
Dragos
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Market talk
Is London the new SF?
London feels different these days. Talk to developers and startup people and there’s a renewed energy and enthusiasm about what can be built - backed by a multitude of events, meetups, initiatives and a bunch of mega tech deals.
The attention and money make for easy San Francisco comparisons, which are fairly common topics over beers or dinners. London is becoming one of the world's leading AI hubs, but becoming an AI hub isn't the same thing as becoming San Francisco. The capital, compensation structures, exit markets, and founder flywheel that made Silicon Valley remain overwhelmingly American - New York included, which is running AI hot too.
However, if you put away the noise from the social media posters, here’s a few facts:
UK AI startups raised $6 billion in 2025 and more than $4 billion in Q1 2026 alone. London now hosts over 2,000 VC-backed AI companies worth a combined $230 billion, while American AI firms are increasingly opening London offices. Both sides spend most of the budgets on talent - senior London AI engineers are already earning £100-150k while the Americans usually pay better i.e £250k–500k+ total compensation for the same seniority.
The usual London pay has been at about 50-70% of Bay Area pay while the London costs are at 60-80% of Bay Area costs. That gap will attenuate, but not that much. A top engineer comparing offers from London, New York, and San Francisco increasingly expects compensation to converge. Salaries for top AI talent in London will likely approach £200k-250k equivalent gross over the next 2–3 years and mid-level roles will follow more slowly.
But doubt that London will match SF total comp levels any time soon. Few reasons for this:
the talent pool is larger and more internationally accessible (EU, India) than the Bay Area’s more restricted pipeline. Nearshoring options are also more available - i.e Edinburgh, Warsaw, Lisbon, Bucharest + remote work is pretty much standard in tech business.
the tax wedge is punishing at the top - as income rises into the $300k–$700k / £240k–£560k range, the after-tax cash is slightly in the advantage toward California.
equity culture is weaker - London startups offer options, but the magnitude and liquidity rarely match US counterparts. For example, a software engineer or investor making $700k in the Bay Area is often doing so through a mix of salary, bonus, and stock compensation.
the non-financial comp is also taxed differently - the wealth gap over 10-20 years from stock taxation differences is larger than most people realise. In the US, potentially a large portion of that gain escapes federal capital gains tax, while in the UK, the stock gain is generally taxable, meaning an effective tax burden substantially higher and can create a much larger wealth gap over a 10-20 year period than the salary-tax difference alone.
cost of living often matters more than the tax difference. Buying a house, paying for healthcare, private schools, retirement saving opportunities - all can easily outweigh the pure tax difference.
Last point is super important because of the wider British economic context. Inflation has been consistently high, everyday costs rose sharply, asset prices stalled and wages lagged. For the average British worker outside finance and tech, real incomes are on course to flatline through 2026, with inflation running around 4% and unemployment at 5% - youth joblessness at an 11-year high. This would be the fourth time in less than 20 years that average British workers have become poorer in real terms.
It's not just a London problem. Across most of Europe, real wages remain below 2021 levels, before the post-pandemic inflation surge - many workers are still digging out of a hole they fell into four years ago. But in London the contrast is especially visible, as the prosperity of the AI tier sits directly alongside a squeezed professional middle class and a seriously stressed working population below it.
The property market reflects this split. The prices are stagnant in real terms but not crashing - supply is permanently constrained and London absorbs international capital regardless of domestic macro. It won’t boom the way SF did in 2013-2019, in spite of riding a great AI wave. But it won't correct meaningfully either. A recurring wave of American expats will push up premium rentals in specific neighbourhoods without moving the broader housing market.
There’s a more important argument to ponder to the salary/costs of living: whether London's AI momentum starts producing a self-reinforcing founder cycle similar to what happened in Silicon Valley. One large IPO creates a generation of angel investors, repeat founders, and experienced executives - and this week’s SpaceX and upcoming OpenAI and Anthropic going public combined with a few $10B+ acquisitions from the private market should bring some local spillover effects in terms of liquidity. Point is, the ecosystem could look very different in just a few years but the mechanism matters significantly for London - its own success produces a similar cycle rather than feeding an existing American one.
London's IPO activity hit a 30-year low in 2025, with just seven companies listing on the LSE. Not a single scaleup CEO is seriously considering a European public listing. That means London's AI exit cycle will flow through US markets. When Wayve, Nscale, or Isomorphic Labs eventually exit, the gains will benefit founders and VC funds - largely US-backed - but the secondary wealth effect will accrue primarily to San Francisco, where IPO paper wealth recirculates into local real estate, restaurants, and angel investing almost immediately. London gets the talented employees while San Francisco gets the flywheel.
London in two years probably will look more uneven than today: a world-class AI hub at the top, compressed middle-class professionals in the center, and real financial stress at the base.
1:1 San Francisco comparisons are not really the right benchmark. SF is the product of five decades of accumulated capital, founder recycling, deep public markets, and institutional memory. London is still early on building that flywheel - and there’s some encouraging signals - but it's still building it. The real talk goes way beyond salaries parity - rather whether London starts retaining the wealth its exits generate, than watching the value flowing back over the ocean. Because building great companies and capturing the value they create are two very different things.
Signals
We have screened 124 fundraising deals closed in Europe in the past seven days.
We archive/transform deal-related data into an easy-searchable intelligent asset at N9, and email a selection of the interesting ones to our customers every week.
Mega deals
Ⓐ+ 🇫🇷 Morpho Labs - $175m at $2b
Ⓐ+ 🇬🇧 PhysicsX - $300m at $2.4b
Ⓐ+ 🇩🇪 Isar Aerospace - $320m at $2.1b
Ⓐ+ 🇫🇮 Iceye - $527m at $10b
Ⓐ+ 🇩🇪 Neura Robotics - $1.4b at $7b
Those are A+ deals (historical) - we have started grading the weekly investment deals based on a proprietary AI algo trained to answer 'does this deal matter, and why?'.
Browse the database by grade, country, sector or investor.
Curated directory of VC professionals in Europe
Not all London investors are British - discover German, American, French, Nordic and other VC professionals working across Europe's leading startup hubs. Available to our Pro customers.
Cheat sheets
93 family offices active this year in Europe.
Top 180 most active investors in Europe in Q1 2026
Europe’s most active late stage investors.
Europe’s most active angels
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Also notable
Klarna CEO Sebastian Siemiatkowski: ‘Klarna no longer sees itself as just a BNPL company and aspires more to American Express than to a traditional lender’ - NB. They’ve been trying this for 10 years already.
Britain + Japan are launching a fund to support dual use technologies including AI and quantum.
While other European industrial companies shift to defense, Renault put a 5% cap on revenue it wants to get from weapons manufacturing.
Europe 2031 - or what happens if Europe treats AI primarily as a regulatory issue. It’s a nice marketing manifesto though one can easily have a GPT of choice create a more realistic scenario analysis. Jokes aside, while the underlying thesis of the EU being inept at dealing with technology is legit, fact is that they’re already advancing towards the authors’ recommendations. Timidly, European style, but it ain’t nothing - granted, Europe 2031 is yet another flag that hopefully impacts the right audience.
Some investors are ghosting the market - there’s a good tool to find out which.
SpaceX closed up 19% yesterday with a valuation of $2.1 trillion, making it the sixth most valuable public company in the US.
Jeff Bezos raised $12 billion to build an AI physical world lab, which emerged from stealth valued at $41 billion.
The US government ordered Anthropic to shut off worldwide access to Claude Fable 5 and Claude Mythos 5 over national security concerns.
China preps $295B plan to fund nationwide AI buildout - the idea is to rely on local suppliers for at least 80% of technology such as AI chips, effectively squeezing out Nvidia and AMD.
‘Rather than starting with a medium and searching for an audience, we start with the story we want to tell and then determine the format that best serves that story’ - VC funding for short fiction.
American heists are still a thing - meat, cheese, cigarettes worth $4.5m.
Escorts are charging as much as $6K per hour thanks to Silicon Valley’s AI boom
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Created every Sunday by @drnovac of Nordic 9 with weekly notes and observations from the European startup ecosystem.
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