Anthropic and OpenAI close in on Europe with London growth. What we know so far -- TFN

Anthropic and OpenAI are closing in on European AI companies as they cement their presence in the UK, forcing startups to reevaluate salaries and benefits to keep talent, according to investors.

Anthropic is set to open an 800-person office space in London, per CNBC, suggesting a dramatic expansion of its existing 200-strong UK team.

US companies tend to pay more and offer equity to employees, which still isn't commonplace in Europe.

"I do think it will push on salaries in the UK, and our portfolio companies will have to be prepared to go up against some of the big packages these companies can dangle," Dinika Mahtani, partner at Cherry Ventures, tells Tech Funding News.

"The allure of equity in a generational company will be hard to beat, so smaller companies will need to get more creative and competitive."

Anthropic lined up an up to $6 billion employee share sale at a $350 billion valuation in February, according to Bloomberg -- potentially making eligible staffers millionaires. Share buy-backs are a way for employees to cash in their equity without having to wait for an exit, though Anthropic is widely expected to go public this year.

Earlier this month, the company introduced its most advanced AI model yet -- prompting security concerns. It caused an investment frenzy, and VCs looked to cut it cheques at a $800 billion valuation, according to Business Insider.

OpenAI, last valued at $852 billion, is also expected to float this year. The company recently announced its first permanent UK office, driving further demand for talent.

Europe's AI darling Mistral, one of few foundational model plays on the continent, was last valued at $14 billion.

The ChatGPT-maker will set up shop in King's Cross, according to CNBC. The area is already home to Big Tech firms like Google DeepMind and Meta, as well as buzzy AI names synthetic video startup Synthesia and autonomous car company Wayve.

It is unclear where Anthropic's new office will be. The company did not immediately respond to TFN's request for comment.

Mahtani says that the Anthropic's expansion was "inevitable" due to London's talent pool and competitiveness.

The company has 52 open roles in the British capital, according to its careers page at the time of writing. It also has a presence in Ireland and Paris, where it is also hiring, though at smaller scales.

Ekaterina Almasque, cofounding partner growth stage firm BlankPage Capital, told TFN these companies will "provide a powerful training platform for potential future founders" that will help to spawn a new generation of AI-native companies.

International talent could also be lured to London as a result, which is "a crucial factor for creating an even stronger AI industry in the UK."

"This is similar to how frontier research in the UK, followed by the presence of Intel and other silicon technologies companies, helped to shape the semiconductor industry in the UK," Almasque says. In return, it gave rise to ARM, Graphcore and other domestic startups working on quantum, optical and other novel computing architectures, she adds.

US AI companies are no doubt eyeing European companies' market share as well as staffers. Anthropic is reportedly building a vibe-coding competitor to Europe's Lovable, for instance.

"Clearly the frontier labs want to and need to go more vertical to capture more value and improve their margin profiles, and vibe-coding is the most natural place for them to start," says Samir Kumar, a general partner at Touring Capital.

"It would behoove platforms like Lovable to consider switching to open source models where there isn't a conflict of incentives."

The UK's push for sovereign AI capabilities is a boon for the industry, while the government reportedly courted Anthropic, per the FT. It is unclear whether Anthropic will invest in its own data centres on British soil. Historically it hasn't built its own facilities, but last year announced a $50 billion strategy to do so in the US.

OpenAI paused plans for its AI infrastructure project, Stargate UK, which was designed in partnership with Nvidia and Nscale to bolster the country's sovereign compute capacity.