Europe’s Startup Energy Outpaces Its Data – For Now
▼ Summary
– The European venture market has not recovered from the 2022-2023 global reset, but signs like Klarna’s exit and AI startup interest suggest a potential turnaround.
– European startup investment in 2025 is on pace to match, not exceed, the totals from 2023 and 2024, in contrast to the U.S. market which has already surpassed recent years.
– The biggest problem for Europe is venture capital firm fundraising, which is on track for its lowest yearly total in a decade, declining sharply in 2025.
– U.S. investor participation in European deals is rising again, partly due to more attractive entry points and valuations, especially in AI, compared to the U.S. market.
– Recent successes like Klarna are inspiring European founders to build companies with global ambition from the start, increasing investor confidence in the region.
The European startup scene radiates a palpable sense of optimism, yet the latest investment figures reveal a market still finding its footing after a global downturn. While the energy at events like Slush is infectious, the data tells a more nuanced story of cautious recovery and shifting dynamics. European venture capital activity has not yet bounced back to pre-2022 levels, with deal flow stabilizing rather than surging. The more pressing concern lies in a significant drop in fundraising by venture capital firms themselves, pointing to a potential constraint on future growth capital.
According to recent PitchBook analysis, startups in Europe secured €43.7 billion across thousands of deals through the first three quarters of the year. This pace suggests the annual total will roughly match the investment volumes of the previous two years, indicating a plateau. In stark contrast, the U.S. market has already seen its 2025 deal value surpass the totals of 2022, 2023, and 2024. The real pressure point for Europe is on the fundraising side. Venture capital firms in the region have raised only €8.3 billion so far in 2025, putting the year on track for the lowest annual total in ten years.
Navina Rajan, a senior analyst at PitchBook, identifies this as the market’s weakest link. She notes a dramatic decline in capital raised, with a shift toward newer, emerging fund managers rather than the established firms and mega-funds that dominated previously. Despite this sobering metric, Rajan points to several encouraging signals that a turnaround may be beginning.
A key positive indicator is the renewed interest from U.S.-based investors. Their participation in European deals hit a low in 2023 but has been climbing steadily since. Rajan suggests that attractive entry valuations, particularly in cutting-edge fields like artificial intelligence, are drawing American venture capital across the Atlantic. Compared to the fiercely competitive and expensive U.S. market, Europe offers a chance to back similar technology at more favorable multiples.
This trend is evident in recent major funding rounds. Lovable, a Swedish vibe-coding startup, just closed a $330 million Series B round led and heavily supported by U.S. investors like Salesforce Ventures and CapitalG. Similarly, France’s prominent AI lab, Mistral, secured a massive €1.7 billion Series C in September with backing from American giants Andreessen Horowitz and Nvidia.
Significant exits also provide crucial validation for the ecosystem. The recent public offering of Swedish fintech leader Klarna, after years as a private company, is viewed as a milestone. Such a high-profile event helps recycle capital back to European investors and builds confidence in the region’s ability to produce large-scale, successful outcomes.
For investors like Victor Englesson, a partner at Swedish firm EQT, these successes are reshaping the ambition of a new generation of European founders. He observes that entrepreneurs are now inspired by global champions like Spotify, Klarna, and Revolut, leading them to launch companies with worldwide ambitions from day one, rather than focusing solely on regional dominance.
This evolving mindset fuels strong conviction among certain investors. Englesson states that EQT, having invested $120 billion in Europe over the past five years, plans to commit $250 billion over the next five, signaling deep, long-term commitment to the region’s potential. The current moment captures a European startup landscape where vibrant energy and strategic optimism are slowly but surely working to align with the financial data.
(Source: TechCrunch)
