Despite palpable excitement surrounding the European startup market, recent data reveals a stark contrast with its perceived energy. While events like the annual Slush conference in Helsinki buzz with optimism, the region's venture capital (VC) funding landscape has yet to fully recover from the global reset experienced in 2022 and 2023. However, emerging trends, including a surge in interest from US investors and the rapid growth of homegrown AI startups, suggest that a significant turnaround might be on the horizon.

According to PitchBook data, investors poured €43.7 billion ($52.3 billion) into European startups across 7,743 deals through the third quarter of 2025. This pace indicates that the yearly total is on track to merely match — not exceed — the €62.1 billion invested in 2024 and €62.3 billion in 2023. In comparison, US venture deal volume in 2025 had already surpassed its 2022, 2023, and 2024 totals by the end of the third quarter.

Europe's most pressing challenge isn't deal volume, but rather VC firm fundraising. Through Q3 2025, European VC firms managed to raise a mere €8.3 billion ($9.7 billion), putting the region on track for its lowest overall fundraising total in a decade.

"Fundraising, LP to GP, is definitely the weakest area within Europe," Navina Rajan, a senior analyst at PitchBook, told TechCrunch. "We’re on track for around 50% to 60% decline in the first nine months of this year. A lot of that is made up now by emerging managers versus experienced firms, and the mega funds that closed last year haven’t repeated this year."

Positive Indicators Emerge

While Rajan acknowledges the tempered reality compared to the enthusiasm at Slush, she points to several positive data points signaling a potential shift in the European market.

Rising US Investor Participation

One significant trend is the resurgence of US investors in European startup deals. Rajan noted that US-based VCs' participation dipped to a low of just 19% of European venture deals in 2023 but has been steadily on the rise since. This optimism stems from strategic entry points.

"They seem pretty optimistic on the European market," Rajan said. "Just from an entry point of view, because you think about valuations, especially within AI tech and in the U.S., it’s just impossible to get in now, whereas, if you’re in Europe and your multiples are lower, and you’re new as an investor, it just provides a better entry point for perhaps similar tech."

This shift is evident in recent significant funding rounds:

  • Swedish vibe-coding startup Lovable recently secured a $330 million Series B round. The investment was both led by and included participation from a host of US-based VCs, such as Salesforce Ventures, CapitalG, and Menlo Ventures.
  • French AI research lab Mistral also attracted substantial US interest, landing a €1.7 billion Series C round in September, with investors including Andreessen Horowitz, Nvidia, and Lightspeed.

Impact of Major Exits and Global Ambition

Another key indicator of a potential turnaround is the recent exit of Swedish fintech giant Klarna. After raising $6.2 billion over two decades in the private market, Klarna went public in September, with its IPO raising $1.4 billion. This significant event likely recycled capital back to European Limited Partners (LPs) and instilled greater confidence in a changing exit environment.

For Victor Englesson, a partner at Swedish investment firm EQT, these European success stories are fundamentally altering how founders approach building their companies.

"Ambitious founders have seen what great looks like in companies like Spotify, Klarna, Revolut and are now starting companies with that type of ambition," Englesson told TechCrunch. "They’re not starting companies with like, I want to win in Europe, or I want to win in Germany. They start companies with a mindset that I want to win globally. I don’t think we have seen that to the same extent before."

This evolving mindset fuels EQT's strong commitment to the region. "For EQT, we’ve invested $120 billion in Europe [over the] last five years," Englesson stated. "We’re going to invest $250 billion [over the] next five years in Europe. So we are extremely committed to Europe."