Despite the palpable enthusiasm for the European startup scene at last month’s Slush conference in Helsinki, an examination of the region’s venture market data reveals a more complex picture.
In essence, the European market has yet to fully rebound from the worldwide venture capital downturn of 2022 and 2023. However, signs of an impending recovery are emerging, notably with Klarna’s recent successful exit and domestic AI startups attracting significant interest from both local and international investors.
According to PitchBook data, investors allocated €43.7 billion ($52.3 billion) to European startups through 7,743 deals in the first three quarters of 2025. This trajectory suggests the total annual investment will merely align with, rather than surpass, the €62.1 billion recorded in 2024 and €62.3 billion in 2023.
Conversely, PitchBook data indicates that U.S. venture deal volume for 2025 had already exceeded the totals for 2022, 2023, and 2024 by the close of the third quarter.
While deal recovery is a concern, Europe’s primary challenge lies in venture capital firm fundraising. By Q3 2025, European VC firms had secured only €8.3 billion ($9.7 billion), positioning the continent for its lowest annual fundraising total in ten years.
Navina Rajan, a senior analyst at PitchBook, informed TechCrunch that “Fundraising, from LPs to GPs, represents Europe’s weakest sector.” She added, “We anticipate a 50% to 60% decrease in the first nine months of this year. This decline is largely mitigated by emerging managers stepping in where experienced firms and last year’s mega funds have not secured new rounds.”
Although Rajan doesn’t fully echo the fervent optimism observed at Slush, she highlighted several encouraging data points that signal a potential recovery for the European market.
Firstly, U.S. investor involvement in European startup deals is experiencing a resurgence. Rajan noted that this metric reached a nadir in 2023, with U.S.-based VCs participating in only 19% of European venture deals, but has shown consistent growth thereafter.
Rajan remarked, “They appear quite optimistic about the European market. From an entry perspective, considering valuations, particularly in U.S. AI tech, it’s currently nearly impossible to invest. In contrast, Europe offers lower multiples and a more accessible entry point for new investors interested in comparable technology.”
Lovable, a Swedish vibe-coding startup, exemplifies this trend. While vibe-coding firms have attracted substantial VC funding in the U.S., American investors have also shown considerable interest in Lovable. The company recently unveiled a new $330 million Series B round, which saw leadership and participation from numerous U.S.-based VC firms, including Salesforce Ventures, CapitalG, and Menlo Ventures.
Similarly, the French AI research lab Mistral has garnered significant interest from U.S. firms. In September, Mistral secured a €1.7 billion Series C round with participants such as Andreessen Horowitz, Nvidia, and Lightspeed.
Klarna’s recent successful exit also indicates that a market turnaround is in progress.
In September, Swedish fintech behemoth Klarna completed its IPO, having accumulated $6.2 billion over two decades in the private market. This exit likely injected capital back into European LPs or bolstered their confidence in an evolving exit landscape.
Victor Englesson, a partner at Swedish EQT, believes that recent European success stories, such as Klarna, are beginning to transform the approach of European founders to company building.
Englesson informed TechCrunch, “Ambitious founders, having witnessed the achievements of companies like Spotify, Klarna, and Revolut, are now establishing businesses with similar aspirations. Their goal isn’t merely to succeed in Europe or Germany; they launch companies with a global winning mindset, a phenomenon we haven’t observed to this degree previously.”
This shift in mindset has led EQT, among others, to adopt a highly optimistic outlook on Europe.
Englesson stated, “EQT has invested $120 billion in Europe over the past five years. We plan to invest $250 billion in Europe over the next five years, underscoring our profound commitment to the region.”