While the enthusiasm surrounding the European startup ecosystem was palpable at last month’s annual Slush conference in Helsinki, an examination of the region’s venture market data reveals a different reality.
The key takeaway: The European market has yet to fully rebound from the global venture capital correction witnessed in 2022 and 2023. Nevertheless, indicators point towards an impending recovery, highlighted by Klarna’s recent successful exit and the increasing interest from both local and international investors in Europe’s emerging AI startups.
According to PitchBook data, investors committed €43.7 billion ($52.3 billion) to European startups across 7,743 deals through the third quarter of 2025. This trajectory suggests that the yearly total will likely only reach, rather than surpass, the €62.1 billion invested in 2024 and €62.3 billion in 2023.
In contrast, U.S. venture deal volume in 2025 had already exceeded the totals for 2022, 2023, and 2024 by the close of the third quarter, as per PitchBook data.
However, Europe’s primary challenge isn’t deal recovery; it’s the struggle of venture capital firms to raise new funds. By Q3 2025, European VC firms had secured a mere €8.3 billion ($9.7 billion), placing Europe on course for its lowest annual fundraising total in a decade.
“Fundraising, from LPs to GPs, is undeniably the weakest area within Europe,” Navina Rajan, a senior analyst at PitchBook, informed TechCrunch. “We’re anticipating a decline of approximately 50% to 60% in the first nine months of this year. Much of this is now being picked up by emerging managers rather than established firms, and the mega-funds that closed last year haven’t been replicated this year.”
While Rajan doesn’t share the same intense optimism observed among Slush attendees, she highlighted several encouraging data points that indicate a potential shift in the European market’s fortunes.
For instance, U.S. investor involvement in European startup deals is experiencing a resurgence. Rajan noted that this figure had fallen to a low of 19% of European venture deals in 2023, but has been steadily climbing since.
“They appear quite bullish on the European market,” Rajan stated. “From an entry point perspective, considering the valuations, especially in AI tech in the U.S., it’s become extremely difficult to invest. Conversely, in Europe, with lower multiples, it offers a more favorable entry point for investors seeking similar technological opportunities.”
Swedish vibe-coding startup Lovable exemplifies this trend. While vibe-coding companies have attracted substantial VC funding in the United States, U.S. investors clearly have a strong interest in Lovable. The company recently announced a new $330 million Series B round, which was both led by and included participation from numerous U.S.-based VCs, such as Salesforce Ventures, CapitalG, and Menlo Ventures, among others.
French AI research lab Mistral has also garnered significant interest from U.S.-based firms. Mistral secured a €1.7 billion Series C round in September, with participants including Andreessen Horowitz, Nvidia, and Lightspeed.
The recent exit of Klarna also signals that a market upturn is in progress.
Swedish fintech powerhouse Klarna went public in September, having raised $6.2 billion over two decades in the private market. This exit likely injected capital back into European LPs or bolstered their confidence in a shifting exit landscape.
For Victor Englesson, a partner at Swedish EQT, Europe’s recent success stories, such as Klarna, have begun to reshape how founders in Europe approach building their businesses.
“Ambitious founders have observed what excellence looks like in companies like Spotify, Klarna, and Revolut, and are now establishing companies with that level of aspiration,” Englesson shared with TechCrunch. They are not launching companies with the goal of winning solely in Europe or Germany. Their mindset from the outset is to achieve global dominance. I don’t believe we’ve seen this to the same degree previously.”
This evolving mindset makes EQT, and others, optimistic about Europe.
“EQT has invested $120 billion in Europe over the last five years,” Englesson stated. “We intend to invest $250 billion over the next five years in Europe. So, our commitment to Europe is exceptionally strong.”