Europe's €43.7B Startup Market: Stagnation or the Start of a Rebound?

The buzz at Helsinki's Slush conference last month suggested Europe's startup scene was roaring back to life. The data, however, tells a different story. Europe's venture market hasn't recovered from the global reset of 2022 and 2023. But a thaw might be coming, sparked by Klarna's recent exit and homegrown AI giants attracting global attention.

A Tale of Two Markets

According to PitchBook data, investors poured €43.7 billion ($52.3 billion) into European startups through Q3 2025 across 7,743 deals. This pace means the yearly total will likely match—not exceed—the €62.1 billion invested in 2024 and €62.3 billion in 2023. In stark contrast, U.S. venture deal volume in 2025 had already surpassed the totals for 2022, 2023, and 2024 by the end of the third quarter.

The Real Bottleneck: Fundraising

Europe's biggest problem isn't deal volume; it's VC firm fundraising. Through Q3 2025, European VCs raised a mere €8.3 billion ($9.7 billion), putting the continent on track for its lowest annual fundraising total in a decade. "Fundraising... is definitely the weakest area within Europe," Navina Rajan, a senior analyst at PitchBook, told TechCrunch, noting a 50% to 60% decline in the first nine months of the year.

US Capital Sparks Glimmers of Hope

Despite the gloomy fundraising figures, positive signs are emerging. Participation from U.S. investors in European deals is rising again after hitting a low of just 19% in 2023. Rajan suggests that U.S. firms see an opportunity in Europe's lower valuations, especially in AI. "It just provides a better entry point for perhaps similar tech," she said.

This trend is evident in major deals. French AI lab Mistral landed a €1.7 billion Series C in September with backing from U.S. giants like Andreessen Horowitz and Nvidia. Meanwhile, Swedish fintech Klarna's successful IPO in September has also boosted confidence, signaling a more favorable exit environment.