The excitement for the European startup market was hard to ignore at the annual Slush conference in Helsinki last month. But the real data on the state of the region’s venture capital market points to a different reality.
The result: The European market has not recovered from the global reset of venture capital that took place in 2022 and 2023. However, there are signs that it is on the verge of a recovery, including the recent exit of Klarna and the region’s homegrown AI startups that are attracting attention from local investors and beyond.
Investors poured 43.7 billion euros ($52.3 billion) into European startups in 2025 through 7,743 deals in the third quarter, according to PitchBook data. This means that the annual total matches — not exceeds — the €62.1 billion invested in 2024 and the €62.3 billion in 2023.
By comparison, US venture deal volume in 2025 had already surpassed 2022, 2023 and 2024 by the end of the third quarter, according to PitchBook data.
But getting a deal back isn’t Europe’s biggest problem — it’s raising capital from VC firms. In the third quarter of 2025, European VC firms raised just 8.3 billion euros ($9.7 billion), which puts Europe on track for its lowest annual fundraising total in a decade.
“Fundraising, LP to GP, is definitely the weakest area in Europe,” Navina Rajan, senior analyst at PitchBook, told TechCrunch. “We’re on track for about a 50% to 60% drop in the first nine months of this year. A lot of that is now being made by emerging managers versus experienced firms, and the mega funds that closed last year haven’t repeated this year.”
While Rajan doesn’t share the same fever as the Slush attendees, she pointed to some positive data points that suggest the European market is turning around.
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First, US investor participation in European startup deals is on the rise again. Rajan said that percentage dropped to a low in 2023, when US-based VC firms were involved in just 19% of European business deals. It’s been steadily on the rise since then, he said.
“They seem quite bullish on the European market,” Rajan said. “Just from an entry point of view, because you think about the valuations, especially in AI and in the US, 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 maybe similar technology.”
Swedish coding startup vibe Lovable is an example of this shift. Vibe coding companies have raised a lot of VC money in the United States. But American investors clearly love Lovable, too. The company just announced a new $330 million Series B round, which was led by and participated in by a number of US-based VCs, including Salesforce Ventures, CapitalG and Menlo Ventures, among others.
French AI research lab Mistral has seen similar love from US-based companies. Mistral has landed a €1.7 billion Series C round in September that included Andreessen Horowitz, Nvidia and Lightspeed.
Klarna’s recent exit also suggests a turnaround in progress.
Swedish fintech giant Klarna went public in September after raising $6.2 billion over two decades in the private market. This exit likely recycled some capital back to European LPs or gave them confidence in a changing exit environment.
For Victor Englesson, partner at Swedish EQT, recent European success stories like Klarna are starting to change the way founders in Europe approach building their companies.
“Aspirational founders have seen the great look at companies like Spotify, Klarna, Revolut, and now they’re starting companies with that kind of ambition,” Englesson told TechCrunch. They don’t start companies with like, I want to win in Europe or I want to win in Germany. They start companies with a I-want-to-win mentality globally. I don’t think we’ve seen it to the same degree before.”
This mindset has EQT, and others, on the rise in Europe.
“For EQT, we have invested $120 billion in Europe [over the] the last five years,” Englesson said. “We will invest 250 billion dollars [over the] the next five years in Europe. So we are extremely committed to Europe.”
