Data from the European startup market does not yet match its energy

THE enthusiasm for EEuropean startup market was hard to ignore at the annual Slush conference in Helsinki last month. But actual data on the state of the region’s venture capital market reveals a different reality.

Bottom line: The European market has not recovered from the global venture capital reset that occurred in 2022 and 2023. But there is evidence that it is poised to recover, including Klarna’s recent exit and local AI startups attracting attention from investors locally and beyond.

Investors poured 43.7 billion euros ($52.3 billion) into European startups in 2025, in 7,743 deals during the third quarter, according to PitchBook data. This means that the annual total is on track to equal, without exceeding, the 62.1 billion euros invested in 2024 and the 62.3 billion euros in 2023.

In comparison, U.S. venture capital deal volume in 2025 had already surpassed that of 2022, 2023 and 2024 by the end of the third quarter, according to PitchBook data.

Deal recovery isn’t Europe’s biggest problem, though: it’s fundraising from venture capital firms. In the third quarter of 2025, European venture capital firms raised just 8.3 billion euros ($9.7 billion), putting Europe on track to hit its lowest annual fundraising total in a decade.

“Fundraising, from LP to GP, is definitely the weakest area in Europe,” Navina Rajan, principal analyst at PitchBook, told TechCrunch. “We’re on track for about a 50-60% decline in the first nine months of this year. Much of that decline is now emerging managers versus experienced firms, and the mega funds that closed last year have not been repeated this year.”

While Rajan doesn’t share the same fever that spread among Slush attendees, she did point out some positive data points that suggest the European market is recovering.

On the one hand, the participation of American investors in European startups is on the rise again. Rajan said this figure fell to a low in 2023, when US-based venture capital firms participated in only 19% of European venture capital deals. Since then, this figure has been steadily increasing, she says.

“They seem pretty bullish on the European market,” Rajan said. “Just from an entry point of view, because you think about the valuations, particularly in AI technologies and in the US, it’s just impossible to get in there 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 technologies. »

Swedish mood coding startup Lovable is an example of this shift. Vibrational coding companies have raised a lot of venture capital money in the United States. But American investors also clearly like Lovable. The company has just announced a new $330 million Series B round which was both led and participated by a large number of US-based venture capital firms, including Salesforce Ventures, CapitalG and Menlo Ventures, among others.

French AI research lab Mistral has seen similar love from U.S.-based companies. Mistral lands a €1.7 billion Series C round in September, Andreessen Horowitz, Nvidia and Lightspeed.

Klarna’s recent exit also suggests a turnaround is underway.

Swedish fintech giant Klarna went public in September after raising $6.2 billion over two decades in the private market. This release likely recycled some capital to European LPs or gave them confidence in a changing release environment.

For Victor Englesson, partner at Swedish EQT, recent European success stories, like that of Klarna, have started to change the way European founders approach building their businesses.

“Ambitious founders have seen what greatness looks like at companies like Spotify, Klarna, Revolut and are now creating companies with that type of ambition,” Englesson told TechCrunch. They don’t start companies saying: I want to win in Europe or I want to win in Germany. They build businesses with the belief that I want to win globally. I don’t think we’ve seen this to the same extent before.

This mindset makes EQT and others optimistic about Europe.

“For EQT, we have invested $120 billion in Europe [over the] last five years,” Englesson said. “We are going to invest $250 billion [over the] next five years in Europe. We are therefore extremely committed to Europe.