The excitement for the European startup market was hard to ignore at the annual Slush conference in Helsinki last month. But the actual data on the state of the region’s venture market shows a different reality.
The upshot is that the European market has not recovered from the global venture capital reset that occurred in 2022 and 2023. However, there is evidence it is on the cusp of a turnaround, including Klarna’s recent exit and the region’s homegrown AI startups garnering attention from local investors and beyond.
Investors poured 43.7 billion euros into European startups in 2025 across 7,743 deals through the third quarter, according to PitchBook data. That means the yearly total is on pace to match, not exceed, the 62.1 billion euros invested in 2024 and 62.3 billion in 2023. In comparison, U.S. venture deal volume in 2025 had already surpassed 2022, 2023, and 2024 by the end of the third quarter.
Deal recovery isn’t Europe’s biggest problem though; it’s VC firm fundraising. Through the third quarter of 2025, European VC firms raised a mere 8.3 billion euros, which puts Europe on track for its lowest overall fundraising yearly total in a decade. Navina Rajan, a senior analyst at PitchBook, noted that fundraising is the weakest area within Europe, with a decline of around 50% to 60% in the first nine months of the year. She pointed out that a lot of that activity is now made up 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 that oozed out of attendees at Slush, she pointed to a few positive data points that suggest the European market is turning around. For one, the participation of U.S. investors in European startup deals is back on the rise. That figure dipped to a low in 2023 when U.S.-based VCs participated in just 19% of European venture deals, but it has been steadily rising since. Rajan said U.S. investors seem optimistic on the European market, partly because European valuations, especially in AI tech, provide a better entry point compared to the high multiples in the U.S.
Swedish vibe coding startup Lovable is one example of this shift. The company recently announced a new 330 million dollar Series B round that was both led by and participated in by a slew of U.S.-based VCs. French AI research lab Mistral has seen similar interest, landing a 1.7 billion euro Series C round in September that included several prominent U.S. firms.
Klarna’s recent exit also suggests a turnaround is underway. The Swedish fintech giant went public in September after raising 6.2 billion dollars across two decades in the private market. That exit likely recycled some capital back to European limited partners or gave them confidence in a changing exit environment.
For Victor Englesson, a partner at Swedish EQT, the recent European success stories have started to change how founders in Europe approach building their companies. He observes that ambitious founders, having seen what great looks like in companies like Spotify and Klarna, are now starting companies with the mindset of winning globally, not just regionally. That shift in ambition has EQT and others bullish on Europe. Englesson stated that EQT has invested 120 billion dollars in Europe over the last five years and plans to invest 250 billion dollars over the next five years, demonstrating a strong commitment to the region.