The European startup market was buzzing with excitement at the recent Slush conference in Helsinki, showcasing the region’s potential for growth and innovation. However, the data on the state of the venture market in Europe tells a different story.
Despite the enthusiasm at Slush, the reality is that the European market has yet to fully recover from the global venture capital reset that occurred in 2022 and 2023. While there are signs of a turnaround, such as Klarna’s recent successful exit and the increasing attention towards AI startups in the region, there are still challenges to overcome.
According to PitchBook data, investors injected €43.7 billion ($52.3 billion) into European startups in 2025 through 7,743 deals up to the third quarter. While this is a significant amount, it is expected to match rather than surpass the investment levels of 2024 and 2023. In comparison, the U.S. venture deal volume in 2025 had already exceeded the previous years by the end of the third quarter.
One of the major challenges facing the European market is VC firm fundraising. European VC firms raised only €8.3 billion ($9.7 billion) in the first three quarters of 2025, putting the region on track for its lowest fundraising total in a decade. The lack of substantial fundraising could hinder the growth and development of startups in the region.
Despite these challenges, there are positive signs indicating a potential turnaround in the European market. The participation of U.S. investors in European startup deals is on the rise, with U.S.-based VCs showing optimism towards the European market. This trend is driven by the lower valuations and better entry points for investors in Europe compared to the highly competitive U.S. market.
Several success stories, such as Swedish startup Lovable and French AI research lab Mistral, have attracted significant investment from U.S.-based firms, signaling a growing interest in European startups. Additionally, Klarna’s recent successful exit through its IPO has instilled confidence in European LPs and highlighted the changing landscape of exits in the region.
Victor Englesson, a partner at Swedish EQT, believes that the success stories like Klarna have inspired ambitious founders in Europe to aim for global success. This shift in mindset has led to a wave of startups with a global outlook, positioning Europe as a hub for innovation and growth.
EQT and other investors remain bullish on Europe, with plans to invest significantly in the region in the coming years. The commitment to Europe’s startup ecosystem reflects the growing potential and opportunities that the region offers for both investors and entrepreneurs alike.
