The European startup market data doesn’t match its capacity – yet

It was hard to ignore the excitement in the European startup market at the annual Slush conference in Helsinki last month. But actual data on the state of the investment project market in the region shows a different reality.

The result: 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 on the cusp of a turnaround, including the recent exit of Klarna and local AI startups in the region that are attracting interest from local and overseas investors.

Investors pumped 43.7 billion euros ($52.3 billion) into European startups in 2025 across 7,743 deals during the third quarter, according to PitchBook data. This means that the annual total is on pace to match – but not exceed – the €62.1 billion invested in 2024 and €62.3 billion in 2023.

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

However, the rebound in deals is not the biggest problem facing Europe, but rather the fundraising from venture capital firms. During the third quarter of 2025, European venture capital firms raised just €8.3 billion ($9.7 billion), putting Europe on track for its lowest annual fundraising total in a decade.

“Fundraising, from LP to GP, is definitely the weakest area in Europe,” Navina Rajan, senior analyst at PitchBook, told TechCrunch. “We are on track for a 50% to 60% decline in the first nine months of this year. A lot of that is now being offset by emerging managers versus experienced firms, and the huge funds that closed last year are not being repeated this year.”

While Ragan doesn’t share the same fever that emanated from Slush attendees, she did point to some positive data points that suggest the European market is starting to turn around.

On the one hand, US investor participation in European startup deals is back on the rise. This figure fell to its lowest level in 2023 when US venture capital firms participated in just 19% of European venture deals, Rajan said. She said it has been on a steady rise since then.

“They seem to be very optimistic about the European market,” Rajan said. “Just from an entry point of view, because you think about valuations, especially in AI technology and in the US, it’s impossible to get in now, whereas if you’re in Europe and your multiples are lower, and you’re new as an investor, it provides a better entry point for similar technology perhaps.”

Swedish ambient coding startup Lovable is one example of this shift. Vibe-coding companies have raised a lot of venture capital money in the United States. But it’s also clear that American investors love this beloved book. The company just announced a new $330 million Series B round led by and participating in a slew of US venture capital firms, including Salesforce Ventures, CapitalG, Menlo Ventures, and others.

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

Klarna’s recent exit also signals a shift.

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

For Victor Engelson, partner at Swedish firm EQT, recent European success stories, such as Klarna, are beginning to change the way founders in Europe approach building their companies.

“Ambitious founders have seen what great looks like in companies like Spotify, Klarna, and Revolut, and now they’re building companies with that kind of ambition,” Ingleson told TechCrunch. They don’t create companies that are like, I want to win in Europe, or I want to win in Germany. They are creating companies with a mindset that I want to win globally. “I don’t think we’ve seen that 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] “The last five years,” Ingleson said. “We will invest $250 billion [over the] The next five years in Europe. “So we are very committed to Europe.”