At the annual Slush conference held in Helsinki last month, it was impossible to ignore the excitement in Europe's startup market. However, actual data on the current state of the region's venture market shows a different reality.
Result: European markets have yet to recover from the global venture capital reset that occurred in 2022 and 2023. However, there is evidence that the European market is on the mend, 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 in 7,743 deals through the third quarter, according to PitchBook data. This means that the annual total will match, but not exceed, the 62.1 billion euros in 2024 and the 62.3 billion euros in 2023.
By contrast, U.S. venture deal value in 2025 had already exceeded 2022, 2023 and 2024 by the end of the third quarter, according to PitchBook data.
But Europe's biggest problem is not recovering deals, but funding for VC firms. By the third quarter of 2025, European VC firms are expected to have raised just 8.3 billion euros ($9.7 billion), making Europe's total annual funding the lowest in a decade.
“Fundraising is definitely the weakest area within Europe, from LP to GP,” Navina Rajan, senior analyst at PitchBook, told TechCrunch. “We are on track to see a drop of about 50-60% in the first nine months of this year. Much of that is now being replaced by new managers and experienced firms, and the big funds that closed last year are not doing the same again this year.”
While Rajan doesn't share the same enthusiasm exuded by Slush attendees, he pointed to some positive data points that suggest the European market is turning around.
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For one thing, U.S. investor participation in European startup deals is once again on the rise. Rajan said this number dropped to its lowest point in 2023, when US-based VCs participated in just 19% of European venture deals. It's been steadily increasing since then, she said.
“They seem pretty optimistic about the European market,” Rajan said. “Even from an entry standpoint, it's just not possible to get in now because of the valuations, especially within AI technology and in the US. Whereas if you're in Europe and the multiples are lower and you're a novice investor, it probably just provides a better entry point for similar technologies.”
Swedish vibecoding startup Lovable is an example of this shift. Vibe coding company raised significant VC funding in the US. But U.S. investors clearly love Lovebubble, too. The company just announced a new $330 million Series B round led by and with participation from a number of US-based VCs, including Salesforce Ventures, CapitalG, and Menlo Ventures.
French AI research institute Mistral has received similar favors 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 suggests a turnaround is underway.
Swedish fintech giant Klarna went public in September after raising $6.2 billion in private markets over 20 years. This exit likely diverted some capital back to European LPs or provided them with confidence in a changing exit environment.
For Victor Englesson, partner at Sweden's EQT, recent European success stories like Klarna are starting to change the way European founders approach building companies.
“Ambitious founders have seen the greatness of companies like Spotify, Klarna, and Revolut and are now starting companies with those ambitions,” Engleson told TechCrunch. They are not starting a company thinking, “I want to win in Europe'' or “I want to win in Germany.'' They start a company with the idea that I want to win in the world. I don't think I've ever seen a situation like this before. ”
Based on this idea, companies like EQT are bullish on Europe.
“For EQT, we invested $120 billion in Europe. [over the] “We plan to invest $250 billion,” Engleson said. [over the] The next five years were in Europe. So we are very committed to Europe. ”