According to TechCrunch, the European startup market is showing a major disconnect between on-the-ground energy and hard data. At the recent Slush conference in Helsinki, the vibe was overwhelmingly positive, but PitchBook figures tell a different story. Through Q3 2025, investors put €43.7 billion into European startups across 7,743 deals, putting the year on pace to merely match the €62.1 billion of 2024. More alarmingly, European VC firms themselves have raised only €8.3 billion so far this year, tracking toward the lowest annual fundraising total in a decade. In contrast, U.S. venture deal volume has already surpassed its 2022-2024 totals. However, analysts point to rising U.S. investor participation in European deals and exits like Klarna’s $6.2 billion September IPO as potential turnaround signals.
The funding famine is real
Here’s the thing: flat deal flow is one issue, but a collapse in VC fundraising is a much bigger, scarier problem. A 50-60% decline in money raised by the funds themselves? That’s the capital engine sputtering. Navina Rajan from PitchBook nailed it—this is the weakest link. When the firms that write the checks can’t raise new funds, the whole pipeline eventually dries up. And the fact that this year’s meager total is being propped up by emerging managers, not the established mega-funds repeating their raises, is a huge red flag. It means the big, experienced players are sitting on their hands. That doesn’t scream “confidence” to me.
So where’s the hope coming from?
The optimism seems to hinge on two things: outsiders and exits. U.S. investors are creeping back in, participating in more European deals after a 2023 low. Why? Basically, it’s a valuation play. As Rajan said, getting into a hot AI startup in the States is “impossible” now, but European multiples are lower. It’s a bargain-hunting expedition. We’re seeing this with companies like the French AI lab Mistral, which bagged a €1.7 billion round from U.S. giants like a16z and Nvidia, and the Swedish “vibe coding” startup Lovable, which just landed a $330 million Series B led by U.S. firms.
Then there’s Klarna. Its IPO is being treated as a psychological reset button. The theory is that returning capital to European limited partners (LPs) will make them more likely to reinvest in local VC funds. It’s a needed success story, for sure. But is one big exit after a long drought enough to refill a decade-low fundraising coffers? I’m skeptical. It’s a start, but you need a whole season of rain to end a drought.
The ambition gap might be closing
This is the most interesting, if intangible, shift. Victor Englesson from EQT argues that European founders now have a “win globally” mindset, inspired by Spotify, Klarna, and Revolut. That’s huge, if true. For decades, the critique was that European startups aimed too small, happy to be a regional leader. If that culture is genuinely changing, it could alter the entire trajectory. And EQT is putting its money where its mouth is, pledging to double its European investment to $250 billion over the next five years.
But let’s be real. A global mindset needs global-scale capital to back it up. And with local VC fundraising in the gutter, that capital is increasingly going to have to come from abroad. That creates a new dependency. It also raises a question: if the best European tech is increasingly funded by American money, who really reaps the biggest long-term rewards?
The verdict: cautiously pessimistic
Look, the positive signals are there. U.S. interest is a vote of confidence. Klarna’s exit is a relief. The ambition is palpable. But the core data is still bleak. You can’t build a resilient, independent startup ecosystem when your own venture firms are struggling to raise money. The energy at Slush is great—you need that belief to build anything. But belief doesn’t pay the bills. Sustained, local capital does.
Until those VC fundraising numbers turn meaningfully north, Europe’s recovery is built more on hope and foreign capital than on a solid foundation. The turnaround might be on the cusp, as TechCrunch notes, but it feels like it’s waiting for one big, confirming piece of data that hasn’t arrived yet. The market needs its own funders to believe again, not just its founders and outside investors.
