European Venture Capital Market Struggles to Regain Momentum

The European startup market, once a hotbed of excitement and investment, has yet to fully recover from the global venture capital reset of 2022 and 2023. Despite the enthusiasm displayed at the annual Slush conference in Helsinki last month, the data paints a different picture. According to PitchBook data, European startups received a total of 43.7 billion euros (52.3 billion USD) in investments across 7,743 deals through the third quarter of 2025. This puts the yearly total on pace to match or exceed the 62.1 billion euros invested in 2024 and 62.3 billion euros in 2023.

However, when compared to the U.S. venture deal volume, Europe's performance appears lackluster. By the end of the third quarter, U.S. venture deal volume had already surpassed 2022, 2023, and 2024 levels, according to PitchBook data. This disparity highlights the challenges facing European venture capital firms, which are struggling to regain momentum.

One of the primary concerns is the decline in venture capital firm fundraising. Through the third quarter of 2025, European VC firms raised a mere 8.3 billion euros (9.7 billion USD), which would put Europe on track for its lowest overall fundraising yearly total in a decade. This decline is a significant concern, as it may limit the ability of VC firms to invest in new startups and support the growth of existing ones.

The European startup market is not without its successes, however. The recent exit of Klarna, a Swedish fintech company, has generated significant interest and attention from local investors and beyond. Additionally, the region's homegrown AI startups are beginning to gain traction, with several notable companies attracting significant investments.

The European startup market is a critical component of the region's economy, driving innovation and job creation. However, the current challenges facing the venture capital market may have a ripple effect on the broader economy. If European VC firms continue to struggle to raise capital, it may limit the growth of startups and hinder the region's ability to compete with other major tech hubs.

Looking ahead, there are signs that the European startup market may be on the cusp of a turnaround. The recent successes of Klarna and other AI startups suggest that there is still significant potential for growth and innovation in the region. However, for the European startup market to truly regain momentum, VC firms will need to overcome their fundraising challenges and provide the necessary support for new and existing startups.

Ultimately, the European startup market's ability to recover from the global venture capital reset will depend on the ability of VC firms to adapt and innovate in the face of changing market conditions. If they can do so, the region may yet see a resurgence in startup activity and a renewed focus on innovation and growth.