The data for the European start-up market does not match its strength – yet

The joy to Ethe primary market in Europe it was hard to ignore at Slush’s annual conference in Helsinki last month. But the reality of the region’s commercial market shows a different reality.

The result: The European market is no longer available for the global financial restructuring that took place in 2022 and 2023. But there is evidence that it is about to turn around, including the recent exit of Klarna and their own AI startup that is attracting attention from local investors and beyond.

Investors poured €43.7 billion ($52.3 billion) into European startups in 2025 for 7,743 projects across the third quarter, according to PitchBook data. This means that the whole year is going well – not to exceed – € 62.1 billion invested in 2024 and € 62.3 billion in 2023.

By comparison, the number of US businesses in 2025 had already surpassed 2022, 2023, and 2024 at the end of the third quarter, according to PitchBook data.

Recycling is not a big problem in Europe, however – it is fundraising for VC firms. Through Q3 2025, European VC firms raised just €8.3 billion ($9.7 billion), which puts Europe on track for its lowest annual revenue in a decade.

“Funding, LP to GP, is the weakest area in Europe,” Navina Rajan, chief analyst at PitchBook, told TechCrunch. “We’re on track to be down 50% to 60% in the first nine months of this year. Much of that is by emerging managers versus experienced companies, and the big funds that closed last year didn’t repeat this year.”

While Rajan doesn’t share the fever that came out of Slush’s arrivals, he did point to a number of positives that show the European market is turning around.

For one thing, the participation of US investors in European startups is back. Rajan said this number dropped in 2023 when US VCs participated in only 19% of European ventures. It’s been on the rise ever since, he said.

“They seem to be optimistic about the European market,” Rajan said. “First of all, because you think about the cost, especially within AI technology and in the US, it’s impossible to enter here, whereas, if you’re in Europe and your volume is low, and you’re new as an investor, it just provides a good entry point for maybe a similar technology.”

Swedish vibe-coding startup Lovable is one example of this change. Vibe companies have received the most VC funding in the United States. But US investors also like Lovable. The company has just announced a new product $330 million Series B round which were all led by the participation of several US VCs, including Salesforce Ventures, CapitalG, and Menlo Ventures, among others.

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

Klarna’s recent exit also shows that change is underway.

Swedish fintech giant Klarna went public in September after raising $6.2 billion over two decades in the private market. Those exits may have returned some cash to European LPs or given them confidence in the changing exit environment.

For Victor Englesson, partner at Swedish EQT, recent European success stories, such as Klarna, have begun to change the way European startups approach building their companies.

“Aspirational startups have seen their exposure to companies like Spotify, Klarna, Revolut and are now starting companies with similar ambitions,” Englesson told TechCrunch. They are not starting companies like, I want to win in Europe, or I want to win in Germany. They start companies with ideas that I want to succeed in the world. I don’t think we’ve ever seen it like that before.”

Those ideas have EQT, and others, European.

“For EQT, we’ve invested $120 billion in Europe (over) the last five years,” Englesson said. “We will invest 250 billion dollars (over the next five years) in Europe. So we are very committed to Europe.”