Hello there! It’s that time of the year. ₊°｡❆
As we wrap up 2025, it feels like the right time to look back at what shaped Europe’s tech and venture over the past twelve months. A lot has changed, some expected, some surprising, and it’s worth taking a look before we head into a new cycle.
In this edition, we’re taking a step back to recap the key trends, turning points, and signals from the year. Think of it as a quick, friendly pulse check on where European tech stands today and where it might be heading next. Let’s dive in.
Europe’s tech world is closing the year on a positive note.
Tech now plays a big role in the continent’s economy, and the past decade has brought bigger companies, more talent, and faster growth. There’s also a stronger shared belief that Europe can build global winners if it keeps pushing forward.
People across the industry are feeling more optimistic too. Half of those surveyed by Atomico said they’re more confident than they were a year ago, the highest level in years. But that optimism isn’t universal. Many still wonder whether Europe has the tools and support needed to help its strongest startups scale into worldwide leaders.
Investment levels tell a similar story. After a few rough years, funding is rising again and is expected to reach around $44B. It’s still well below the record highs of 2021, but it shows that the downturn may finally be behind us. Early-stage funding looks solid, but Europe still struggles with big, late-stage rounds compared with other major tech markets.
2025 venture deal activity - fewer deals, bigger rounds
Venture activity across Europe slowed down in 2025, but the deals that did happen were much larger. Deal count dropped throughout the year, yet the average round size kept rising as investors focused their money on fewer companies. By Q3, total deal value was on track to finish slightly below 2024, but the market clearly shifted toward backing bigger, more established players rather than spreading capital widely.
AI was the main driver of this trend.
Almost 50% of all VC deal value came from AI startups. Investors put about €17.1 billion into AI companies, which is already well ahead of last year’s pace. And this wasn’t just about pure AI startups; many companies across retail, logistics, cybersecurity, and software relied heavily on AI, which helped draw even more capital into the sector.
As AI drew more attention, other areas slowed. Life sciences and fintech started the year strong but lost momentum in Q3, and full-year investment is now expected to decline. Overall, 2025 made it clear: AI dominated the market and shaped where most investors chose to invest.
Another change we saw this year is how AI value creation is moving beyond startups and into large, established companies. As Shu Nyatta explains in a recent interview, the real breakthrough won’t come from building new models but from fixing the “messy middle”, cleaning data, integrating systems, and deploying AI across big organizations with millions of customers.
These distribution-rich, founder-led companies can apply AI at scale from day one, seeing faster growth, higher margins, and more efficient operations without reinventing themselves.
“The companies that win in AI will be the ones that solve the messy middle. They’re the ones connecting systems, cleaning data, and making AI deployable.”
Why companies are staying private longer and what it means for private markets
Even though IPO activity picked up in Q3, many tech companies are choosing to stay private much longer than they used to. The average time to exit has grown from about 12 years in 2015 to nearly 16 years today. With access to big late-stage funding rounds, easier secondary markets, and the ability to grow without the pressure of quarterly earnings, companies don’t feel the need to go public as quickly. Private markets now give them the room and resources to scale at their own pace.
This change is also part of why private markets are moving differently from public stocks. Because companies stay private longer, their valuations update more slowly and don’t react to daily market swings. Exits take more time, and liquidity comes in larger but less frequent waves. For investors, this means private markets can help smooth out volatility, but they also require patience and careful planning around cash needs.
At the same time, many founders don’t feel much pressure to go public because private markets offer so much capital, especially for fast-growing tech and AI companies. Huge late-stage rounds and new rules allowing more money to flow into private assets are making it even easier to stay private. But the FT argues that IPOs still matter.
Public markets provide deep liquidity, lower capital costs, and an essential path for investors, employees, and founders to eventually cash out. And even though the IPO market has been choppy in recent years, history shows that windows reopen — and companies that wait too long often miss them. So while staying private has clear benefits, it’s not a complete substitute for going public when the time is right.
What to Expect in 2026
AI will continue to dominate venture investing. After taking nearly half of all VC deal value in 2025, AI isn’t slowing down. Expect even more capital to flow into AI infrastructure, models, and applied AI across every major sector — and for the funding gap between AI and everything else to widen.
Fewer deals, but even larger rounds. The “big money, fewer bets” pattern will likely continue. Investors are showing a strong preference for backing market leaders over spreading capital across many startups, especially in later stages.
Early-stage funding should stay healthy. Seed and early-stage deals held up well in 2025, and that resilience is set to carry into 2026. With so many new AI-native startups launching, early-stage activity should remain one of the market’s bright spots.
Stronger interest in secondaries and alternative liquidity. With longer hold periods, more LPs and founders will look to secondaries to manage liquidity. Expect deal flow in this area to grow meaningfully.
Private markets will drift further from public markets. Expect valuations to move on their own timeline, with liquidity coming in slower cycles. This decoupling means less volatility but also longer wait times for returns.
Did we miss anything? Drop your thoughts below.
Across the Market | Expectations for 2026
This year brought a lot of movement across Europe’s venture ecosystem, with AI attracting record levels of capital while other sectors slowed and investors grew more selective. Founders, VCs, and LPs are adapting to longer exit timelines, different liquidity options, and a funding environment where scale and clarity matter more than ever.
As we head into 2026, the big question is how Europe will build on this year’s momentum, and who will be quickest to adjust to a landscape that’s becoming more concentrated, more AI-driven, and increasingly defined by long-term resilience over short-term cycles.
📄 Article | The 2026 J.P. Morgan Long-Term Capital Market Assumptions
The 2026 J.P. Morgan Long-Term Capital Market Assumptions show us how investors should think about the next decade in a world that feels both resilient and uncertain. The framework breaks market expectations into core components like growth, inflation, yields, and valuations, offering a long-term roadmap rather than reacting to short-term noise.
This year’s outlook points to three major forces reshaping markets: rising economic nationalism, heavier government spending, and the rapid acceleration of AI and other technologies.
📊 Report | 2026 US Venture Capital Outlook by Pitchbook
The 2026 US venture market is getting ready to enter the year with a little dose of optimism. Early-stage investing is expected to pick up, driven mainly by AI, which now accounts for a vast share of new company formation and first-time financings. AI startups are raising money faster, at earlier stages, and in larger volumes than the rest of the market, while large multistage firms are pushing deeper into seed and Series A investing to secure early positions in future winners.
Even though liquidity remains tight and fundraising has been slow since 2022, dealmaking continues to grow, especially in the early stages, helped by rising markups and improving sentiment around portfolio values.
Excellent synthesis of the current VC landscape. The "fewer deals, bigger rounds" dynamic you identify is fundamentally reshaping capital allocation strategy across the ecosystem.
What really stands out is how AI has captured nearly 50% of deal value. This isn't just sector rotation, it's a structural shift in how investors assess technology risk. When you combine this concentration with the extended time-to-exit (now 16 years vs 12 in 2015), you're seeing two compounding forces: capital pooling into fewer companies while liquidity windows stretch further out.
The secondaries market insight is particularly important. As companies stay private longer and traditional exit paths narrow, secondary liquidity isn't just an alternative anymore, it's becoming essential infrastructure for maintaining LP appetite and managingfund lifecycles. The decoupling between private and public market valuations you mention creates both opportunity and risk.