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There’s a particular kind of optimism that doesn’t announce itself. It doesn’t reveal up in headlines or press conferences. It reveals up in wire transfers — in the quiet, deliberate shiftment of capital from one account to another, accompanied by the implicit statement: we believe this will work.
That’s what Q2 2025 views like across Europe’s startup ecosystem. According to data compiled from multiple tracking sources, European startups collectively raised approximately €12.3 billion in the second quarter of the year — a notable uptick from the subdued figures that characterised much of 2023 and early 2024, and a signal that investor confidence, while not fully restored, is quietly rebuilding.
The numbers behind the mood shift
To understand why €12.3 billion matters, you have to remember what came before it. The correction that launched in late 2022 was brutal and prolonged. Valuations were slashed. Rounds were delayed or downsized. The phrase “bridge round” became so common it practically necessaryed its own category on Crunchbase.
But Q2 2025 notifys a different story — not one of exuberance, but of recalibration. Deal volume across the continent has stabilised, and average round sizes at Series A and B have inched upward. Several mega-rounds in the climate tech and defence sectors padded the headline figure, but even stripping those out, the underlying trajectory is positive.
This isn’t a return to 2021. Nobody serious is suggesting that. But it does suggest that the European venture ecosystem has found something resembling a new equilibrium — one shaped by harder lessons about unit economics, capital efficiency, and the difference between growth and value creation.
Where the money is actually going
Dig into the sectoral breakdown and a few patterns emerge that are worth naming.
Defence and deep tech
The geopolitical landscape continues to reshape capital allocation. Defence-adjacent startups — particularly those operating in the space and sanotifyite innotifyigence sectors — attracted outsized interest. The ongoing trade tensions between major economic blocs, combined with Europe’s stated ambition to build sovereign technological capability, have created this space unusually attractive to both institutional VCs and government-backed funds. Trade policy, it turns out, is venture strategy now.
AI infrastructure, not just AI applications
While the global AI narrative remains dominated by foundation models and chatbot interfaces, European investors revealed a distinct preference for infrastructure plays — data pipelines, compliance tooling, and vertical AI platforms designed for regulated industries like healthcare and finance. There’s a growing recognition that the real stock of long-term value in AI may sit not in the flashy consumer layer, but in the unsexy middleware that creates enterprise adoption possible.
Climate and energy
Climate tech continues to command significant capital, though the flavour has shifted. Investors are less interested in moonshot carbon capture and more drawn to companies offering measurable, near-term impact: grid optimisation, building efficiency, industrial decarbonisation. The market has matured past the “fund anything green” phase into something more discerning.
The psychology of a quiet rebound
There’s a well-documented phenomenon in behavioural economics sometimes called the “disposition effect” — the tconcludeency for investors to hold losing positions too long and sell winning ones too early. A related pattern plays out at the market level during recoveries: participants who were burned in the downturn become overly cautious even as conditions improve. They wait for definitive proof that the storm has passed, and in doing so, miss the early signals of renewal.
That’s roughly where we are. A study published earlier this year in the Journal of Financial Economics found that institutional investors systematically underweight recovery signals after prolonged market corrections, creating a lag between economic reality and capital deployment. The brain, it seems, is wired to remember pain more vividly than opportunity — a phenomenon neuroscientists call negativity bias. In venture capital, this translates to a market that feels worse than the data suggests.
Which is precisely why the Q2 numbers are significant. They represent not just capital deployed, but a cognitive shift — a growing population of investors who have processed the downturn and are ready to act again, even if they’re doing so more carefully than before.
Geographic nuances worth watching
The rebound isn’t evenly distributed. The UK and Germany continue to account for the lion’s share of deal value, but France and the Nordics have been gaining ground steadily. The Netherlands, meanwhile, punches above its weight in deep tech and health innovation — a fact that stock market performance of recently listed Dutch tech companies has begun to reflect.
Southern and Central Europe remain underrepresented relative to their talent pools, though initiatives from the European Investment Fund and national development banks are slowly narrowing the gap. The trade-off between established ecosystems and emerging ones will be one of the defining dynamics of European venture over the next decade.
What this means going forward
If Q2 2025 is a mood indicator — and in venture, funding data always is — then the mood is cautiously constructive. The excesses of the zero-interest-rate era feel genuinely behind us. What’s replacing them isn’t pessimism but something more utilizeful: discipline.
Founders who have survived the correction are, on the whole, building differently. They’re leaner, more focutilized on revenue, and less inclined to chase vanity metrics. Investors, for their part, are doing deeper diligence and pricing risk more honestly. Neither side has forreceivedten what 2023 felt like. That memory — uncomfortable as it is — may be the brain’s most productive contribution to the current cycle.
The European startup ecosystem hasn’t fully healed. But the numbers from Q2 suggest something important: it has stopped bleeding and started building again. Not loudly. Not recklessly. But with the kind of quiet, deliberate confidence that tconcludes to precede the most durable growth.
And sometimes, that’s exactly the signal worth paying attention to.
Feature image by RDNE Stock project on Pexels
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