Europe’s AI SaaS Startups in 2025: Pre-Seed and Seed VC Trends from the Q1 PitchBook Report

Intro: A New Cycle for European Startups

The Q1 2025 European Venture Report, published by PitchBook and sponsored by J.P. Morgan, paints a cautiously optimistic picture for the continent’s venture capital landscape. With public equity markets in Europe showing resilience and the European Central Bank (ECB) shifting toward dovish policy, early indicators signal that venture capital activity may rebound in 2025.

But what does that mean for pre-seed and seed-stage startups—particularly those innovating in artificial intelligence and SaaS?

This blog post summarizes the report’s findings with a special lens on AI SaaS startups at the pre-seed and seed stages, which face a unique mix of opportunity and challenge in Europe’s evolving funding climate.

Pre-Seed and Seed Deal Activity: Europe Slows Down

Let’s start with the hard truth: pre-seed and seed funding in Europe is on track for an 18% year-over-year (YoY) decline in 2025, according to PitchBook. While the overall European deal value in Q1 2025 hit €16.7 billion—representing a +10.8% YoY run rate increase—early-stage deals didn’t share that momentum.

This makes sense in a climate where investors are more risk-averse. As interest rates shift and IPO markets remain soft, venture capitalists are doubling down on their later-stage, revenue-generating portfolio companies. This creates a capital bottleneck for seed-stage founders—especially those working in complex and regulation-sensitive verticals like AI and SaaS.

Venture Capital Flight to Safety

Seed-stage startups in general, and especially in AI SaaS, are competing with late-stage rounds that promise more near-term returns. According to the report, venture-growth rounds showed the most resilience in Q1 2025, pacing to exceed last year’s full-year value by more than 60%. In contrast, pre-seed and seed-stage startups saw the steepest drop in deal value.

AI Surpasses SaaS in VC Deal Value for the First Time

One standout development in the Q1 report is that AI & Machine Learning overtook SaaS in total deal value, marking a shift in investor interest.

• AI & ML: €4.6 billion (27.5% of Q1 deal value)
• SaaS: Just behind fintech, in third place
• Fintech: €4.8 billion, leading the quarter

This shift suggests that even while early-stage capital tightens, AI startups still attract significant interest—especially when positioned as infrastructure or vertical solutions within larger SaaS categories (e.g., healthtech, edtech, or fintech SaaS platforms infused with AI).

That said, many of these AI deals are not at the pre-seed or seed stage, but rather larger, later-stage rounds like the €556.2 million raised by Isomorphic Labs (AI & life sciences, UK) or €251.4 million by Sweden-based Neko Health (AI & healthtech).

Pre-Seed AI SaaS: Facing a Chasm Between Attention and Access

It’s clear that interest in AI SaaS is growing—but early-stage startups face a tough landscape. Here are three reasons why:

1. Investor Concentration at the Top

The rise in mega-rounds suggests that capital is becoming increasingly concentrated among mature, well-networked companies. Pre-seed teams without repeat founders or deep sector expertise are often overlooked.

2. AI Regulation Uncertainty

The EU AI Act, which came into effect in 2024, imposes strict compliance demands on startups developing AI systems. This has added friction for early-stage AI SaaS startups, especially those in high-risk domains like finance, healthcare, and surveillance.

3. Longer Time-to-Value

AI SaaS startups at the pre-seed stage typically require significant upfront R&D and access to data. Without early access to meaningful contracts or pilots, many are stuck in the “proof of concept” trap, making it harder to justify valuations and secure pre-seed checks.

Geographic Disparities: Who’s Raising What—and Where?

The report highlighted important regional differences in European venture funding, which also apply to early-stage startups.

Lagging: France & Benelux

• Q1 2025 deal value: €2.3 billion
• YoY decline pace: –26.3%
• Notable AI deals: FlexAI (France), Alice & Bob (cybersecurity, €100M), Flowdesk (crypto, nearly €100M)

Despite France’s AI ambition, seed-stage momentum seems to be tapering, with fewer emerging players raising rounds in Q1.

Holding Ground: UK & Ireland

• On pace for a 12.4% YoY increase
• Hosted several top AI SaaS deals, including:
  • Isomorphic Labs (€556.2M)
  • Rapyd Financial Network (€473.6M, includes SaaS)
  • AdCreative.ai (acquired for €37.3M)

The UK remains Europe’s AI SaaS powerhouse—especially for startups at the Series A or later stages. For earlier rounds, however, competition and high costs in London and key hubs remain challenges for founders without a compelling edge.

Strengthening: DACH Region

Germany, Austria, and Switzerland saw relatively modest YoY declines (–5.2%) in deal value and played host to several early-stage raises in cleantech and healthtech. Germany-based AMBOSS (EdTech SaaS) raised €240M, showing continued investor appetite for vertically integrated SaaS applications.

What About Female-Led Pre-Seed AI SaaS Startups?

The Women in VC section of the report noted a stark reality:

• Less than 10% of VC-backed startups in Europe have only female CEOs
• Female founders faced sharper valuation cuts in early stages
• The number of female angel investors has declined

While female-led startups have made some exit gains, funding access remains structurally unequal, especially in male-dominated sectors like AI and SaaS. For underrepresented founders building in these fields, alternative sources of capital (grants, crowdfunding, angel networks) may be necessary to reach seed stage milestones.

Seed-Stage AI SaaS Outlook for 2025: Headwinds and Hopes

Despite the challenges, there are glimmers of hope for early-stage AI SaaS startups:

1. Active LP Fundraising

Sixteen VC funds raised €2 billion in February alone, and first-time funds and emerging managers made up nearly 70% of fund closes in Q1. This suggests there may be more appetite for new deal flow, especially if AI SaaS teams can align with sector-specific mandates (e.g., healthtech, fintech, sustainability).

2. Public Market Resilience

The STOXX Europe 600 was up 5.4% YTD as of March 31, suggesting that valuations in private markets could stabilize. A healthy public market often increases late-stage liquidity, which can free up capital for earlier rounds.

3. IPO Pipeline and Talent Rotation

Over 370 European VC-backed companies are IPO-ready. As some mature firms go public or get acquired, talent may recycle into the ecosystem, spinning out with new AI SaaS startup ideas that attract seed capital.

Recommendations for Pre-Seed AI SaaS Founders in Europe

If you’re building an AI SaaS startup and looking to raise pre-seed or seed capital in Europe in 2025, here’s what you can do:

1. Emphasize AI-SaaS Use Case Clarity

Investors want to see real-world, sector-specific applications—not just generic LLM wrappers. Focus on narrow verticals with data moats (e.g., clinical documentation in healthtech, compliance AI in fintech).

2. Mitigate AI Regulatory Risks Early

Show that your AI pipeline complies with the EU AI Act from day one. Use tools for explainability, data privacy, and model governance.

3. Form Strategic Partnerships

Find pilot customers, academic labs, or corporate partners to accelerate traction without overspending. The more usage data and feedback you gather, the stronger your case for funding.

4. Look Beyond Tier-One VCs

While top funds are chasing late-stage unicorns, emerging managers and specialist funds are more open to early-stage bets—especially if you align with their thesis.

Final Take: The Cautious Optimism of 2025

The European venture ecosystem is navigating a post-peak environment with caution, yet the rise of AI as a key driver of deal value shows where the future lies. For pre-seed and seed-stage AI SaaS startups, the funding climate is tough but navigable—with clear paths for those who can differentiate and de-risk early.

While Q1 may not have delivered fireworks for pre-seed AI SaaS, it sets the stage for a selective but impactful year ahead.

Also published on Medium.