Introduction: Early-Stage Venture Capital Finds Its Footing in Europe

In the first quarter of 2025, early-stage startup funding in Europe held steady even as global investment saw big changes. According to Crunchbase, total global venture funding hit $113 billion in Q1. However, much of that came from one huge deal: OpenAI’s $40 billion raise. If we take out that outlier, funding worldwide was flat or even slightly down.

So, how did Europe do in this complex funding environment? While the total amount of money flowing into European startups did not skyrocket, early-stage companies in the region showed strength. These smaller, younger firms continued to raise funds and build toward future growth. This article will break down where the money went, what industries received the most interest, and how different countries performed in early-stage funding across Europe.

What Is Early-Stage Funding?

Before we go any further, let’s define what early-stage funding means. This usually includes:
– Seed rounds: The first major round of funding to help build a product and enter the market.
– Series A: Funding to grow the business, build the team, and improve the product.
– Series B: Money to expand operations, reach more customers, and boost revenue.

Early-stage companies are often under five years old and still testing their product or market fit. Investing at this stage is risky, but the potential rewards are high if the company becomes successful.

The Big Picture: Europe Raised $5.4 Billion in Early-Stage Funding in Q1 2025

In the first three months of 2025, European startups raised $5.4 billion in early-stage funding across more than 280 funding rounds.

While these numbers don’t compete with U.S. mega-deals, they tell a story of steady support for Europe’s early innovation. For comparison, this amount is roughly in line with what Europe raised in Q4 2024, showing that investor confidence hasn’t faded.

This consistency is a win in a global market filled with caution. Many investors are waiting to see how economic trends and geopolitical shifts unfold. The fact that early-stage deals in Europe stayed strong is a positive sign for the region.

Top Countries for Early-Stage Deals in Europe

1. United Kingdom
The UK led the pack with $4.4 billion in total venture funding, a large share of which went to early-stage startups. London continues to serve as Europe’s top tech and fintech hub. Even after Brexit, the UK attracts global venture capital, partly due to its startup-friendly legal and financial system.

2. Germany
Germany came next with $1.6 billion raised. Berlin remains a hotspot for tech and AI startups, while Munich is strong in engineering and deep tech. The country’s focus on research and development helps attract funding.

3. France
French startups raised about $1.3 billion, boosted by government support programs like La French Tech. Paris remains a creative and financial center, and is home to a growing number of startups focused on clean tech and mobility.

4. Spain
Spain saw a standout quarter, raising $1 billion—its best result in over two years. Much of this came from fintech and healthtech startups in Madrid and Barcelona. The country’s cost-effective talent and growing digital economy make it attractive to foreign investors.

Which Sectors Are Getting Funded?

1. Biotech and Healthcare
Healthcare and biotech startups were big winners in Q1 2025. Two standout rounds included:
– Verdiva Bio (UK) raised $411 million in Series A funding. The company is working on synthetic biology solutions for rare diseases.
– Neko Health (Sweden) raised $260 million in Series B funding. The firm is building AI-based health screening systems.

2. Fintech
Even though fintech is no longer the hottest sector globally, it’s still strong in Europe. Neo-banks, payment processors, and financial inclusion tools received early-stage capital, especially in the UK and Spain.

3. AI and Deep Tech
With AI dominating headlines, it’s no surprise that deep tech startups in Europe are also receiving early-stage capital. While no single European company matched OpenAI’s scale, there is clear investor interest in AI infrastructure, language models, and automation tools.

Why Is Early-Stage Funding Holding Up in Europe?

Several reasons explain why early-stage deals are staying stable in Europe:
– Diversified Economies: European nations are not overly reliant on one industry. This spreads out risk for investors.
– Government Support: Countries like France, Germany, and the Nordics offer public grants, R&D tax credits, and startup subsidies.
– Talent Density: Top universities and research labs across Europe produce founders with strong technical backgrounds.
– Affordable Costs: Compared to Silicon Valley or New York, it’s often cheaper to build a startup in Europe.

Europe’s Share of Global Funding Is Shrinking—But That’s Not All Bad

While early-stage funding in Europe remains steady, the region’s share of global venture capital is declining. It made up just 11% of all venture funding in Q1 2025, down from 16% the year before.

This drop is mostly due to large deals elsewhere—like OpenAI’s $40 billion raise in the U.S. Still, it highlights how hard it is for Europe to compete in terms of deal size.

However, focusing only on dollar amounts misses the bigger picture. Europe is investing in more deals at smaller sizes, spreading capital across many startups instead of placing big bets on a few.

This can create a healthier ecosystem with a broad base of companies growing together. It also aligns with Europe’s more cautious, long-term investment culture.

What Challenges Lie Ahead?

Europe’s early-stage ecosystem is strong, but not without risks. Here are some of the top challenges for the rest of 2025:
– IPO Market Is Quiet: With few tech IPOs on the horizon, late-stage investors may delay new investments, which could eventually trickle down to early-stage deals.
– Trade and Tariff Uncertainty: New tariffs, especially between the U.S., EU, and China, could hurt startups that depend on global hardware, chips, or cloud infrastructure.
– Overcrowded AI Market: As more startups pitch AI solutions, it becomes harder to stand out. Investors may begin demanding real traction before funding even early-stage rounds.
– Hiring Constraints: With tech layoffs continuing from 2024 into early 2025, startups have access to talent—but must compete with better-funded companies for top hires.

Final Thoughts: Steady, Not Spectacular—And That’s Okay

The big story in venture capital this year has been the size of U.S. AI deals. But Europe’s early-stage market tells a quieter, yet hopeful story. Startups are still getting funded. Investors remain active, especially in biotech, healthtech, and AI. And countries like the UK, Germany, and France continue to lead the charge.

While Europe may not produce unicorns at the same pace as Silicon Valley, it’s nurturing a wide and healthy base of early innovation. That’s good news for founders, investors, and anyone hoping to see long-term growth and technological progress in the region.

Also published on Medium.