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European VC valuations 2025 look strong on the surface — median valuations are rising, down rounds are near historic lows, and unicorn deal value has doubled year-over-year. But a deeper look at the data reveals growing structural imbalance. Series E+ valuations surged 223%, fueled largely by AI enthusiasm, while early-stage growth remains muted. Meanwhile, nontraditional investor participation is approaching bubble-era levels, and public market signals — including Klarna’s post-IPO decline — suggest private valuations may be out of sync with fundamentals.

This analysis examines the widening gap between narrative-driven AI exuberance and sustainable company economics, highlights warning signs buried in the data, and outlines what founders, investors, and corporate development teams should watch as European venture markets move from conditional stability toward potential correction.