European VC investment remained resilient in Q1’26, supported by a record number of $1 billion‑plus deals, while overall activity stayed highly selective and concentrated among large, established companies.
Q1'26 highlights for Europe
- European VC‑backed companies raised $25.7 billion across 1,939 deals
- Europe recorded a record number of $1B+ VC deals in Q1’26
- Investment activity remained highly selective, concentrated in large, late‑stage rounds
- AI and defense tech emerged as the strongest areas of investor focus
- Exit activity remained muted, with M&A outpacing IPOs
Europe sees strong deal value driven by megadeals
VC investment in Europe posted a solid start to 2026, driven by an unprecedented number of billion-dollar funding rounds. While deal value increased meaningfully, activity remained concentrated in a limited number of large transactions, reflecting continued investor caution toward earlier stage and higher risk opportunities.
Despite pockets of strong performance, Europe’s VC ecosystem remained highly selective in Q1’26. Investors focused capital on companies demonstrating scale, clear paths to profitability, and defensible market positions. Startups operating outside these parameters continued to face a challenging fundraising environment, often accepting tougher terms or exploring alternative funding structures such as venture debt.
Defense tech and AI gain momentum amid geopolitical tensions
Defense tech continued to gain acceptance as an investable asset class in Europe, supported by rising geopolitical tensions and increased government engagement. At the same time, AI remained a central theme, with investor interest spanning large platforms, industry specific solutions, and AI enabled infrastructure. Dual use technologies — capable of serving both commercial and defense applications — attracted particularly strong attention during the quarter.
Exit conditions in Europe remained subdued in Q1’26, with IPO activity soft and M&A emerging as the more viable path to liquidity. Private equity interest in durable, EBITDA positive VC backed companies continued to grow, influencing investors to prioritize capital efficient business models and later stage opportunities.
After very strong Q4’25, VC investment in Nordics region takes a breather
Following a seven-quarter high of $3.2 billion in Q4’25, VC investment in the Nordics region took a bit of a breather in Q1’26 — not surprising given the strong end to 2025. A $550 million Series D raise by Sweden-based legaltech Legora, an AI platform for lawyers, was the largest deal of the quarter in the Nordics region. During Q1’26, Finland-based quantum computing company IQM also announced plans for a SPAC merger with Nasdaq-listed Real Asset Acquisition Corp — which could see it become the first publicly listed Europe-based quantum computing company. The merger is expected to be completed in Q2’26.
Trends to watch for in Q2’26
Looking ahead to Q2’26, VC activity in Europe will continue to be shaped by geopolitical developments, energy price volatility, and evolving regulatory frameworks, particularly in AI. While investor selectivity is expected to remain high, interest in defense tech, AI, energy infrastructure, and fintech is likely to persist. Exit activity is expected to remain uneven, with M&A continuing to outpace IPOs in the near term.
Venture Pulse Q1’26
Explore the latest deals and venture capital trends through the first quarter of 2026
