Europe

Despite expectations that deal volume might begin to show a true rebound in Q1’25, the number of VC deals in Europe fell to a nine-year low amid a fresh wave of geopolitical and economic uncertainty driven in part by concerns related to the new US administration’s announcement of various tariffs regimes.

During Q1’25, VC investors in Europe continued to show significant interest in AI, although deal sizes were relatively subdued compared to previous quarters — partly due to the absence of big raises by LLM-focused companies. Startups focused on industry applications of AI saw the strongest interest in Q1’25, with companies in the health and biotech (Neko Health — $260 million, Cera — $150 million) and enterprise communications (Synthesia — $180 million) spaces raising large rounds.

The European Commission showed very strong commitment to the evolution of AI in Q1’25 with the announcement of its $206 billion InvestAI program,1 including significant funding for the development of gigafactories. In Q1’25, France also announced $112 billion in committed AI investments, including €20 billion from Canada-based investment firm Brookfield for AI-focused projects in the country.2

investment in the health and biotech sector was robust in Q1’25, with numerous $100 million+ funding rounds across the region, including raises by UK-based Verdiva Bio ($410 million) and Cera ($150 million); Sweden-based Neko Health ($260 million); Switzerland-based Windward Bio($200 million), Numab ($194 million), CeQur Simplicity ($120 million), and Ireland-based Fire1 ($120 million). The diversity of investments across both geographies and focus areas (e.g. obesity therapeutics, oncology treatments, insulin delivery wearables, digital healthcare solutions, medical scanning) highlights the continued strength of investor interest in all areas of health and biotech, from health management and monitoring to medical devices, digital health, and disease prevention.

VC investment in the UK fell between Q4’24 and Q1’25 as VC investors continued to show a preference for proven startups given the uncertain market conditions and the ongoing lack of exits. While the health and biotech sector continued to attract robust investment during Q1’24 — led by a $410 million raise by Verdiva Bio — some UK-based biotech companies requiring patient capital struggled to attract funding as VC investors focused on startups with quicker paths to profitability.

M&A activity started to pick up in the UK during Q1’25, although the uptick has not yet translated into deal value given slow deal speeds and the enhanced focus on due diligence. During the quarter, PE firms were much more active in the M&A market, both due to improving interest rates and the desire to make investments within a reasonable timeframe or risk taking themselves out of existence.

Despite an increase in VC funding in Q1’25, the total number of VC deals in Germany was incredibly low compared to historical norms, with many completed deals coming as follow-on investments from existing investors. Seed and pre-seed deals were particularly soft, driven in part by a pullback from VCs looking to derisk their investments. The federal election in February likely also had a subduing effect on deal activity as investors waited to assess the impact of shifting government priorities on the VC ecosystem.

Despite uncertainties, fintech, AI and deeptech, and defense remained quite attractive to VC investors in Germany. Real estate decarbonization firm Reneo raised the largest funding round in Germany during the quarter ($624 million), followed distantly by medical education company Amboss ($257 million). During Q1’25, a growing number of late-stage companies in Germany also focused on IPO readiness programs, with the hope of exit opportunities towards the end of 2025 and into 2026.

VC investment in the Nordic region fell quarter-over-quarter, although investors continued to show interest in areas like healthtech and cleantech. During the quarter, Sweden-based preventative health technology company Neko Health raised $260 million, sustainable energy services company Elvy raised $153 million, and Finland-based low carbon hydrogen producer Hycamite raised $45.8 million. Current geopolitical uncertainty, tariffs and trade tensions may prolong the stagnate state of the Nordic VC investment further down 2025.

Ireland experienced it’s strongest quarter of VC investment in several years in Q1’25, driven primarily by large megadeals, including a$125 million raise by AI-powered productivity software company Tines,a $120 million raise by medical device company Fire1, and a $120 million raise by ocean data services company Xocean. Fintech and medtech sectors in Ireland continue to attract significant interest from VC investors given their robust innovation ecosystems and strong talent base, with AI solutions also receiving significant investment over the quarter. While positive coming into 2025, the sentiment of VC investors in Ireland was one of caution in the latter half of Q1’25 amid rising geopolitical uncertainties. The growing uncertainty could impact VC investment heading into 2025.