Europe

The strong geographic diversity of VC investments in Europe was on display in Q2’25, with companies from five different jurisdictions attracting the largest deals in the region during the quarter, including Germany-based Helsing ($683 million), Portugal-based Tekever ($500 million), Netherlands based ATS Holding ($444 million), Israel-based Cato Networks ($359 million) and UK-based Believ ($339 million). Several other jurisdictions in the Europe and Middle East also saw $100 million+ funding rounds, including Spain, Ireland, Iceland, the UAE, Switzerland, and Latvia.

The AI space continued to be a very attractive sector for VC investment in Europe during Q2’25. While startups focused on developing AI models and AI infrastructure attracted sizeable funding rounds — including Israel-based AI21 Labs, which raised $300 million — the hottest segment of  AI investment in Europe was the intersection of AI and defencetech. During the quarter,  Germany-based battlefield AI and intelligent drone developer Helsing raise $683 million, Portugal-based unmanned aerial solutions firm Tekever raise $500 million, Germany-based drone manufacturer Quantum Systems raise $178 million, and Israel-based military technology platform Kela Technologies raise $88 million.

The robust deal sizes reflect the keen interest of VC investors in the application of AI to defence technologies, particularly given shifting norms around investing in defence companies, growing concerns related to geopolitical tensions and conflicts, and the rapid maturation of AI-powered startups in the space. 

In recent quarters, Europe has seen both regional and jurisdictional governments make substantial moves to support critical technology development capabilities in order to enhance technology sovereignty in the region and decouple ecosystems from the US and China. Following on its Q1’25 announcement of a $206 billion InvestAI program, the European Commission launched a new EU Startup and Scaleup Strategy in Q2’25 to encourage companies to start and scale in the region in order to boost technology independence and sovereignty.¹ To support this strategy the Commission announced a new public-private partnership investment fund valued at a minimum of €10 billion to support the growth and expansion of EU-based technology companies in areas like AI, cybersecurity, and cleantech in order to narrow the innovation gap between the EU and the US and China.²

VC investment in Germany picked up from $2.4 billion in Q1’25 to $2.7 billion in Q2’25, despite a small decline in deal volume as VC investors prioritized late-stage deals and shied away from making seed and early stage investments. At a sector level, defencetech was a particularly bright light during the quarter, led by a $682 million raise by Helsing and a $178 million raise by Quantum Systems, with VC investors showing particular interest in AI and remote sensing technologies. Many other sectors in Germany struggled during Q2’25 as VC investors pulled back from making deals given the uncertain geopolitical and trade environment globally. The quarter did see a number of corporate spin-offs, with the resulting companies now co-financed by VC investors.

During Q2’25, Germany’s government also announced a new €500 billion Defence and Infrastructure Fund;³ with one-fifth of it dedicated towards facilitating the energy transition and supporting climate protection activities. The creation of this fund is well positioned to spark further investments in cleantech over the next few quarters.

VC investment in the UK dropped to $3.5 billion in Q2’25 — down from $5.2 billion in Q1 and marking the slowest quarter since early 2020. The decline was driven largely by a pullback in corporate venture capital activity.

Despite the dip, artificial intelligence remained a dominant investment theme, with growing confidence in AI innovation across sectors. The UK government has reinforced its commitment to AI, pledging to create 13,000 jobs and strengthen national computing capacity by 20x. At London Tech Week, Prime Minister Starmer and Nvidia CEO Jensen Huang announced a £1.5 billion investment aimed at positioning the UK as an “AI maker, not an AI taker,” boosting the country's fast-growing AI startup ecosystem.⁴

Notable Q2 megadeals included Believ ($338 million, EV charging), XY Miners ($300 million, cloud computing), and CMR Surgical ($200 million, healthtech). In H1 2025, healthtech narrowly edged out fintech as the UK’s top-funded sector, followed closely by enterprise software.⁵

After a robust quarter of investment in Q1’25, including a number of outsized deals, Ireland saw VC investment drop in Q2’25. This decline likely reflects both a natural pause given the significant investment seen in the previous quarter and the general state of uncertainty in the broader macroeconomic and geopolitical environment. Investor sentiment and outlook for H2'25 remains cautiously positive, in part because Ireland's VC ecosystem has a strong focus on software companies, which have less direct exposure to US tariff risks causing so much uncertainty globally, but also because of the strength of Ireland’s innovation ecosystem and the positive valuations that have been garnered by Ireland-based startups in recent months.

Fintech continued to attract a significant amount of VC investment in Ireland during Q2'25, with NomuPay and Wayflyer raising $40 million and $35 million respectively.

VC investment in the Nordics region fell to $899 million in Q2’25 — a low not seen since Q3’19 — driven primarily by regional and global challenge and uncertainties, including evolving US tariff policies, the tensions in Middle East, and a stagnating exit market. Large deals were generally absent in the region during Q2’25, with some later stage companies avoiding the need for raises by adjusting their operating models or finding non-dilutive funding options — including venture debt. At a sector level, VC investors in the region continued to show robust interest in defence tech and dual-use solutions. AI and deep tech also continued to see traction; during the quarter, Legora — which provides a collaborative AI platform for Lawyers — raised $80 million.⁶