Europe’s venture capital market bounced back in the third quarter of 2025, with fund managers showing renewed optimism after months of uncertainty, the European Investment Fund (EIF) reported.
Market sentiment for financing innovative companies improved after earlier unease triggered by US policy shifts and global uncertainties. Four times more respondents expect the fundraising environment to get better, while six times more are optimistic about exit opportunities in the coming months. The survey covered prospects for selling stakes, attracting new investors, and arranging stock market listings. European Investment Fund Chief Executive Marjut Falkstedt said “the market environment for innovative startups is brightening.”
The improvement comes after a tough period that started with Russia’s invasion of Ukraine in 2022. The EIF conducts quarterly surveys with support from Invest Europe, which represents the continent’s private equity and venture capital sectors. More than 1,200 venture capital and private equity managers participated in the latest survey, a record-high number. But current market conditions still lag behind pre-2022 levels. The number of respondents who view the fundraising environment as difficult remains 46 percentage points higher than those who see it as favorable.
The European Tech Champions Initiative, launched in 2023 by six EU countries and the EIB Group, has mobilized over €20 billion for European tech companies. Officials disclosed that the program has supported nine European unicorns by allocating €3.9 billion through participating countries and the EIB Group. Building on this success, the EIB Group launched the TechEU initiative this summer to mobilize at least €250 billion for innovation by 2027. The EIF is currently working on “ETCI 2.0” with member states and private investors for launch in early 2026.
Fund managers in the survey highlighted Europe’s strengths: a strong innovation ecosystem, large talent pool, and ambitious startup founders. But they also pointed to weaknesses including complex tax regimes, challenging exit environments, and regulatory fragmentation across different countries. US-based fund managers specifically mentioned Europe’s regulatory patchwork as a problem. Scale-up financing for portfolio companies remains difficult for many venture capital providers. These challenges partly explain why some European companies choose to relocate or reduce their European focus.
The survey shows that investments by US-based funds influence European companies’ decisions to move operations elsewhere. This happens largely because of more attractive market and exit opportunities in the US, especially for companies planning to go public. For the first time, the survey compared market conditions between Europe and other regions including the US. Despite the recent optimism, Europe still faces competition from other markets that offer clearer paths to growth and exits for tech companies.
