Germany takes lead as Europe's startup investment landscape slows down

In the second quarter of 2025, Europe’s startup landscape showed signs of settling. Not in retreat, not in resurgence—just recalibrating. After years of volatility, the market seems to be finding its balance.

Startups across the region raised $12.6 billion through around 1,200 deals, down 24% from the record highs of Q2 last year. But quarter over quarter, activity held steady. The number of deals—also around 1,200—mirrored the previous two quarters almost exactly. 

This consistency certainly points to a certain maturity in the market, no longer spiralling but settling into something more stable, yet it also raises questions about the overall pace of capital deployment.

Germany Overtakes the UK in Startup Funding

Within this shift, Germany quietly pulled off a milestone. For the first time since 2012, it surpassed the United Kingdom in venture capital raised. German startups brought in $2.8 billion. UK companies fell behind at $2.5 billion, marking their weakest quarter since 2019. France, in third place, raised $1.8 billion. The movement wasn’t driven by headline-grabbing megadeals. Instead, Germany’s total came from consistent activity across several sectors.

Still, the quarter’s biggest raise didn’t belong to Germany. That went to Dream Games in Turkey, which closed a $1.25 billion round. But just behind it was Berlin’s Helsing, an AI defense tech firm, which secured $694 million. Multiverse Computing in Spain, focused on quantum software, raised $218 million. These deals reflect where European investor interest is heading: deep tech, critical infrastructure, and future-defining sectors like energy, robotics, therapeutics, and advanced software.

Startup Acquisitions Accelerate

Momentum wasn’t limited to funding alone. European M&A activity picked up pace, signalling growing confidence. The region saw $7.2 billion in disclosed exit value from 172 deals. Four of the world’s 18 billion-dollar-plus startup acquisitions came from Europe in Q2. They spanned sectors and cities: a crypto exchange in the Netherlands, a fintech firm in London, a quantum startup in Oxford, and a legal tech company in Barcelona. This variety points to something important—not just survival, but global relevance across verticals.

Late-Stage Funding Falls Behind

Yet for all the action, the gap is growing at the top end. Late-stage capital is where Europe continues to fall short. Only $5.7 billion was invested across 75 growth-stage deals, accounting for just 10% of global late-stage venture funding. By contrast, early-stage companies raised $5 billion, and seed-stage startups brought in $1.9 billion—both around 19% of global totals.

This imbalance matters. Early and seed investment can ignite ideas, but without deep late-stage capital, it’s hard to fuel global scale. And the bigger picture reinforces the concern. Europe’s share of global venture capital fell to 13% in the first half of 2025, down from 19% a year earlier. Meanwhile, North America surged, with $145 billion invested in the same period, driven heavily by artificial intelligence.

Germany’s ascent this quarter shows where Europe’s strengths may lie in the months ahead. But unless the funding environment deepens, especially at the later stages, those strengths may struggle to translate into long-term global competitiveness.