How Europe's top investors will invest in 2026
Check your homework against the competition
Quality dealflow; more confident investors
Equity investment into European startups grew from €48bn in 2024 to €53.6bn in 2025, according to Sifted data — an 11.6% rise, and the third highest level on record. January 2026’s off to a slower start than the previous two years, but investor sentiment would suggest a similar rate of increase is on the cards. The hottest startups’ rounds are more competitive than ever: 86 equity deals of €100m or more were announced in 2025, compared to 66 the year prior, and valuations are rising again. Unicorn and decacorn creation is up.
"Tech sovereignty will stop being a political slogan and start becoming an economic reality. In AI infrastructure, semiconductors or climate tech, European startups will no longer rely by default on US or Asian dependencies. They will build, own, and scale critical technologies from Europe, for the world.”
– Achim Plum, managing director, HTGF
“Our boldest prediction is that European businesses will prove to be far more resilient and high performing than the prevailing narrative suggests. Behind the headlines, European companies are delivering real growth, strong operating performance, and increasingly global relevance.”
– Verdane
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Optimism is back. Liquidity isn’t (yet)
VCs are a confident bunch. It goes with the territory. Yet VC fundraising in 2025 fell to $20.6bn, the lowest total over a 12-month period since 2020, according to Dealroom data. While 42% of surveyed investors tell us they expect to close a fund this year, and a further 28% are fundraising with a view to closing in 2027, the backdrop remains challenging. Exit horizons are stretched, making it harder for GPs to return capital within the typical 10-year fund cycle. Secondaries are helping to unlock some liquidity, but they don’t change the underlying reality: this is a tough fundraising market, even for Europe’s best.
"The number of active VCs will decline."
– Inventure
“Bold bet: VC secondaries go mainstream.”
– Alkemia Capital
“Some emerging managers won’t survive fundraising, which concentrates capital with fewer, stronger funds. More and more secondaries will help unlock liquidity.”
– Vorwerk Ventures
“In Europe, VC fund exits remain exceptionally scarce, with depressingly low DPI for older vintages.”
– Origins
“Meanwhile, the angel market is growing at 13% annually and professionalising fast with rolling funds and syndicates. Traditional VCs are stuck with bloated 10-year fund cycles that don't match today's pace. Small VC funds are disappearing while mega-funds get bigger, leaving a massive gap at seed stage that angels are filling and founders prefer them too.”
– Sure Valley Ventures
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Europe’s dependence on US capital isn’t going to change anytime soon
Here lies the problem. Europe has no shortage of micro-VCs, but writing the big cheques remains out of reach for most. Sifted tracked more than 1,500 active US funds investing in Europe in 2025 — up 20% on the year before. They’re showing greater conviction in backing European companies: a striking 86% of the 50 most active US funds investing in Europe increased their dealmaking here last year. Whether that surge continues will depend, in part, on how the geopolitical landscape evolves.
“We’re seeing an increasing number of higher-calibre founders who think big and global from day one. As a result, the overall quality of companies keeps improving, which will continue to attract more interest from global VCs.”
– JME Ventures
“Globally 2025 was, by far, our most active year in an 11-year history for new investments across seed, venture, and growth. But this was not reflected in the number of our new deals in Europe ( 2 ). Looking ahead to 2026 we hope to invest in a larger number of great European cybersecurity and cyber-adjacent companies particularly at seed and series A.”
– Ten Eleven Ventures (US fund)
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Expect deal count to be on par with 2024 and 2025
Deal volumes have settled into a new normal over the past two years, with 2025 deal count just 1% below its 2024 level. Looking ahead, 81% of investors tell us they expect to make the same number of investments in 2026, if not slightly more. The result? Modest upside is possible, but with far less spray-and-pray than in years past.
“We have only invested about 20% of our main €250m early-stage fund. We will invest in two main topics in 2026: deeptech and AI. In deeptech we see continuously more relevant deal flow; therefore, we will do more deals. In AI we assume a decrease of the hype and hope to see more suitable companies in terms of traction and valuation.”
– UVC Partners
“We believe that there is the opportunity to build global leaders from Europe and that there is a lack of dedicated capital at the pre-seed stage to help companies build the right foundations. As one of the few firms investing exclusively at pre-seed in Europe, we'll continue to deploy at the same cadence through all phases of the cycle.”
– Playfair Capital
“It continues to be a challenging market for fundraising, so we will remain cautious on deployment.”
– Beringa
“We will be more selective going forward. Backing the few.”
– Inventure
“Deal volume comes down, but deal quality goes up.”
– Vorwerk Ventures
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VCs are on the hunt for new bets
Nearly six in 10 say they plan to make more new investments than follow-ons in 2026, signalling a renewed focus on adding new companies to portfolios rather than doubling down on existing ones. It’s a sign that confidence has returned, but also that patience with underperforming companies and legacy bets made in a very different market, is wearing thin. It’s also partly mechanical: with 2022 and 2023 the peak fundraising years, many funds are now in the heaviest years of deployment — good timing given the quality of startups and founders around right now.
“Market conditions, the quality of early-stage deal flow, disciplined valuations, and a focus on allocating capital primarily to new investments.”
– Blast Club
“We continue to see a very strong high quality dealflow of spacetech and defence tech companies mainly at pre-seed from a variety of eastern European ecosystems. Therefore we expect to continue with an increased deployment pace of about two new investments per quarter throughout 2026.”
– Sunfish Partners
“Most paper unicorns will hit a wall.”
– Acrobator Ventures
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Seed is the new Series A
Investors are increasingly moving earlier, with pre-seed and seed rounds attracting more attention from funds. General Catalyst alone backed 15 named pre-seed and seed rounds in Europe in 2025, while early-stage specialists say they’re backing teams even pre-product to secure the strongest opportunities at inception. Competition is intensifying, but many investors argue that signal quality has improved, with stronger founding teams and more technically mature startups from the outset.
“We're moving earlier to capture the best opportunities at inception, while also backing companies at the scaling stage through our growth fund.”
– United Ventures
“More capital is coming into the market, and valuations are going up. Pre-seed and seed rounds are getting more competitive as a result. This pushes us to be more selective and to move earlier.”
– Flyer One Ventures
“We're also going in earlier. If the founding team is exceptional or the technology groundbreaking, we're prepared to invest even pre-product.”
– SFC Capital
“Points of worry are elevated valuations in inception/pre-seed rounds, especially in AI startups.”
– Daphni
“There is a lot of noise at pre-seed. Many companies have credible founders, decent products and promising early traction but these are no longer a proxy for long term success. The companies that shine through will be the ones where founders have deep domain expertise, which creates marginal gains across every aspect of their product & go-to-market strategies.”
– Circle & Co
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“We are seeing more technically mature pre-seed and seed opportunities across biotech and industrial innovation, while valuation discipline has returned. This allows us to deploy early with conviction, move quickly in competitive rounds, and concentrate capital behind the highest-quality companies as they begin to scale.”
– ZAKA VC
“While later-stage valuations have mostly stabilised, early-stage valuations remain inflated. There's been a surge of new funds willing to pay high valuations at pre-seed and seed which often results in unrealistic expectations at the next round. Too often, we meet seed-stage teams whose pre-seed round was raised at a $15–20m pre-money and more, and they’re now aiming for valuations that simply don’t match their traction. The maths simply don't work.”
– AltalR Capital
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AI bubble or not, Europe’s riding the wave
Most investors are well aware that parts of the AI market look frothy. Many AI-native startups have raised on rapid early ARR growth, but the harder test will come in year two: sustaining that growth, retaining customers and embedding products deeply enough into enterprise workflows to become indispensable. That risk is widely understood, but it isn’t putting them off. Instead, many seem to be treating the bubble narrative as a feature of the cycle rather than a reason to step back — accepting that some disappointment is inevitable and pressing ahead anyway.
“Capital is often deployed on expectations rather than proven cash flows, with some valuations assuming near-perfect outcomes despite high uncertainty. That said, this enthusiasm serves a purpose: Western economies need a credible source of productivity growth to address structural debt, and AI is the only technology perceived as capable of delivering it. The narratives around what current generative models, especially LLMs, can do are often exaggerated. But the scale of investment in infrastructure, compute, and energy is rational and will enable fundamentally new approaches, as illustrated by the recently announced launch of AMI Labs, Yann LeCun’s startup.”
– Paul Moriou, partner, Serena
“There’s a lot of discussion around an AI bubble but we take a more optimistic view. Yes, there are signs of overheating: capital flooding into anything labeled “AI,” and inflated valuations driven by large transactions between major players. These are signs of hype, but not of a true bubble like the dot-com era, when many companies had no product, no customers, and no revenue. This time is different. We’re seeing real adoption and revenue growth at unprecedented speed. Companies like Lovable or Cursor are already scaling rapidly.”
– AltalR Capital
“2026 will be the year the AI hype cycle breaks in Europe. Most AI-native startups will struggle to defend pricing or retention, while a smaller group embedding AI into mission-critical financial and operational workflows will quietly compound value.”
– Aperture
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“2026 will be the year the B2B AI landscape decisively shifts from pilots to real value. Many AI companies that raised on the back of enterprise PoC budgets and inflated expectations will struggle to show measurable impact and quality revenue, leading to valuation corrections.”
– T.Capital
“Europe will have its Theranos moment, as investors chase hot AI deals with a lower bar for due diligence and competition for these deals leads investors to cut corners. A negative, of course, but also a sign of how far Europe has come in the world of startups and venture capital in the past decade. The industry is mature enough to attract fraudsters.”
– 6 Degrees Capital
“Although it's a big part of the UK government’s AI strategy, Nscale won’t make it.”
– Ten Eleven Ventures
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AI grows up
Over half (55%) believe we are currently in an AI investment bubble, although 80% of VCs tell us broader concerns around an AI bubble won’t impact their AI deployment strategy. Rather than the noise disappearing, investors expect it to become more substantive in 2026, as attention shifts from experimentation to execution. In Europe, the focus is increasingly on applied AI: industry-specific solutions, workflow redesign and technologies embedded deep into real-world, often regulated environments. A smaller group of companies is likely to pull ahead by successfully integrating AI into core enterprise processes that actually stick.
“In 2026, AI value shifts from raw compute to real-world adoption. Only 5% of workflows currently use AI, so the focus is on industry specific solutions and workflow redesign, innovation that happens close to the end users, especially across Europe. A wave of top AI talent returning from the US to Europe will lead to Europe’s first AI decacorns.”
– Michael Kotting, partner, Northzone
“2026 feels like the year where momentum in AI crystallises, moving from clever demos to production systems that work; a year where new paradigms emerge beyond LLMs; and where AI moves deeper into enterprise workflow.”
– Sam Endacott, partner, Firstminute Capital
“The first wave of AI investments will start to disappoint. We're watching the first phase of the .com bubble - too early, too expensive and wrong expectations. The second wave will be where the real winners are. Better products built by teams that actually focus on customer needs, with better timing as enterprises will finally be ready to adopt the new tech. This will also come with clearer use cases and more realistic valuations for investors.”
– SFC Capital
“This is the year that enterprises and startups figure out how to work together leading to large enterprise budgets being allocated to real deals with startups (vs exploratory AI budgets).”
– Playfair Capital
“Europe will quietly win in AI applications, while the US over-invests in models.”
– TX Ventures
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“This is the year agents are genuinely adopted by enterprise. The technology has matured enough to handle autonomous operations and, critically, to be auditable. As software moves from assisting humans to owning bounded outcomes, the constraint shifts from model capability to decision design - what systems can decide, when they escalate, and what receipts they leave behind.”
– Sure Valley Ventures
“Europe will produce the world’s strongest applied AI startups in 2026. While the U.S. continues to lead in foundation models, European founders will win by embedding AI deeply into real-world, regulated industries, turning domain expertise into defensible, revenue-generating products that scale globally.”
– AI.FUND
“AI data center overhang starts to crack and has a knock on effect. But the AI data centre boom also becomes a core driver of deployment of energy efficiency and energy generation technologies.”
– 2150
“Five new European AI decacorns will be minted in 2026.”
– RTP Global
Let’s get physical
After years of software-led growth, investors expect Europe’s next tech wave to be rooted in the physical world. Defence, robotics and industrial technology are climbing the agenda, driven by geopolitical pressure, the urgency to secure supply chains and infrastructure, stronger commercial pathways and Europe’s deep bench of scientific and industrial talent.
“In 2026, we officially flip the script from 'software eats the world' to 'hardware builds the future.' What is currently a VC thesis is becoming undeniable reality: Europe is producing vertically integrated companies — in geothermal, advanced manufacturing, and beyond — that physically cannot be built elsewhere. The rest of the world simply lacks the unique industrial talent, supply chains, and infrastructure to compete on this playing field.”
– First Momentum
“Europe’s next tech wave will come from products and services rooted in the physical world rather than purely digital or software companies. SaaS is becoming lower margin / cheaper and more commoditised, real innovation will come from hard-tech platforms that solve difficult problems in hardware, supply chains, regulated infrastructure like chips, sensors, energy systems, industrial processes, and of course from defence platforms.”
– Oxford Science Enterprises
“My boldest prediction for European tech in 2026 is that defence and security will become the primary 'flywheel' for European deeptech scaleups — the way consumer internet or fintech played that role in previous cycles.”
– Omnes Capital
“We're focusing on areas where Europe has structural advantages: AI and deeptech. Europe’s university spinout ecosystem has matured. Increasingly, scientists are choosing to build companies rather than just publish papers. This is translating into strong deal flow in industrial robotics, space tech, cybersecurity and energy: areas where Europe's research and industrial base creates defensible advantages. We’re on a mission to encourage more researchers to commercialise IP.”
– Atlantic Labs
“Winning startups in 2026 won’t be those with the fanciest models, but those whose technology integrates into real systems — supply chains, grids, factories — and unlocks measurable economic and sustainability value. Security for energy, food systems, societal structures and productivity improvements will be even higher priorities for Europe. We can see Europe continuing its pace to produce more industrial tech unicorns on the back of tech savvy founders, a strong deeptech ecosystem, and motivated capital ready to back companies in the break out phase.”
– Sandwater
“Increased defence spending will finally translate into real dual-use infrastructure, faster procurement, and strong spillovers into civilian R&D. Europe could see a step-change in 2026 demand for security, robotics, sensing, AI, and resilient energy/telecom creating clearer growth trajectories for startups and scale-ups. That security dividend could also crowd in private capital by lowering perceived tail risks, accelerating consolidation and cross-border industrial partnerships in European tech.”
– Sunfish Partners
“Europe is standing frozen in the headlights of two revolutions, AI and energy. But while everyone stares at the flash, the real transformation is happening inside industry. And that is Europe’s moment. We sit on the world’s largest industrial base. If Europe stops playing small, stops playing safe, and stops being politely incremental, we can lead the category that will actually define global power dynamics: industry tech. The future of Europe’s economy and its citizens isn’t in apps or ads. It’s in reinventing the industries that make, move, and power the world.”
– Endgame Capital
"A ChatGPT moment” for robotics led by European companies. While AI dominates today, 2026 will be the year a robotics product captures the public’s attention – much like ChatGPT did for AI. With its deep roots in industrial robotics, Europe is well placed to lead this."
– Connect Ventures
“Bold bet: Entrance of humanoids into homes on a big scale.”
– Planet A Ventures
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All eyes on Stockholm
Investors are pulling out their snow jackets and planning to spend more time in Stockholm this year — thanks, no doubt, to the attention Lovable and its AI peers have brought back to the city. Helsinki will be hoping for its own Lovable moment in 2026.
Zurich, meanwhile, is quietly climbing investors’ priority lists. The world’s biggest tech companies have long clocked the city’s deep talent pool — Google, Nvidia, Apple, Meta, Microsoft, Oracle, Palantir, OpenAI and Anthropic all have a presence there — but breakout local champions have been thinner on the ground. Momentum swung in 2025 as Zurich cemented itself as Europe’s go-to hub for robotics and industrial tech, helped by a bumper run of spinouts from ETH Zurich, which churned out a record number of startups in 2023 and 2024.
“We’re seeing more and better startups/founders than ever before in Spain. The activity we’ve seen in the past 12 months is much greater and of apparent better quality than what we’ve seen in the past 10 years."
– Kfund
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Exits are coming (gradually)
Few investors are anticipating a landslide of exits in 2026, but over two-thirds (68%) think Europe will see more exits this year than in 2025. That optimism isn’t entirely unfounded: Sifted data shows exit activity ticked up by 6% between 2024 and 2025. If that gradual recovery continues — and accelerates as many investors expect — it would be welcome news for the 70% of VCs planning to begin fundraising, or close a fundraise, in 2026.
“Continued exit momentum (including both positive and mediocre/poor outcomes), to round up consolidation around major macro themes. Potentially, more mergers than cash-based sales.”
– 14 Peaks Capital
“2026 will be the year when European tech really starts to move on its own rhythm instead of constantly reacting to what happens in the US. We’ll likely see fewer headline-grabbing megarounds, but many more solid, strategic acquisitions – especially in deep tech, energy, defense, and industrial AI.”
– kickfund
“Europe sees more exits: maybe some flashy IPOs, but overall, exits will be driven by M&A and strategic buyers.”
– Vorwerk Ventures
“Bold bet: Large M&A.”
– K Fund
Read the rest of the Sifted Predicts series
The 10 forces set to shape European tech in 2026
The 26 startups to watch in 2026
The hottest sectors to watch in 2026
