The excitement for the European startup market was hard to ignore at the annual Slush conference in Helsinki last month. But the actual data on the state of the region’s venture market shows a different reality.

The upshot: The European market has not recovered from the global venture capital reset that occurred in 2022 and 2023. But there is evidence it is on the cusp of a turnaround, including Klarna’s recent exit and the region’s homegrown AI startups garnering attention from local investors and beyond.

Investors poured €43.7 billion ($52.3 billion) into European startups in 2025 across 7,743 deals through the third quarter, according to PitchBook data. That means the yearly total is on pace to match — not exceed — the €62.1 billion invested in 2024 and €62.3 billion in 2023.

In comparison, U.S. venture deal volume in 2025 had already surpassed 2022, 2023, and 2024 by the end of the third quarter, according to PitchBook data.

Deal recovery isn’t Europe’s biggest problem, though — it’s VC firm fundraising. Through Q3 2025, European VC firms raised a mere €8.3 billion ($9.7 billion), which puts Europe on track for its lowest overall fundraising yearly total in a decade.

“Fundraising, LP to GP, is definitely the weakest area within Europe,” Navina Rajan, a senior analyst at PitchBook, told TechCrunch. “We’re on track for around 50% to 60% decline in the first nine months of this year. A lot of that is made up now by emerging managers versus experienced firms, and the mega funds that closed last year haven’t repeated this year.”

While Rajan doesn’t share the same fever that oozed out of attendees at Slush, she pointed to a few positive data points that suggest the European market is turning around.

For one, the participation of U.S. investors in European startup deals is back on the rise. Rajan said that figure dipped to a low in 2023 when U.S.-based VCs participated in just 19% of European venture deals. It has been steadily on the rise since, she said.

“They seem pretty optimistic on the European market,” Rajan said. “Just from an entry point of view, because you think about valuations, especially within AI tech and in the U.S., it’s just impossible to get in now, whereas, if you’re in Europe and your multiples are lower, and you’re new as an investor, it just provides a better entry point for perhaps similar tech.”

Swedish vibe-coding startup Lovable is one example of this shift. Vibe-coding companies have raised a lot of VC money in the United States. But U.S. investors also clearly love Lovable. The company just announced a new $330 million Series B round that was both led by and participated in by a slew of U.S.-based VCs, including Salesforce Ventures, CapitalG, and Menlo Ventures, among others.

French AI research lab Mistral has seen similar love from U.S.-based firms. Mistral landed a €1.7 billion Series C round in September that included Andreessen Horowitz, Nvidia, and Lightspeed.

Klarna’s recent exit also suggests a turnaround is underway.

Swedish fintech giant Klarna went public in September after raising $6.2 billion across two decades in the private market. That exit likely recycled some capital back to European LPs or gave them confidence in a changing exit environment.

For Victor Englesson, a partner at Swedish EQT, the recent European success stories, like Klarna, have started to change how founders in Europe approach building their companies.

“Ambitious founders have seen what great looks like in companies like Spotify, Klarna, Revolut and are now starting companies with that type of ambition,” Englesson told TechCrunch. They’re not starting companies with like, I want to win in Europe, or I want to win in Germany. They start companies with a mindset that I want to win globally. I don’t think we have seen that to the same extent before.”

That mindset has EQT, and others, bullish on Europe.

“For EQT, we’ve invested $120 billion in Europe [over the] last five years,” Englesson said. “We’re going to invest $250 billion [over the] next five years in Europe. So we are extremely committed to Europe.”