The European venture capital market has shown resilience in the second quarter of 2025, with valuations and deal sizes rising across most series despite ongoing geopolitical turbulence and macroeconomic uncertainty.
According to PitchBook’s Q2 2025 European VC Valuations Report, the region’s startup ecosystem is navigating a complex landscape with cautious optimism, driven by refined methodologies and shifting investor sentiment.
The report indicates that venture valuations in Europe continued to climb in Q2 2025, with deal sizes increasing across most series, even as overall deal volume remained relatively flat.
This growth follows a broader recovery trend observed since 2024, where median deal sizes and valuations rebounded after a dip in 2023.
Notably, the UK led valuation gains, with venture-growth valuations reaching €34.2 million, while seed-stage valuations rose 15.4% year-over-year.
Early-stage valuations, however, saw a slight decline, particularly in AI, where median valuations dropped to €6 million, trailing SaaS at €8.5 million.
PitchBook’s updated methodology, which now segments data by series rather than stage, reportedly provides a more accurate view of the market by excluding lower-quality outliers that previously skewed results.
This refinement has revealed stronger pricing power among startups, with the proportion of down rounds declining year-over-year.
However, Q2 saw a slight uptick in down rounds, particularly in AI, where nearly 25% of deals occurred at lower valuations than previous rounds.
This suggests that while investor confidence is improving, certain sectors face heightened scrutiny.
AI remains a focal point for European VC, with deal value pacing 24% above 2023 levels, driven by massive rounds such as Isomorphic Labs’ €536 million raise.
However, the report highlights a divergence in AI valuations: early-stage AI deals saw a slight valuation decline, while late-stage AI valuations remained robust.
SaaS, meanwhile, emerged as the leading vertical, with median valuations reaching €8.5 million, underscoring its stability and appeal to investors.
Fintech also saw significant valuation jumps, reflecting renewed interest in high-quality investments.
The report notes that larger rounds have dominated the market, signaling investor confidence in established startups.
Venture-growth deals, in particular, accounted for over half of Q3 2024’s top 10 deals, a trend that continued into 2025.
This focus on larger, later-stage rounds suggests that investors are prioritizing companies with proven traction, even as early-stage deals face challenges from tariff-induced market volatility and a dimming IPO window.
Despite the positive trends in valuations, the exit market remains a concern.
The report highlights a “private-to-public dispersion” in valuations, with private valuations averaging over twice the level of VC-backed public listings over the past decade.
Down round IPOs in Q2 2025 further underscore this gap, with only one unicorn exit recorded in Q1 via bankruptcy.
The IPO market faces additional pressure from tariff-related volatility, which is expected to depress exit valuations and delay major public listings throughout 2025.
The Q2 2025 European VC Valuations Report paints a picture of a market in transition.
While valuations and deal sizes are on an upward trajectory, the flat deal volume and challenges in the exit market signal that recovery is not yet complete.
The report suggests that stabilizing interest rates and slowing inflation, which contributed to Q3 2024’s recovery, may continue to support valuation growth into 2025.
However, macroeconomic headwinds, including tariff impacts, could temper optimism.
For European startups, the focus on high-quality investments and larger rounds offers opportunities for well-positioned companies, particularly in SaaS and fintech.
AI, while still a hotspot, faces valuation pressures in early stages, requiring founders to demonstrate strong fundamentals to secure funding.
As Europe’s VC ecosystem navigates these dynamics, PitchBook’s refined data and insights provide a clearer roadmap for investors and entrepreneurs alike, highlighting both the resilience and the challenges of the region’s startup market.