European tech funding has stabilised after a period of extreme volatility. Investment levels peaked at $101 billion in 2021, a 170% year-over-year increase during the pandemic-fueled tech boom. However, as macroeconomic conditions shifted dramatically, capital invested has returned to levels more aligned with the ecosystem’s long-term growth trajectory.
The latest State of European Tech report by Atomico and Dealroom projects that startups in the region raised approximately $45 billion in 2024, down slightly from $47 billion in 2023. This modest decrease signals continued pressure on the funding environment rather than the return to “normal” growth curves many had anticipated after the 2023 contraction.
So, how are startups adapting to Europe’s funding crisis? Tech Funding News spoke with prominent founders and investors driving this shift — here’s what they told us.
Local resilience, different outcomes
Funding challenges vary across Europe. The UK leads with tech companies on track to raise over $13.1 billion in 2024, followed by France ($7.5 billion) and Germany ($6.7 billion). The Netherlands has shown the most substantial absolute funding increase, attracting $2.5 billion in 2024 compared to $1.8 billion in 2023, overtaking Switzerland and Sweden to claim fourth place.
Despite these challenges, Europe’s tech ecosystem has shown remarkable long-term expansion. Over the past decade, funding has grown tenfold compared to the previous ten years, from $43 billion to $426 billion. This growth rate outpaces other global regions, with Europe achieving a 10-year compound annual growth rate (CAGR) of 13%, compared to 8% for the United States and 2% for China.
Konstantin Gnyp, a VC at Runa Capital, shared his insights with TFN: “The years 2021–2022 were certainly outliers in the EU VC-backed ecosystem, with extremely high levels of investment activity. In 2023 and 2024, we see more alignment with the ecosystem’s natural long-term growth trajectory. Although there’s been a modest decline in investment capital compared to 2023, it’s worth highlighting that we are still performing above 2020 levels despite multiple negative macroeconomic factors currently affecting the EU.”
Ross Strachan, Partner at Adara Ventures, offered an optimistic perspective: “Despite the recent downturn in VC funding, we see this as a great moment to invest. The fundamentals of innovation are stronger than ever… A noticeable surge in early-stage activity, particularly at pre-seed and seed stages, aligns well with our strategy.”
Kyrillos Akritidis, Co-founder and Managing Director at Schwarzwald Capital, added: “We see this decline more as an opportunity, as there is more choice for cooperation. If others invest less, we have more projects to choose from. We continue to evaluate them across different countries, and we are still committed to investing in pre-seed and seed-stage startups, particularly in the creator economy and fintech sectors. These areas continue to show strong growth potential: We mainly focus on projects that have a clear growth path in their minds, along with monetization strategies.”
Leaner teams, sharper focus
Startups that thrived in the era of easy money now face a different reality. With fewer late-stage deals and smaller rounds, founders must make tough decisions, often trading growth-at-all-costs for capital efficiency, product focus, and profitability.
Vitalijus Majorovas, co-founder of Pulsetto, explained: “Looking back, we’ve actually been following a strategy that works for us: keeping things practical and lean from day one… For us, the formula has always been simple: stay lean, move fast, and build what matters.”
Luis Garay, Partner at Samaipata, echoed this sentiment: “Rather than pivoting our strategy, we have leaned into the prevailing value-over-volume mindset. Capital continues to concentrate around the most promising companies, and our portfolio reflects that trend: eight of our startups raised compelling Series A rounds in 2024, including Embat (Spain) and Nory (Ireland) with €15M+ rounds led by Creandum and Accel, respectively.”
“In 2024, we’ve ensured that our team is very lean, allowing us to achieve profitability by the end of the year,” said Jens Neuse, CEO and co-founder of WunderGraph. “With virtually infinite runway, lots of cash in the bank, and a strong burn multiple, we raised a solid Series A.”
Davide Dattoli, Executive Chairman and Founder of Talent Garden, echoes these strategies: “In recent years, the venture capital landscape has changed significantly, with investors becoming more selective and focusing on business sustainability. We’ve adjusted our strategy by balancing growth with operational efficiency. Resilience has been at the core of our approach, focusing on revenue diversification, cost optimisation, and innovation in our offerings.”
Is it really a funding crunch?
Not everyone agrees that startups face a crisis. Nick Perrett, CEO and founder of Prosper, offered a counterpoint: “I would challenge the whole premise that investment is challenging in venture at the moment. The best companies are still raising,” he said. “If anything, too many of the wrong companies were funded in 2021, so I see this more as a reversion to the mean than a fall.”
From his perspective, the market isn’t shrinking — it’s refocusing. “We have not seen a decline in venture capital funding. What we have seen is a refocus on ‘responsible’ growth. That’s what investors are looking for.”
Neuse echoed the sentiment but with a clear bias toward the U.S. ecosystem. “We tried in 2021 to get funding from European and American VCs. European VCs were reluctant to invest in early-stage SaaS with new business models. They wanted early traction when we needed time for R&D,” he said. “Consequently, we abandoned the idea of finding investment from VCs in Europe. They’d much rather invest in clones of proven business models from overseas.”
A shift in venture priorities — but not the thesis
As venture funding becomes more challenging, many startups have turned to debt financing to bridge gaps. Garay noted: “We believe this trend is driven by two main factors: first, venture capital is inherently expensive… Second, recent valuation mismatches have led some companies to explore debt as a temporary bridge.”
“The decline in European venture funding has sharpened our strategy. Rather than retreating, we’ve intensified our focus on resilient, high-potential critical sectors such as healthcare and AI-driven biotechnology (TechBio),” said Krish Ramadurai, Partner at AIX Ventures. “We also actively leverage geographic arbitrage, bringing promising EU and UK startups into the US market, where more attractive valuations enable us to efficiently achieve target equity ownership at the early stage.”
According to Anton Waitz, General Partner at Project A, the core investment thesis remains intact. “The decline in venture funding hasn’t altered our focus. We continue to back early-stage startups — pre-seed to seed — where we see the greatest opportunity to add lasting value,” he said.
Sebastian Heitmann, Partner and co-founder of Extantia Capital, explained, “We’re seeing a rise in debt and hybrid financing products. These can be useful tools for certain startups, especially those with predictable revenues, but equity capital remains critical for high-growth, high-risk ventures.”
Alternative capital is rising — but not replacing VC
Alternative capital is gaining traction as an option for startup founders, but it’s not replacing venture capital (VC). As Ramadurai explains, “Indeed, alternative financing models have been adopted. Notably, revenue-based financing (RBF) and strategic venture debt. Additionally, strategic investors, huge biopharmaceutical companies, increasingly invest directly from their balance sheets.”
Founders like Thomas Vles, GoDutch’s CEO, focus on sustainable growth through innovative approaches. “Our main funding source is our users. We prioritise delivering value and generating cash flow from day one. We’re also considering external funding, especially angel rounds for capital and expertise,” Vles noted. He emphasised the importance of early relationships with VCs: “While we’re not seeking partnerships now — and VCs are cautious—these discussions set the stage for efficient future funding rounds.”
Julian Wiedenhaus, CEO of Plancraft, advocates for a strategic mindset in fundraising: “A good friend once told me, don’t chase — attract. That’s exactly how we see fundraising. It’s not about chasing checks but building the most valuable company in your space.” He further noted that scarcity in capital can be advantageous: “Capital is scarcer now, but that’s a feature, not a bug. It filters out noise.”
Rosaria Di Donna, CEO of familymind.ai, shares her views on adapting to the current funding landscape. Regarding her fundraising strategy amidst declining VC availability, she stated: “We’ve shifted from a ‘grow fast’ mindset to one focused on resilience and real-world value. Our strategy is twofold: leveraging governmental grants for independence and creating a customer-centric product with strong market fit. This allows us to validate deeply and grow with purpose.” Di Donna also highlighted Familymind’s business model, designed to withstand economic uncertainty: “We’ve built Familymind to be resilient by default, grounded in real family routines and supported through partnerships for responsible scaling.”
From an investor’s perspective, Alexander Lange of Inflection sees the current climate as a return to the roots of venture capital: “Venture used to be a niche, cottage industry driven by misfits with radical ideas before it turned into a factory churning out incremental businesses following a playbook. Those days are over, and we’re back to the industry’s roots.” He also views the downturn as an opportunity: “We perceive the risk/return ratio in venture to be far more attractive now than at any time during the last decade.”
Banking the right way
Beyond equity and debt, financial institutions also play a key role in helping startups weather the storm. Mano Bank is one example in Lithuania, tailoring its services to support young companies with practical, hands-on banking partnerships. “Startups don’t just need storage accounts; they need strategy,” said Paula Zulonė, head of key accounts. “We proactively guide them through changing conditions, which creates trust.”
Startups struggling with reduced venture capital and rigid financial systems increasingly turn to specialised banks. Mano Bank, a Lithuania-based financial institution, believes banks must go beyond basic services to support innovation. Zulonė also warns against the “one-stop-shop” fallacy for startups: “Find your niche, understand your strengths, and communicate your value. Don’t jump on market trends just because they might seem profitable.”
Strategic partnerships and alternative funding channels are also key strategies for startups. Jasmi Thrikediswarenaden of PayZlip highlights the benefits of collaborating with regional financial institutions: “These partners not only provide more tailored financial instruments — such as bridge loans and factoring services—but also bring valuable networks within our core markets.”
Ultimately, success in today’s challenging funding environment requires resilience and adaptability. As Strachan advises founders: “Try to go as far as you can without external capital… Take only what you need, and raise as late as possible to retain control and minimise dilution.”
What’s next for Europe?
Looking ahead to 2025, optimism remains despite challenges. Garay summarised: “The European startup ecosystem is slowly catching up with broader macro recovery… We expect 2025 to be a more dynamic year for innovation and exits.” Pulsetto’s Majorovas added: “For companies like ours, regulatory clarity helps us scale trust just as much as product.”
The consensus? Stay lean. Think long-term. Downturns don’t kill great companies — they build them.
