European venture capital remains highly selective, even as early-stage funding remains steady. In 2025, venture funding to Europe-based startups reached $58 billion, with AI emerging as the region’s leading sector for startup investment for the first time, accounting for $17.5 billion in funding.
At Series A and B, European valuations have risen into the mid‑€30M range, with deal sizes typically clustering around €13–14M, reflecting a market that is funding fewer but larger, more de‑risked rounds, according to industry experts.
Yes, capital is still flowing, but VCs are pickier than ever. The bar for Series A has shifted, driven by the AI and defence-tech boom.
From the conviction round to the validation round
Series A in Europe used to be about vision and early wins. Now, it’s all about proving you can scale with clear product-market fit and repeatable results.
Patrick Tucci, Principal at Vsquared, frames the shift bluntly: “It’s about proof. Over the past few years, Series A has matured from a conviction into a validation round. In 2021, especially in SaaS, ambition and momentum could take you quite far. Today, investors expect demonstrated product-market fit and meaningful traction, often around €2M+ ARR in many sectors, sometimes €10M+, depending on the sector.”
Igor Ryabenkiy, Founder and Managing Partner of AltaIR Capital, reinforces this: “Series A capital today is not meant to fix fundamentals. It’s fuel for a business that is already working. At this stage, we expect a company to look less like an experiment and more like a proven machine ready to scale. In today’s market, that typically means around €2-3M in ARR with consistent, predictable growth.”
Timelines are stretching out. Where it once took 18 months to go from seed to Series A, it now takes 24 to 30 months. Investors want more proof, less risk, and they’re not rushing to write big checks.
For founders, adapting to this longer runway is key. Set clear targets every 6–9 months, keep your team and early investors in the loop, and be ready to tweak your plans as you go. Stay lean, save capital for the experiments that matter, and don’t over-hire too soon. Start planning your next fundraiser early. Regular updates and hitting milestones will keep investors engaged during this extended pre-Series A phase.
Higher traction benchmarks: AI resets the floor
AI’s rise has reset the bar for traction at Series A. Laura Waldenström, Principal at Earlybird, notes that for plain‑vanilla B2B software and AI applications, the bar on both traction and capital has clearly moved up: “Not long ago, raising a Series A required around €1-2m ARR, 3x year-on-year growth, solid unit economics, and a strong differentiation story. That playbook no longer holds.”
AI has set a new pace: some teams hit €2M ARR in just a few months and break €10M in their first year, especially in AI-powered apps. That speed is now the benchmark, even if it’s a stretch for deep tech or infrastructure, where things naturally move more slowly.
But in deep tech or infrastructure, Series A readiness looks different. Here, €500K–€1.5M ARR, a handful of key customers, and strong technical proof, like pilots or paid partnerships, can be just as valuable as big revenue. What matters here is the commercial interest, strong IP, and a clear growth plan.
Bob Thomas, Partner at Oxx, aligns with this uplift: “For a B2B software company, we would want to see clear proof of PMF – probably over €1.5M+ ARR with clear month-over-month momentum, repeatable customer acquisition and good retention – net revenue retention above 100%.”
A bifurcated market: AI hype vs. fundamentals
Europe’s VC scene is splitting in two. AI and defence/security startups are seeing record growth and funding, while non-AI software and deep tech need to double down on fundamentals to stand out.
AI and defence-tech benefit from both global momentum and national security priorities. Caroline Niemeyer, Principal at Speedinvest, describes the dynamic: “AI or defence tech companies with defensible intellectual property, strong data moats, and exceptional growth (often exceeding 5x year‑over‑year) are able to raise a Series A within 12 months post‑Seed, frequently on highly competitive terms.”
On the flip side, if you’re not in AI and don’t have clear differentiation or traction, the bar is higher than ever. Strong revenue quality, retention, and capital efficiency are now non-negotiable.
Just look at Q1 2025: Verdiva Bio’s €411M Series A shows how high-velocity sectors can pull in huge capital, while everyone else faces tougher scrutiny. Europe leads in quantum, but still trails the US in AI chips and space.
Europe’s fragmentation and structural edges
Europe’s market is fragmented, with many languages, regulations, and local ecosystems, which brings both challenges and opportunities.
Dominik Esen, Principal at Northzone, notes: “With various existing regulations, languages and tech stacks, Europe has a lot of different markets under a single umbrella. For startups, this is both an asset and a liability, as geographical scaling and expansion might be more cumbersome, but it can also create defensibility and force startups to think outside of their home market early on.”
What does this mean in practice? Cross-border traction, even just across DACH, Iberia, or into LatAm, is now a key signal for Series A. If you’re only local, expect lower valuations and more questions about your ability to scale.
On the plus side, Europe shines in deep tech and climate, with public funding and grants offering a big (and often underused) advantage. Thomas highlights: “Grants and non‑dilutive funding can matter enormously. This is probably the single biggest structural advantage pre‑Series A European founders have and underutilise. EIC Accelerator grants, Horizon Europe, and national innovation agencies (Vinnova in Sweden, Bpifrance, KfW in Germany) can provide meaningful non‑dilutive capital. Smart founders use this strategically to reach Series A metrics on less dilutive seed capital.”
Valuations are rising across Europe, but still trail the US by 20–35% at Series A, according to PitchBook. That’s why US crossover investors are eyeing Europe for better entry points.
What VCs really want in 2026?
Looking at the data and quotes, a clear picture emerges of what VCs expect before a Series A round in Europe today. The table below compares the “traditional” pre-2023 world with the 2026 expectations.
| Criterion | Traditional (Pre‑2023) | Current (2026) |
| ARR | €0.8–2M | €1.5–5M+ (often €2–3M+ for non‑AI) |
| Growth | 3x YoY sufficient | 3–5x+ YoY; velocity and momentum matter |
| Timeline seed‑to‑A | Around 18 months | 24–30 months, with more proof required |
| Round size | Smaller, more uniform | €2–10M typical; AI outliers €10M–€100M+ |
Behind the numbers, the real shift is in what VCs care about: quality growth (repeatable GTM, defined ICP, real customers), a team that’s more than just founders ( sales/growth leads and a solid management crew), capital efficiency (burn multiples of 1.0–1.5x are strong), healthy cap tables (founders holding 50–70%), and margins plus moat, predictable gross margins and defensibility through data, IP, distribution, or regulatory edge are now must-haves.
One thing every VC agrees on: timing and a clear story matter just as much as your numbers. Thomas advises, “Start the process six months before you think you need to. Build relationships with target lead investors before you have a deck. Have a clear story and the data to support it. The market is real, but increasingly selective.”
Ryabenkiy warns that performance must not slow down for fundraising: “If performance slows because ‘we were fundraising,’ that immediately raises concerns. By Series A, the engine should already run, and fundraising is not an excuse to slow it down.”
All these voices point to one thing: Europe is still packed with opportunity and global ambition, but raising on vision alone is over. In 2026, being Series A-ready means proving your business is a well-oiled machine, ready to scale across borders, whether you’re surfing the AI wave, riding the defence boom, or building quietly in less-hyped sectors.
