The European venture capital scene in 2025 is dramatically contracting, with funding levels collapsing nearly 60% compared to the previous year. For founders navigating an already challenging financial environment, this brings both immediate roadblocks and long-term ripple effects.
Europe’s venture firms have collectively raised just €5.2 billion this year, according to data from sources like PitchBook and Sifted. This figure not only represents a sharp drop from 2024 but also marks the weakest performance in the past decade. Founders, investors, and the broader ecosystem are left asking: What’s happening and how should entrepreneurs adapt?
What’s Causing the Funding Drop?
The slowdown is rooted in major global and local factors. Let's break this down:
1. Macroeconomic Uncertainty
The era of ultra-low interest rates has come to an end. With rising rates across Europe, institutional investors, like pension funds, have become cautious about committing to high-risk asset classes such as venture capital. Instead, they have flocked to safer options like government bonds, which offer guaranteed returns.
2. A Freeze in Exits
European tech startups are struggling with limited exit opportunities. IPO markets are stagnating, and acquisitions have slowed due to tighter budgets among corporations. Without big exits, venture firms are finding it harder to prove their value to Limited Partners (LPs) who provide capital for new funds.
3. Oversupply of Capital from Previous Years
Between 2020 and 2022, European VCs raised record-breaking sums. Many funds are still deploying that capital into existing portfolios, often prioritizing follow-on funding for survival rather than placing fresh bets on new startups.
4. Increased Competition for Funds Globally
European VCs now face fierce competition from U.S. and Asian funds for LP commitments. With global LPs consolidating their investments, only the top-tier European funds are successfully securing capital.
The Impact on Founders and Startups
As someone who has spent years navigating European entrepreneurship, I can tell you this: the effects will touch every corner of the funding ecosystem. Here's how:
Early-Stage Startups
Seed and Series A stage companies are facing elongated fundraising cycles and lower valuations. Investors, spooked by macroeconomic uncertainty, are now conducting more due diligence and demanding proof of traction before signing checks. Founders may find themselves spending months, instead of weeks, on fundraising, delaying product development and growth.
Growth-Stage Startups
For companies at Series B and beyond, the pinch is even more acute. Growth-stage startups need large investments to scale, but in this current environment, mega-rounds are increasingly rare. Startups in this phase will need to prove they've reduced burn rates significantly to remain attractive.
Emerging or First-Time VCs
It’s also worth noting that new entrants into the venture world are struggling immensely. Investors are prioritizing established funds with a track record during this downturn. First-time fund managers will find it nearly impossible to raise in these market conditions.
How Founders Can Adapt
Let’s acknowledge the reality: these conditions are tough. But navigating tough markets is what builds resilient founders. Here’s how I recommend adapting in 2025.
1. Focus on Cash Flow
Raising funds in this environment might not be realistic in the immediate term. Instead, shift focus to maximizing cash flow. Can you cut operational costs? Negotiate better payment terms with suppliers? Explore lighter business models? A lean startup that runs efficiently is better positioned to survive until funding picks up.
2. Explore Alternative Financing
Venture capital isn’t the only way to secure funding. Government grants (such as those from the EU Horizon program), loan options, crowdfunding, and revenue-based financing might suit your business model better without diluting equity.
A good place to start might be platforms like Venture Deals, which regularly update grant and financing opportunities suited to European startups.
3. Build Strong Investor Relationships for the Long Game
While the fundraising market may be tight, relationships built today can bear fruit tomorrow. Keep potential investors updated with quarterly newsletters or progress updates, even if they pass on funding you now.
4. Focus on Your Core Market
Expanding into new markets or launching additional products might not be prudent this year. Instead, focus on your strongest customers and most promising revenue streams. European investors right now value startups with deep traction in focused niches more than overly ambitious expansion plans.
Mistakes to Avoid
While trying to stay afloat, it’s easy to fall into traps. Here are the most common missteps I see founders making:
-
Failing to Adapt Valuations
It’s tempting to anchor yourself to valuations from the 2021-2022 boom years. But pushing for unrealistic valuations now can result in prolonged fundraising, or outright failure. -
Overfunding Burn-heavy Growth
Don’t overspend in anticipation of future funding. This is not the year for premature growth, aggressive hiring sprees, or outsized office expansions. -
Chasing the Wrong Investors
Not all investors have dry powder left right now; focus on engaging those who are actively writing checks. This is where founder networks or platforms like Vestbee can help you identify the right investor match. -
Ignoring Smaller Funding Sources
Skip the mindset of "go big or go home." Even a small bridge round of €50,000 to €100,000 can keep you in the game and buy time.
Deep Insights into the Next Phase
While these challenges may seem disheartening, downturns often weed out weaker players and create space for stronger businesses to shine. By planning strategically and maintaining a clear focus, founders can emerge with stronger products and more sustainable business models.
Does this contraction spell permanent doom for European venture capital? Absolutely not. Investors are sitting on massive amounts of "dry powder" globally. Once markets stabilize, many of these funds will return, eager to deploy capital. Founders who position themselves well during this downturn will be poised to capture that resurgence.
If you’re hunting for funding, refining your pitch deck, or strategizing for what’s next, remember: this isn’t the first challenging cycle European tech has faced, and it won’t be the last. Creators, builders, and problem-solvers always survive, and even thrive, when the tide eventually turns.
FAQ
1. Why has European VC funding dropped by nearly 60% in 2025?
The drop in funding is primarily due to macroeconomic uncertainty, tighter exit opportunities, and competition for Limited Partner commitments globally. Read more about the causes
2. How much capital has been raised by European VCs so far in 2025?
European VCs have collectively raised €5.2 billion in 2025, marking the weakest annual performance in a decade. Check out the fundraising data
3. How are early-stage startups impacted by the funding contraction?
Seed and Series A startups are facing longer fundraising cycles, lower valuations, and increased requirements to show traction. Discover startup trends
4. What is the impact on growth-stage startups?
Growth-stage startups are finding it increasingly hard to secure large-scale funding as investors prioritize reduced burn rates. Learn more about the challenges for growth-stage funding
5. How are emerging venture funds performing in 2025?
First-time VC fund managers are struggling to raise capital, with LPs focusing on funds with proven track records. Read insights on emerging VCs
6. What alternatives to traditional venture capital can founders explore in 2025?
Founders can turn to government grants, revenue-based financing, crowdfunding, and loans as alternatives to VC funding. Find alternative financing options
7. How can startups build strong relationships with investors during a downturn?
Maintaining communication through progress updates and quarterly newsletters helps founders stay on investors' radar for future opportunities. Explore investor strategies
8. What mistakes should founders avoid during the funding winter?
Common mistakes include pushing for unrealistic valuations, overspending on growth, chasing inactive investors, and ignoring smaller funding rounds. Check out mistakes to avoid
9. Can the current VC contraction have long-term benefits for the ecosystem?
Yes, downturns often lead to stronger business models, reduced oversupply of capital, and more sustainable startup environments. Discover long-term VC benefits
10. Is there hope for recovery in European VC markets?
A rebound is expected once macroeconomic conditions improve, and global investors deploy their "dry powder." Read more about recovery potential
About the Author
Violetta Bonenkamp, also known as MeanCEO, is an experienced startup founder with an impressive educational background including an MBA and four other higher education degrees. She has over 20 years of work experience across multiple countries, including 5 years as a solopreneur and serial entrepreneur. Throughout her startup experience she has applied for multiple startup grants at the EU level, in the Netherlands and Malta, and her startups received quite a few of those. She’s been living, studying and working in many countries around the globe and her extensive multicultural experience has influenced her immensely.
Violetta Bonenkamp's expertise in CAD sector, IP protection and blockchain
Violetta Bonenkamp is recognized as a multidisciplinary expert with significant achievements in the CAD sector, intellectual property (IP) protection, and blockchain technology.
CAD Sector:
- Violetta is the CEO and co-founder of CADChain, a deep tech startup focused on developing IP management software specifically for CAD (Computer-Aided Design) data. CADChain addresses the lack of industry standards for CAD data protection and sharing, using innovative technology to secure and manage design data.
- She has led the company since its inception in 2018, overseeing R&D, PR, and business development, and driving the creation of products for platforms such as Autodesk Inventor, Blender, and SolidWorks.
- Her leadership has been instrumental in scaling CADChain from a small team to a significant player in the deeptech space, with a diverse, international team.
IP Protection:
- Violetta has built deep expertise in intellectual property, combining academic training with practical startup experience. She has taken specialized courses in IP from institutions like WIPO and the EU IPO.
- She is known for sharing actionable strategies for startup IP protection, leveraging both legal and technological approaches, and has published guides and content on this topic for the entrepreneurial community.
- Her work at CADChain directly addresses the need for robust IP protection in the engineering and design industries, integrating cybersecurity and compliance measures to safeguard digital assets.
Blockchain:
- Violetta’s entry into the blockchain sector began with the founding of CADChain, which uses blockchain as a core technology for securing and managing CAD data.
- She holds several certifications in blockchain and has participated in major hackathons and policy forums, such as the OECD Global Blockchain Policy Forum.
- Her expertise extends to applying blockchain for IP management, ensuring data integrity, traceability, and secure sharing in the CAD industry.
Violetta is a true multiple specialist who has built expertise in Linguistics, Education, Business Management, Blockchain, Entrepreneurship, Intellectual Property, Game Design, AI, SEO, Digital Marketing, cyber security and zero code automations. Her extensive educational journey includes a Master of Arts in Linguistics and Education, an Advanced Master in Linguistics from Belgium (2006-2007), an MBA from Blekinge Institute of Technology in Sweden (2006-2008), and an Erasmus Mundus joint program European Master of Higher Education from universities in Norway, Finland, and Portugal (2009).
She is the founder of Fe/male Switch, a startup game that encourages women to enter STEM fields, and also leads CADChain, and multiple other projects like the Directory of 1,000 Startup Cities with a proprietary MeanCEO Index that ranks cities for female entrepreneurs. Violetta created the "gamepreneurship" methodology, which forms the scientific basis of her startup game. She also builds a lot of SEO tools for startups. Her achievements include being named one of the top 100 women in Europe by EU Startups in 2022 and being nominated for Impact Person of the year at the Dutch Blockchain Week. She is an author with Sifted and a speaker at different Universities. Recently she published a book on Startup Idea Validation the right way: from zero to first customers and beyond, launched a Directory of 1,500+ websites for startups to list themselves in order to gain traction and build backlinks and is building MELA AI to help local restaurants in Malta get more visibility online.
For the past several years Violetta has been living between the Netherlands and Malta, while also regularly traveling to different destinations around the globe, usually due to her entrepreneurial activities. This has led her to start writing about different locations and amenities from the POV of an entrepreneur. Here’s her recent article about the best hotels in Italy to work from.
About the Publication
Fe/male Switch is an innovative startup platform designed to empower women entrepreneurs through an immersive, game-like experience. Founded in 2020 during the pandemic "without any funding and without any code," this non-profit initiative has evolved into a comprehensive educational tool for aspiring female entrepreneurs.The platform was co-founded by Violetta Shishkina-Bonenkamp, who serves as CEO and one of the lead authors of the Startup News branch.
Mission and Purpose
Fe/male Switch Foundation was created to address the gender gap in the tech and entrepreneurship space. The platform aims to skill-up future female tech leaders and empower them to create resilient and innovative tech startups through what they call "gamepreneurship". By putting players in a virtual startup village where they must survive and thrive, the startup game allows women to test their entrepreneurial abilities without financial risk.
Key Features
The platform offers a unique blend of news, resources,learning, networking, and practical application within a supportive, female-focused environment:
- Skill Lab: Micro-modules covering essential startup skills
- Virtual Startup Building: Create or join startups and tackle real-world challenges
- AI Co-founder (PlayPal): Guides users through the startup process
- SANDBOX: A testing environment for idea validation before launch
- Wellness Integration: Virtual activities to balance work and self-care
- Marketplace: Buy or sell expert sessions and tutorials
Impact and Growth
Since its inception, Fe/male Switch has shown impressive growth:
- 5,000+ female entrepreneurs in the community
- 100+ startup tools built
- 5,000+ pieces of articles and news written
- 1,000 unique business ideas for women created
Partnerships
Fe/male Switch has formed strategic partnerships to enhance its offerings. In January 2022, it teamed up with global website builder Tilda to provide free access to website building tools and mentorship services for Fe/male Switch participants.
Recognition
Fe/male Switch has received media attention for its innovative approach to closing the gender gap in tech entrepreneurship. The platform has been featured in various publications highlighting its unique "play to learn and earn" model.