In H1 €29.2 billion (about $34.1 million) was invested in an estimated 5,362 deals representing a 3.7% decline in deal count and a 6.2% decline in value.

The return to growth that was expected this year due to falling interest rates and inflation is not projected for Europe’s VC market.

Instability fuelled by the US administration’s “Liberation Day” tariffs is a key culprit.

Pre-seed and seed had the biggest year-over-year drop in dealmaking; however, the declines have been across all stages.

Investors have been more inclined to seek safety in larger, more mature deals. More than 80% of the deal value in H1 was from rounds worth more than €10 million.

AI has been somewhat exempted from Europe’s dealmaking woes, with deal value in the vertical pacing 19.8% above last year’s total at €10.1 billion.

At the current run rate, AI investment could reach a new record. Half of Q2’s top 10 rounds were for AI-related startups, and the space now accounts for over a third of all European VC deal value.

However, deal count is not following the same trend, and Europe’s market is only a tenth of the size of the US, which has already broken the $100 billion barrier for the second time.

The pullback in dealmaking is directly linked to the lack of fundraising and exit activity in recent years.

Only 65 vehicles worth €5.2 billion closed in Europe in H1, with the year likely to be one of the worst in a decade for fundraising. The current run rate implies a 53.1% YoY decline in capital raised compared to 2024, which had the lowest annual total since 2018.

As VC firms struggle to raise new funds, they’re left with more limited dry powder, constraining their ability to make new investments.

The drop in exits in recent years has further compounded the issue. The expectation that IPO markets would open this year was stymied by the volatility from US tariff policy, and VCs are still finding it difficult to return capital to their LPs.

Only four public listings closed in H1, with investment platform eToro’s €3.5 billion IPO being the largest. Acquisitions are also pacing below last year’s levels, both in terms of count and value.

Buyouts, on the other hand, are a bright spot. Some 117 were completed in the first half of the year, implying an annual increase of 7.3% over 2024.

On the whole, 2025 is likely to be another year of subdued exit activity and depressed fundraising. Absent a meaningful recovery in both, dealmaking will remain muted