Europe stands at a crossroads. There’s never been a better time to be a tech founder here: the continent has the talent, ambition, and ideas to lead. Yet Europe still hasn’t realised its full potential on the global stage. That’s why Atomico’s eleventh State of European Tech report, released today, sets out a bold roadmap for action, and a rallying call to power Europe’s first trillion-euro tech company.
With optimism reaching its highest level in a decade and Europe's tech sector now worth nearly $4 trillion—15% of GDP—the report argues the building blocks are in place. Europe counts almost 40,000 funded tech companies, up from 13,000 in 2016. But structural gaps mean Europe is potentially leaving trillions of future, unrealised GDP on the table. Closing these gaps and steepening the curve of European growth isn’t merely an economic imperative, it will determine Europe’s ability to define the future on our own terms.
Tom Wehmeier, Partner and Head of Intelligence at Atomico said: “Technology is no longer a sector, it’s the driving force reshaping everything: how we govern, defend, power our homes, manage money, and deliver healthcare. ‘Sovereignty’ in technology isn't about protectionism, it's about agency and choice – building the capability, confidence and capital to shape the future, while retaining the freedom to act independently and leadon Europe’s own terms.”
The report identifies four key ambitions that will define Europe's success and introduces a scorecard to track progress.
Fix The Friction: Make it easier to build, grow and sell across European borders, at scale
The Challenge: Almost 70% of founders say Europe's regulatory environment is too restrictive, with market fragmentation, capital markets, and labour regulations the top barriers. Only 18% view the current environment as supportive.
“Improved regulatory environment” features among the top three changes that survey respondents say would improve the exit environment for European tech companies, and “regulatory environment” is also among the most cited drivers of relocation for founders.
The Opportunity: Political momentum is starting to build behind a unified European business environment with harmonised regulation designed for today's companies, but speed and ambition are key.
The Solution:
●Test and Learn: To enable founders to build, policy must be crafted like great products — test fast, learn faster, build trust, and scale what works.
● EU Inc: To grow, Europe needs a single pan-European company framework that lets founders incorporate digitally, raise capital, and operate seamlessly across borders in 48 hours.
● Spinouts that Scale: Incentivise inventors to become founders, align spinout terms with global standards, and connect to markets.
The Data: Geographic power is already shifting. London dominated VC in 2024 with eight of the top ten funds. In 2025, French and German firms claimed all but three of the top ten spots—suggesting momentum behind European integration.
Empower Talent: Make Europe the home of choice for world’s most ambitious talent
The Momentum: Europe's talent pool grew 4% to 4.6 million in the past year. The region is on par with the US and Asia in terms of global startup creation and remains a net beneficiary of international talent flows, while 81% of European AI founders now stay in Europe, up from 74% in 2016.
Confidence and mission are also rising: 42% say it's more attractive to become a founder in Europe today than a year ago, versus just 19% saying less attractive, while 51% say building in Europe is core to their mission. In Southern Europe, 45% of respondents were more optimistic about the future of European tech in 2025 than they were last year. 17% felt less optimistic, the lowest across the European regions.
The Challenge: For some founders, scaling triggers departure. Around 18% of European-founded Seed-stage tech companies are based outside of the continent’s borders, but this number rises to around 30% by Series C and beyond, and repeat European founders increasingly choose to build from the US, up to 18% from 9% a decade ago. While the ‘brain drain’ narrative is clearly misplaced, one founder leaving Europe is too many.
The Solution:
● Reward Risk: Simple, fair and accessible employee ownership, benchmarked to ‘Not Optional’ gold standards.
● Bring the world’s best talent to Europe: Create a single, fast-track visa scheme that makes relocation frictionless, and staying obvious.
● Unlock Talent Mobility: Make it easier for founders and operators the freedom to move, work and build within Europe.
Fund the Future: Mobilise Europe’s own capital to power deep, full-stack markets fit for global champions
The Progress: VC investment rose 7% to $44 billion, and European pensions increased their VC allocations by 55% in 2024—from $650 million to $1 billion. The second half of 2024 delivered $14.7 billion in new capital, the second strongest half-year since 2021. Southern European tech companies are expected to raise $2.9 billion in 2025, remaining the 5th highest in Europe.
The persistent myth of European VC underperformance is being debunked: European VC outperforms US returns over a ten year horizon and outperforms European public markets by 10 percentage points over 10+ years.
The Gap: European pensions still lag the US by a factor of three. If they matched US allocation levels, an additional $210 billion could flow into VC over the next decade. Yet the region records Europe's second-lowest capital invested as a share of GDP at 0.06% - less than half the 0.17% European average. And when companies reach maturity, they encounter fragmented public markets that lack the depth, liquidity and sophistication to support European champions with truly global ambitions. Europe captured 10% of the $608 billion in global tech exit value in 2025.
However, institutional support is strengthening: European Investment Fund commitments to Southern Europe jumped from 8% to 24% in 2024 - a major vote of confidence. Southern Europe also claims the second-highest share of pension fund AUM committed to VC at 0.022% - trailing only France & Benelux.
The Focus: Deep tech and AI now capture 36% of European VC, up from just 19% in 2021. Defence tech funding jumped 55% year-on-year to $1.6 billion, and 31% of all European funding raised in 2025 is going to companies building in AI/ML. While the US invests at a greater scale in AI (on track in 2025 for $146 billion versus Europe's $14 billion), European champions like Lovable, ElevenLabs, DeepL, Synthesiaand Poolside. Southern Europe is making its mark in emerging sectors: Italy's Domyn has raised $764 million, including $377M debt funding, for AI gigafactory projects designed for use in defence, finance and advanced manufacturing.The challenge remains at growth stage: the share of US deep tech companies raising $100 million-plus rounds exceeds Europe's by five times.
The Solution:
● European Capital Compact: Channel pension, insurance and sovereign assets to fund European innovation, scaling national models like Tibi, WIN and Mansion House across Europe
● Savings into Growth: Empower Europeans to put their savings to work - productively, responsibly and confidently.
● One Listing, One Capital Market:A single, liquid European market for growth companies — harmonised disclosure, pooled liquidity, and shared analyst coverage to keep IPOs, ownership and value in Europe.
Champion Risk: Strengthen risk culture as foundational infrastructure, as essential as energy or capital
The momentum: Europe’s innovation base has transformed over the last decade, with the number of active investors in the region now at 2850, up from 1350 in 2016. European founders are building with unprecedented velocity ambition. Europe is home to the fastest-growing company of all time in Lovable. 28 companies have already crossed the billion-dollar valuation milestone this year, the strongest year since 2022, bringing the overall count past 400. Southern Europe welcomed 3 unicorns in 2025, bringing the total to 25. Across the region, breakthrough companies are emerging from diverse markets: Tekever crossed the $1 billion valuation threshold in 2025, making Portugal one of 11 different countries to produce new unicorns this year. Spain saw an 18% increase in capital invested year-over-year and now has 12 unicorns, up from 11 last year, with AI momentum building through companies like Multiverse Computing (latest funding round of $208 million) and TravelPerk (latest funding round of $200 million). Italy also added one unicorn this year.
The Challenge: Building a culture that serves as a tailwind, not brake, on this talent and innovation: going further to reframe entrepreneurship positively and champion risk across investment, policy and procurement. For instance, Only 20% of European corporates actively engage with startups versus 50% in the US. Europe invests just 9% of public procurement in innovation versus 20% in the US.Domestic demand is about money, but also validation. Companies that prove themselves with European corporates and governments are better positioned to win globally. Spain is demonstrating the commercial value of this approach: the country captures 5.5% of first non-domestic sales hires by European Series A companies - evidence that startups see Spain as a commercial gateway to the Spanish-speaking world.
The Solution:
● Own the Narrative: Change how Europe talks about risk. Invest in narrative to celebrate ambition, embrace failure and success, and reframe entrepreneurship and experimentation positively
● Procure the Future: One fast, trusted, passportable route for startups to sell to European public and corporate buyers willing to bet on innovation
● Fail Better:Make it easier to start again. Make insolvency and restructuring easier, faster and fairer so founders can wind up, reset and restart without bureaucracy, stigma, or lost time
The Path Forward
"Europe's mission has never been stronger," said Sarah Guemouri, Principal at Atomico. “The talent, ambition, and ideas are all in place. What's missing are the conditions to match that potential: simpler regulation, more patient capital, and public commitment. This year’s report is our blueprint for change, because the next decade will decide whether Europe leads the next tech era or lets others define it."
The State of European Tech is created by Atomico in partnership with Amazon Web Services, Orrick, HSBC Innovation Banking, Slush
About Atomico
Atomico is the founder-built European venture capital firm. We partner with the most ambitious entrepreneurs using technology to rewire the world, better. Skype co-founder Niklas Zennström launched Atomico in 2006 with the belief that entrepreneurs are the ultimate gamechangers for positive transformation across the most critical aspects of our society and economy.
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