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If you look at some of the blockbuster deals getting done this year, you’d be forgiven for thinking VC funding was on the up-and-up. But that’s not quite the story.
In the first half of 2025, VCs wrote cheques worth 11.5% less than in the first half of 2024, with investment totalling €23.8bn across 2,143 funding rounds, according to Sifted data. Still, that figure is up on the second half of last year by a hefty 21%.
But investors themselves aren’t upbeat. “The return to growth expected for this year has not materialised, also due to macroeconomic and geopolitical uncertainty,” Jan Miczaika, partner at HV Capital, tells me.
‘Like it’s 2021’
The problem with the data is that it’s been boosted massively by a few big deals in a few buzzy sectors: AI, of course, is still red hot — and AI-native startups in Europe raised 61% more in the first half of this year (€3.04bn) compared to the same period last year (€1.89bn). And then there’s defence. Defence tech has become one of the most hyped sectors in 2025, boasting some of the biggest deals of H1: German AI defence startup Helsing raised €600m, while drone makers Quantum Systems and Tekever both closed unicorn-making fundraises.
Miczaika reports that for those hot sectors, there’s “competing term sheets and deals closing within days — like it’s 2021.” (Look no further than Swedish AI startup Lovable’s whopping new $1.8bn valuation this week.) He adds that “startups using AI to their advantage are in high demand,” while “in other sectors startups need to show absolutely top-quartile metrics to gain funding.”
Other VCs say they’re encouraging founders to “sprint like it’s 2021 all over again” with their fundraising. “It’s one of those ‘I don’t know whether to laugh or cry’ situations,” Jag Singh, partner at Berlin-based Angel Invest, tells me. “Megafunds are steamrolling the obvious/consensus bets, so if it’s a proven founder, a hot space, or real traction, they’ll outbid anyone with bigger cheques and sky-high valuations.”
Fundraising slough
Although VCs are finding hot spots to invest in, there’s still a big problem under the surface: M&A activity has largely flatlined this year. Exits are up only 1% over the last six months compared to H1 last year; meanwhile IPOs are still essentially nonstarters for most startups.
That is having — and will continue to have — a big impact on VCs’ own fundraising. As I’ve written about at length this year, things are tough for investors looking for cash. Some new data also points to perhaps how tough: according to a recent Bloomberg report using PitchBook data, European VC fundraising in 2025 is on track for a decade-low year. Ouch.
Speaking to my colleague Amy Lewin last week, the European Investment Fund’s Uli Grabenwarter confirmed that things are tricky for European GPs. “We definitely see a very, very significant increase in our deal flow. In a market environment where the best funds can get to the market without having to rely on any public sector money, there would be less pressure on our side — but in times like this, basically everything that moves in the market knocks on our door.” (Keep your eyes peeled for our full interview with the EIF, coming to Sifted soon.)
But VCs, I’d love to hear from you: what did you make of VC activity in the first half of this year? Busier or quieter than expected? What sectors stood out to you? And has your own fundraising gotten easier — or harder? I’m all ears.
