Atomico’s latest State of European Tech 2025 report paints a picture of a continent that has entered a pivotal new phase — one defined by maturity, resilience, and urgent choices. After several turbulent years in the global tech economy, Europe’s innovation landscape is stabilising, yet the data reveals a system still struggling to turn promise into global scale. Venture investment levels are projected to reach $44 billion in 2025, effectively flat year-on-year, but well below the highs of 2021, signalling that while the bottoming-out of the funding cycle may be behind us, Europe’s private markets remain shallow compared to global peers.
Despite this cooling, Europe’s ecosystem has added extraordinary value over the past decade. The continent’s tech economy is now worth around $4 trillion, up from less than $1 trillion ten years ago — an indication of just how quickly innovation has become a central economic engine.
Optimism is climbing back as well: half of all respondents in Atomico’s 2025 survey say they feel more optimistic about European tech than a year ago, the highest level in years. Yet, that also means half remain unsure, reflecting persistent concerns about regulatory friction, capital scarcity at scale, and whether Europe can compete in the AI age.
One of the defining features of 2025 is the resurgence of company creation. Over 27,000 founders started companies this year — the highest number ever recorded in Europe and nearly 60% more than in 2023. Europe still contributes the largest share of global founders, although Asia has now caught up, driven by surges in India and the UAE. At the same time, more than four in five European founders continue to build on home soil, a sign that the continent’s talent engine remains strong. However, among experienced “seasoned founders,” incorporation in the US is rising — a trend tied directly to easier company formation and greater access to growth capital overseas.
In terms of unicorn creation, Europe adds 28 new unicorns in 2025, a more stable output than the explosive wave of 2021 but a sign that entrepreneurial ambition remains strong even in tougher markets. The challenge, however, is not in starting companies — it is scaling them. More than 30% of repeat founders now choose to establish headquarters outside Europe by Series C, citing fragmented regulation, restrictive labour rules, and shallow late-stage capital markets.
Deep tech has emerged as the continent’s strongest driver of investment. In 2025, 36% of all VC dollars went into deep tech — nearly double the share from four years ago. While the US continues to dwarf Europe in absolute numbers, Europe is growing an increasingly diversified deep-tech base across AI, quantum, defence, climate, and advanced infrastructure. Significant raises from Helsing, Isomorphic Labs, and European aerospace and fusion ventures reflect an ecosystem gaining technical depth and strategic importance.
Still, Europe’s capital markets continue to be a structural bottleneck. Pension funds — one of the world’s largest sources of patient capital — allocate just 0.009% of assets to venture, compared with 0.028% in the US. Matching US allocation levels would unlock an estimated $210 billion in additional European venture funding over the next decade.
This underinvestment contributes directly to Europe’s slow scaling cycle, where promising companies often look abroad for the depth of capital required to reach global dominance.
A notable detail in this year’s report is Croatia’s continued presence among Europe’s emerging tech investment hubs. While total investment levels in many smaller ecosystems declined in 2025, Croatia remains on the map of the continent’s top 30 countries by capital invested. Atomico’s data shows Croatia maintaining measurable venture activity within the $0–$200 million band, positioning it alongside regional peers in Central and Eastern Europe whose funding trends have softened amid broader macroeconomic pressures.
Although Croatia is not among the fastest-growing ecosystems this year, its consistent appearance in the rankings underscores its ongoing relevance as a developing technology market — one with room to accelerate in future cycles as regional founders, talent, and capital networks deepen.
On the policy side, regulatory complexity remains one of Europe’s thorniest challenges. Seventy percent of founders describe the continent’s regulatory environment as restrictive, pointing particularly to market fragmentation, taxation, labour rules, and slow-moving public procurement. The European Commission has proposed ambitious reforms for 2026 — including a 28th Regime for startups, the European Innovation Act, and a unified policy “launchpad” — but founders remain cautious, noting that implementation will determine whether these changes meaningfully reduce friction.
Public procurement remains one of Europe’s most underutilised levers. Only 9% of European public-sector procurement goes toward innovative solutions — far below the EU’s own 20% target. Studies cited in the report show that a one-percentage-point increase in innovation procurement can boost GDP per capita by as much as €6,000, and a five-point increase could potentially double it. Yet structural barriers and long procurement cycles continue to limit adoption of emerging European technologies.
Whether Europe can lead globally in AI and deep tech is one of the defining questions of the decade. Survey responses reveal a continent evenly split: 35% believe Europe can define its technological future, 36% do not, and 29% remain undecided. Optimism correlates strongly with belief in Europe’s AI leadership, suggesting that success in AI will shape broader perceptions of the continent’s strategic trajectory.
Atomico closes its report with a call for coordinated, founder-first reform across four missions: Fix the Friction, Empower Talent, Fund the Future, and Champion Risk. Together, these aim to build a unified, scalable, competitive European tech economy capable of producing not just hundreds of startups, but dozens of global champions. Europe now stands at a turning point — and whether it can convert talent and innovation into long-term global leadership will define the story of European tech in the years to come.