Atomico’s State of European Tech report provides a definitive, in-depth look at the forces and factors shaping Europe’s tech ecosystem, and what these trends could mean for the future.

Here are a just a few of the FAQs answered in this year’s edition.

One of the standout findings of the report speaks to Europe’s deep, dynamic tech talent base. Rich in technical expertise, the talent pool is expanding faster in Europe than it is in the US. However, scaling challenges remain. To take the next step, it’s time to turn Europe’s talent advantage into a competitive edge by building out the infrastructure to make the continent the best place to build and scale tech businesses.

The pieces of the puzzle are all in place:

• Scale:

  Europe’s tech workforce is expanding at a faster rate than the US and now employs over 4.3M people in VC-backed tech companies

• Quality:

  8.5% of engineers working for deep tech companies have a PhD — higher than the US (7.4%)

• Pipeline:

  Company creation volumes are closer to the US than at any point in the past decade, up 35% year on year across first-time and repeat founders.

Emily Turner, CEO of HSBC Innovation Banking UK, speaks to the way these factors are converging to drive an optimistic outlook on Europe’s future:

"Europe’s tech workforce is now expanding faster than that of the US, with over 4.3 million people employed in VC-backed companies. Company creation continues to surge – up more than 35% year on year – driven by both first-time and repeat founders. Importantly, half of global founders see building in Europe as central to their mission, solving global challenges from a European base with worldwide reach. This optimism and confidence has not always been there, but Europe is making strides forward in being recognised as an attractive place to build and scale."

Europe is generating more investable companies than ever. There’s record founder activity, increasing unicorn creation, and a new wave of pan-European champions with truly global ambition. However, this momentum faces tight funding conditions: investment is plateauing and capital concentration at the top is intensifying. The challenge? Back the strongest companies with deeper, late-stage capital while nurturing promising early-stage players.

A few telling points to call out:

• Overall investment levels in European tech have remained broadly unchanged since 2023, the US seems to have “hit the gas pedal”, with tech investment growing while other regions keep a foot on the brake.
• European VCs are raising bigger funds to write bigger checks: Average fund size has doubled over the past 10 years, but there are fewer but larger rounds at seed and Series A.

On the importance of a strong, reliable domestic pool of European capital, Stephen Lowery, Head of Investor Coverage and Business Development at HSBC Innovation Banking UK points out:

"Europe is producing world-leading innovation and investors continue to see European founders delivering in the next decade’s defining sectors – AI, climate, health, automation. However, without domestic capital at scale it risks becoming an exporter of innovation rather than an economic winner. Europe must build deep, patient pools of domestic capital to fund companies at scale, build resilience into funding markets, capture the value and own the future that Europe is already creating."

As Europe’s ecosystem matures, capital is increasingly concentrated in a handful of standout companies – roughly 22% of all capital invested goes to ecosystem leaders. The result? Many startups are relying on bridge rounds and extensions of existing funding instead of new “priced” rounds. They’re also looking at venture debt as an addition to the capital stack.

Last year was a record year for debt financing for Europe, and 2025 promises to see even more businesses explore debt.

As Simon Bumfrey, Head of Banking at HSBC Innovation Banking UK outlines:

"Venture debt in Europe is accelerating. After a record 2024, 2025 is set to surpass it, with $4.5bn raised already and growth built on solid foundations. Founders are using debt strategically to extend runway, scale efficiently and increasingly for M&A. Lenders remain active but disciplined, prioritising credit quality and long-term partnerships. Much like in the US, venture debt is now a core pillar of Europe’s capital mix, smoothing equity cycles and sustaining innovation through volatility. Interestingly, use cases and debt structures are evolving beyond traditional SaaS funding into funding hardware build-out, digital infrastructure and payment remittance credit lines. A more sophisticated ecosystem is emerging, better equipped to fund ambition at every stage. Today’s momentum could mark a larger structural shift in how Europe finances innovation."