On the surface, the overall volume of investments has held steady at around $12–13 billion for Q1, but the logic of deals and investor priorities has clearly shifted. There are fewer rounds, average check sizes have grown, and both startups and founders now face much higher standards.

In this report, the Zubr Capital team outlines the key trends of the spring season, analyzes where the money is actually going, which segments are attracting the attention of major and niche funds, and what this means for the market, LPs, GPs, and founders. We explain why infrastructure, deeptech, and B2B have come into focus – and which previously hyped sectors are now being left behind.

Our perspective aims to understand how the market is building new foundations after the ‘easy money’ era, how the strategies of leading players are evolving, and which scenarios are becoming most likely for the second half of the year.

Depth over spread: the new discipline in European VC

In spring 2025, European venture capital has taken a deliberate step away from chasing the next big platform for everyone. Instead, investors are channeling capital into startups that own one specific pain point – and solve it better than anyone else.

This change is most visible in the priorities of leading funds. When Cathay Innovation launched its $1 billion fund this spring, it made clear: that the capital would flow only into vertical AI applications, such as healthcare diagnostics, financial automation, or energy optimisation. The era of ‘AI for everything’ is over; now, investors want AI for something real. Smartfin, too, repositioned itself strictly as a backer of B2B infrastructure scale-ups, while Cherry Ventures doubled down on single-solution early-stage bets in key European hubs.

Investment rounds echo the same shift. Isomorphic Labs raised €556 million for AI-driven drug discovery, not a generic platform. Rapyd’s €474 million round was all about expertise in the toughest corner of payments compliance. Even Reneo’s €600 million in climate tech was grounded in focused, technical innovation.

Why does this matter? Because LPs have grown tired of stories and scale for scale’s sake. They want evidence: deep product-market fit, visible technical advantage, and a defensible moat.

At Zubr Capital, we see this as a healthy correction. The winners will be those who choose depth over spread – delivering mastery in one vertical, not chasing every market at once.

Real tech wins: engineering quality over quick fixes

This spring, European venture capital has drawn a clear line: the era of quick-to-market wrappers and surface-level ‘innovation’ is over. Investors are backing startups that build true technology – from the ground up – with substantial engineering and proprietary IP at their core.

The distinction is sharp. Isomorphic Labs, a UK spinout from DeepMind, raised €556 million not for a generic AI platform, but for a domain-specific stack in drug discovery: new algorithms, unique data pipelines, and technical depth rooted in biology and chemistry. Investors are no longer satisfied with startups layering a pretty interface on public models – they want hard science and engineering.

The same is true beyond AI. Sweden’s Neko Health secured $260 million by combining proprietary hardware, sensors, and software for preventive diagnostics – redefining early health screening by building every layer in-house. France’s Loft Orbital became a unicorn not by selling vision, but by delivering engineering: modular satellite buses, custom mission software, and reliable payload integration. Their latest funding will scale working infrastructure, not just prototypes.

Even in creative AI, substance wins. Synthesia’s $180 million round is about advancing proprietary technology for avatar and voice generation – no reliance on off-the-shelf models, but a real R&D engine. And while Quantum Motion (UK) hasn’t raised a headline round this spring, its pursuit of silicon-based quantum processors – rooted in physics, not hype – demonstrates the kind of depth investors now prize.

The signal is clear: capital is flowing to teams that deliver real, defensible technology. For founders, engineering depth and original IP are now the strongest currency in the European market.

Thesis over diversification: how focused funds lead European VC

Spring 2025 has brought a new level of discipline to European venture capital, as thesis-driven funds moved decisively into the spotlight. Instead of spreading bets across the entire innovation spectrum, more VCs are building portfolios around tightly defined investment themes and industry problems.

This trend is reshaping the funding landscape. Funds like Keen Venture Partners have launched dedicated vehicles for European defense and security tech, raising €40 million from EIF specifically for startups tackling national security infrastructure. Recent portfolio moves – EclecticIQ, Perciv.AI, Avalor AI, Rescale – underline a sharp focus on deep, vertical technologies with immediate strategic value.

Other funds are taking a similar approach. 7percent Ventures now concentrates on aerospace, dual-use AI, and moonshot innovation, consistently backing engineering-heavy founders solving mission-critical problems. Their recent investments – satellite comms, cybersecurity AI, aerospace telemetry – reflect this ‘vertical expertise first’ logic.

Lab-to-market models are also gaining ground. Chalmers Ventures has systematised partnerships with scientific teams, turning real innovations into commercial deeptech businesses – not just following buzzwords. Creator Fund backs only PhD-led startups in AI, life sciences, and frontier tech, while Deeptech Labs specialises in seed-stage, IP-rich companies moving from prototype to product.

The message is clear: targeted capital is a sign of genuine conviction. As generalist portfolios lose ground, thesis-driven strategies are setting new standards for discipline and sector insight. For founders and LPs alike, clarity of purpose and deep industry expertise have become critical differentiators in Europe’s maturing VC market.

No more regional bias: VC follows proof, not place

This spring, European venture capital sent a strong signal: location matters less than ever, and operational quality now outweighs geography. The largest rounds and new fund launches consistently favored execution and market traction over traditional ‘hotspots’.

Take Reneo’s €600 million cross-border round – one of the biggest in Q1 2025. Its operations span France and Spain, proving that VC now follows product readiness and strategic vision, not the location of a company’s headquarters. Similarly, Milan-based Hotiday raised €5,5 million from top-tier investors, breaking through Italy’s usual funding ceiling thanks to strong product focus and niche traction.

The fund landscape reflects the same shift. Soulmates Ventures closed a €50 million fund for sustainability startups across Central and Eastern Europe, while 4Founders Capital launched a €44 million fund for Spanish and Southern European founders – emphasising local expertise and regional commitment. Defiant’s $30 million fund connects Western and peripheral European markets, and Voima Ventures’ €100 million Fund III targets deeptech across the Nordics and Baltics.

Even previously secondary regions – Benelux, DACH, Southeast Europe – are seeing increased activity, as new funds target talent and technical strength wherever they emerge.

The bottom line: investors now assess startups by execution, product, and real market potential, regardless of location. For founders, this means access to capital is more meritocratic than ever. For the ecosystem, it signals a Europe-wide race for quality – where substance, not geography, wins.

Infrastructure as strategy: Europe’s new investment priority

Spring 2025 confirmed that infrastructure is now at the heart of Europe’s tech agenda – not just for performance, but for resilience, control, and sovereignty. Governments and VCs are aligned: funding no longer just chases growth, but prioritises the foundational layers powering AI, data, automation, and security.

This shift is massive in scale. The EU’s InvestAI program launched with €200 billion to build core AI infrastructure – giga-factories, sovereign clouds, and advanced chips. France added €109 billion for AI leadership, and the European Technological Competitiveness Initiative is rolling out over €10 billion into chips, cybersecurity, and Cloud through fund-of-funds structures.

Private capital is following suit. Investments in sovereign data pipelines, chip design, and next-gen autonomy are on the rise. Established players like Graphcore (UK) embody Europe’s silicon ambitions, while stealth-mode AI hardware startups are quietly closing large rounds. Industrial infrastructure is another hotbed: FLOW X (Romania) stands out for integrating deep analytics and automation into industrial processes – moving far beyond dashboards. Funding is now targeting digital twins, industrial IoT, and process automation, making deeptech synonymous with infrastructure.

Cybersecurity has become a national priority. Deals now focus on architecture for industrial and state security, with companies like Unseen (UK) pioneering AI-native protection that moves beyond traditional firewalls. Zero-trust systems, sovereign clouds, and industrial cyber platforms are quietly attracting both private and state capital.

The message is clear: in 2025, infrastructure is no longer a supporting function – it’s the main event. For investors and founders, building and owning the tech backbone of Europe is the highest-value play on the market.

Where we go from here: signals from Spring 2025

Spring 2025 has redefined the European VC landscape: investors now demand focus, technical depth, and real traction. This new discipline is making the market quieter but stronger, with capital gravitating toward deep tech, infrastructure, and clearly defensible niches – regardless of geography.

Looking ahead, we expect this logic to hold. The second half of 2025 is likely to bring continued selectivity, with larger rounds flowing to proven teams and sectors solving fundamental problems – AI infrastructure, climate, industrial tech, and security. Government and private capital will keep reinforcing each other, driving further consolidation and accelerating the shift from hype to substance.

For founders and investors, the message is clear: building real technology and demonstrating market resilience will remain the keys to unlocking capital and long-term success. At Zubr Capital, we see a maturing market – one poised not just to survive, but to lead the next cycle of European innovation.