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Over the past decade, the European startup funding ecosystem has transformed, growing in scale and sophistication. Total investment in European startups has grown tenfold, reaching $426B from 2015 to 2024, compared to just $43B between 2005 and 2014.

According to Atomico, one of the largest European venture funds, European founders are demonstrating a clear shift in mindset. They prioritize global impact, environmental sustainability, and legacy-building alongside financial growth. These elements together highlight the importance of having the right funding strategy to support startups at various stages of growth.

In this article, we’ll delve into the funding opportunities and challenges faced by European startups, from navigating fragmented markets and geographic biases to leveraging key funding sources.

Types of funding available for European Startups

As a founder, you can explore several paths depending on the business model, growth stage, and funding needs.

Whether raising early-stage investments from angel investors, exploring equity crowdfunding, or securing growth capital from venture funds, aligning funding sources with your company’s growth stage is something that most founders have on their target. This sounds familiar, right?

Source: 8 ways to find funding for your company by Maj Alaily

Each funding path comes with opportunities and challenges, from equity dilution to regulatory hurdles, making founders aware of the options but signaling the need to evaluate them carefully.

Despite recent global challenges, such as market corrections and economic uncertainty, Europe remains a vibrant hub for innovation. For the first time since 2015, 11 new ecosystems are producing billion-dollar companies.

Below, we break down some key funding categories and what you need to know about each one to raise funds for your company today successfully.

Types of funding sources available for European startups

Angel investors

Angel investors invest their wealth in startups, typically in the early stages. A round raised from angels typically ranges from €10,000 to €100,000 per investor. However, if you are raising through a syndicate, you can raise to €500,000 or more.

A syndicate is a group of angel investors who pool their resources to invest collectively in a startup. Syndicates are usually organized by a lead investor who identifies the opportunity, negotiates terms, and manages the relationship with the startup on behalf of the group.

This funding source offers you faster and more flexible access to capital and valuable mentorship, networks, and industry expertise. Angels are ideal for bridging the gap between bootstrapping and larger funding rounds.

Want to learn more about angel investing? Check out this practical guide for founders, which covers securing angel investments and making the most of your funding opportunity in the early stages.

Venture capital

Venture capital firms provide significant funding to high-growth startups, particularly in later stages. Initial investments often range from €1M to tens of millions in Series A, B, and beyond. VCs provide funding and strategic resources such as operational support, hiring expertise, and network access.

However, VC funding can be a lengthy and complex process. It requires months of due diligence and negotiation, with founders often giving up board seats and significant equity. VCs generally seek scalable startups with strong market potential and expect substantial returns, often 10x within 5-7 years.

Crowdfunding

Crowdfunding enables startups to raise funds by attracting small contributions from a large pool of supporters through dedicated online platforms. Equity crowdfunding offers investors shares in the business, similar to angel or VC funding, but without the lengthy due diligence.

Campaigns typically raise between €50,000 and €2M. Crowdfunding's biggest advantage is that it also builds a loyal customer base. However, managing many investors and fulfilling campaign promises can be challenging.

Looking for the best crowdfunding platforms in Europe? Check out our dedicated guide focused on the top equity crowdfunding platforms for tech startups, their features, and funding options tailored to startups and investors.

Accelerators and startup programs

Accelerators combine funding with mentorship, connections, and resources, making them ideal for startups in the early stages of scaling. Global programs like Techstars or Y Combinator, or local ones such as SpielFrabrique or Hubraum from Germany, or Innovation Labs from Romania often provide investment and expert guidance to help startups prepare for future fundraising rounds.

Startup competitions also offer valuable opportunities to pitch your idea, gain visibility, and win prize money or resources. Tech events with startup competitions included allowing founders to connect with investors and validate their ideas in a competitive environment. While these programs require significant effort and preparation, they often lead to long-term partnerships and growth opportunities.

Government grants and European funding

A significant advantage of building a startup in Europe is access to government and EU-wide grant programs. The European Union offers various funding instruments, including:

• Horizon Europe: The EU's flagship funding program for research and innovation
• European Innovation Council (EIC): Providing funding and support for breakthrough technologies
• Regional Development Funds: Supporting startups in specific European regions
• National Grant Programs: Country-specific funding opportunities

Unlike raising money from angel investors, venture funds, or equity crowdfunding platforms, grants often don't require equity in exchange for funding. This is one reason why founders prefer to seek grants and retain their company ownership for longer. While application processes can be complex, the non-dilutive nature of grant funding makes it worth exploring alongside other funding sources.

Fundraising challenges founders face in Europe

Despite its growth and opportunities, the European startup funding ecosystem presents unique challenges for founders.

Market fragmentation

One of the biggest challenges founders face in scaling their startups is market fragmentation, which comes from the continent's diverse regulations, currencies, and market dynamics.

Source: Keys to unlock Europe’s potential - State of European Tech 2024

Unlike the U.S., which operates as a single, unified market, Europe’s regulatory environment varies significantly across countries, making it difficult for startups to scale seamlessly. Initiatives like the proposed "28th Regime" or EU Inc. aim to address these issues by creating a unified legal framework, which could simplify operations across borders and make Europe a more cohesive market for startups.

Geographic bias

Geographic bias is another challenge founders face when raising funds. While tech hubs like London, Berlin, and Paris attract the lion's share of attention and capital, startups in smaller or emerging ecosystems often struggle to access funding. This bias reinforces regional inequalities and limits innovation outside these key cities.

Additionally, founders in underfunded regions use alternative funding sources, such as crowdfunding and grants, to enter competitive markets.

Diversity and inclusion

Another systemic issue is the lack of diversity and inclusion in funding. Investment in women-led and co-founded startups in Europe has seen significant progress, reflecting a growing focus on diversity in funding. In 2023, women-led startups raised more than double the VC funding they received in 2020. However, despite this growth, the overall share of funding going to women-led or co-founded startups remains relatively low compared to their male counterparts. The investment landscape is improving steadily, driven in part by increased attention to gender equity in funding, but much work remains to bridge the gap fully.

Europe vs US - market differences

Many European startups are drawn to the U.S. market due to its unified regulatory environment, larger pools of venture capital, and a well-established culture of risk-taking and innovation. In contrast to Europe's fragmented markets, the U.S. offers a single currency, fewer regulatory barriers, and easier access to significant growth capital, especially for late-stage startups.

Additionally, U.S. investors are often more willing to take bold bets on emerging technologies, which can attract founders looking for rapid scaling opportunities. The U.S. venture industry is also larger, with assets under management totaling $270B, compared to Europe's $44B. The difference allows U.S.-based startups to access more substantial funding from inception and secure larger investment rounds as they grow.

Historically, U.S. venture funds have outperformed their European counterparts over extended periods, benefiting from a more mature market and a robust exit environment. However, in the short term, this trend has shifted. Over a one-year horizon, European VC funds reported an internal rate of return (IRR) of -1.6%, according to Pitchbook, compared to -4.9% for U.S. funds. This recent outperformance by Europe is attributed to several factors, including differences in exit multiples and valuation adjustments.

Source: How do US, European VC returns compare? By Pitchbook

European founders are also showing signs of changing preference in staying home rather than moving to the US, where they started to have a strong sense of confidence in the continent's startup ecosystem, as reflected in survey responses.

More than 50% of founders surveyed by Atomico in December 2024 that if they were to start over, they would choose to stay in their current location within Europe. This reflects the growing maturity of Europe's tech hubs and the strong local support systems, talent availability, and funding opportunities that have emerged in recent years.

Source: Europe is attractive, but the US is on the horizon - State of European Tech 2024

Lastly, Europe has consistently outpaced the United States in the number of founders starting companies annually, reflecting the growing appeal of tech entrepreneurship across the continent. By 2024, Europe identified over 16,000 unique founders, a figure on par with 2015 levels and continuing to grow.

Source: Europe has more founders starting companies than the US - State of European Tech 2024

Resources for your next fundraising campaign

To dive deeper into fundraising strategies, explore these resources:

• Fundraising 101 by SeedBlink: A guide designed to help founders how to access funding resources available for European startups and what are some of the most successful strategies they can use.
• VC Network by SeedBlink: Our curated list of European venture capital funds helps you find the right investors and match your fundraising with their investment thesis.

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