Europe’s Deeptech Renaissance: Will the Trend Hold?

Something is shifting in the European tech landscape. Not a pivot. Not a trend. Something deeper. We went looking for whether it's real, how long it might last, and what could break it.

Written by: George Patin | Research Contributor, London Venture Capital Network

Over the past three years, the venture capital landscape has changed rather dramatically. Following the pandemic-era boom of 2021, funding across most technology sectors declined by as much as 50-60% as rising interest rates, declining tech valuations, and macroeconomic instability all led to investor pullback. From SaaS to consumer apps, traditional tech sectors saw steep declines in both deal volume and capital deployed — with the exception of, perhaps, an incredible amount of capital flowing into AI startups of all kinds. One category, though, has held remarkably firmly, Deep Tech.

Deep technology has many definitions, but in general refers to ventures based on hard science and engineering. These are often CAPEX-intensive, operating on long scaling timelines of 7-10 years due to intense R&D requirements. The upside is a chance to take control or leadership of the category; DeepTech’s long scaling timelines offer much greater moats than software in this day and age.

In sharp contrast with the overall contraction, VC funding for deep tech has only declined by 28%. That may not seem all that exciting, until you look at the 2020 era numbers. European Deep Technology funding is up over 80% in 2024 compared to 2020, retaining much of the post-2021 momentum (Figure 1). In 2024, approximately €15 billion flowed into European deep tech startups, consolidating the sector's position as the single largest category in European venture capital, now accounting for roughly one-third of all VC investment on the continent.

Figure 1. Source: Dealroom, 2025 (2025 Data incomplete at publication).

One may ask: what is driving this wave of interest? The answer lies somewhere between a number of overlapping trends. Emerging technologies such as quantum computing, foundational AI models and others offer highly defensible IP and a strong moat to those able to break through. The meteoric rise of AI in particular is spurring a lot of knock-on effects, as AI gets applied to everything from material discovery to the scientific method itself. A recent wave of mega-rounds and increased government investment across Europe have also no doubt played a part.

The mega-rounds in particular are worth highlighting. 4 European DeepTechs have recently raised rounds exceeding £600m: Mistral, Helsing, Wayve and Nscale. One in Paris, one in Munich, and two headquartered London; practically a whistle-stop tour of Europe’s top startup hubs. Several of these rounds are record-breaking, too: Paris-based Mistral AI closed a €1.7 billion Series C in September 2025 at an €11.7 billion post-money valuation — the largest funding round ever raised by a European AI company — with an investor lineup including ASML, a16z, General Catalyst and others. Riding a similar wave, London-based Wayve raised £840 million ($1.08 billion) in May 2024 in what became the largest UK deep tech round on record.

This matches a broader investment pattern: Novel AI, Defence and Energy have each grown over 70% YoY, with AI in particular coming in at 114% at $3bn total funding across Europe (Figure 2). It’s worth to again note the overlap: the rise in data centre construction is spurring investment into technologies like SMRs to power them, while the ongoing war in Ukraine is spurring developments in edge AI chips and various drone swarm technologies. Overall, this suggests powerful feedback loops that may well push deep tech investment even higher as scaling startups create new markets on both the supply and application sides.

Figure 2, Segment Deep Dives. Source: Lakestar, WC and Dealroom joint report.

The UK is at the heart of this trend. In 2024, UK Deep Tech companies raised just over $7bn, spread across all stages (Figure 3). 2025 is likely to exceed those numbers yet again, with nearly 35% of UK’s overall VC funding going into deep technology, a larger share than over the previous 6 year period, but relatively modest growth compared to 2024 (Figure 3). Final numbers are, of course, yet to be seen.

Figure 3, UK Deep Technology Funding. Source: RAE.

Figure 4, UK Deep Technology Funding. Source: RAE.

It’s worth noting that 77% of all funding is concentrated in the so-called London, Cambridge Oxford ‘Golden Triangle’. While London in general tends to dominate the UK venture ecosystem, this particular trio likely comes down to an extremely strong university network spanning at least 6 top institutions. A similar pattern holds across the rest of Europe, at least when it comes to spinouts: many leading DeepTechs draw heavily on the scientific and engineering talent offered by leading universities. This may help to explain the geography of European Deep Tech: the UK, France, Berlin and Switzerland. 

Figure 5, Spinout Performance. Lakestar, WC and Dealroom joint report.

Throughout, governments across Europe have acted as catalysts. The UK’s 2025 Industrial Strategy prioritises five frontier technologies: AI, quantum computing, engineering biology, semiconductors, and future telecommunications. That is accompanied with multi-hundred-million-pound investments like the £670 million National Quantum Computing Centre and £121 million quantum technology fund. On the continent, the European Innovation Council (EIC) leads with over €2.6 billion in co-investments, mobilising €3 of private capital for every euro deployed. In both cases, these programs have sought to cultivate new verticals and de-risk initial investments, either through extensive support programs or by participating in rounds directly as in the case of EIC. The spread across both sectors and patents reflects the breadth of the current deep tech landscape (Figure 6.).

Figure 6, EIC Investment Data. Source: EIC.

One key question remains, then, has deep tech actually delivered? And will the trajectory continue?

First of all, returns. By and large, the answer appears to be yes. Looking at deep tech focused funds, they have either outperformed or performed on par with more broadly-oriented tech funds, delivering roughly ~16% Net IRR (Figure 7). Deep tech, however, requires both more time and a higher overall investment before delivering substantial revenues. Looking at earlier breakdowns, the investment pattern appears to be well-spread across stages, with several large companies reaching maturation as billions’ worth of euros and pounds flow into seed and Series A rounds.

Figure 7, Deep Tech Returns. Lakestar, WC and Dealroom joint report.

Altogether, this is likely the beginning of a long-term trend. The sectoral and geographical pattern may yet shift, but given deep tech’s reliance on dense supporting ecosystems, it’s likely that future startups will coalesce around 10-20 major clusters. The space is certainly one to watch.

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