Europe: Q2’26 Venture Pulse Report

European venture investment strengthened during the quarter and remained robust by historical standards. Large rounds supported activity, while investor attention centered on artificial intelligence and adjacent areas such as defense, energy and deep technology. The pattern reflects growing demand for strategically important, capital-intensive technologies and for businesses with clear differentiation and defensibility.

Q3'26 highlights for Europe

Investment reached a multi-quarter high
Several exceptionally large rounds supported the regional total
AI, defense and deep technology attracted significant attention
Exit activity remained muted despite strong investment

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AI broadens into infrastructure and industry

Artificial intelligence remained the clearest investment priority across Europe, but the focus extended well beyond software and model development. Investors backed technologies supporting industrial applications, physical AI, semiconductors, energy capacity and other infrastructure needed to deploy AI at scale. Defense-related businesses also drew strong interest as governments sought greater regional capability and resilience. The breadth of activity shows how the market is shifting toward practical implementation and strategically important technologies, with investors favoring businesses that can demonstrate defensibility, specialized capabilities and credible routes to adoption.

Public priorities support strategic technology investment

Government priorities helped reinforce investor interest in defense, sovereign AI, energy and other strategic sectors. Procurement commitments and public investment initiatives improved the outlook for companies able to support regional security, industrial capacity and technological independence. This environment encouraged investors to make larger commitments to businesses with the potential to secure long-term contracts or address critical infrastructure needs. At the same time, the market remained selective: companies outside favored themes often faced a more difficult fundraising environment, particularly when their differentiation, scalability or path to profitability was less clear.

Exit conditions remain the market’s key constraint

Europe’s exit environment remained subdued even as investment showed resilience. Public listing activity continued to lag stronger reopenings elsewhere, and a notable planned listing was postponed amid market uncertainty. The lack of consistent exit pathways is creating tension as private companies raise larger rounds and investors seek returns. Merger and acquisition activity continued to provide an important route to liquidity, but the region has yet to see a broad reopening of public markets. A stronger pipeline of prepared companies offers some grounds for optimism, although timing will depend on market confidence and wider geopolitical conditions.

Trends to watch for in Q4’26

European venture investment is expected to remain robust, led by continued interest in artificial intelligence, defense, alternative energy and deep technology. Industry-specific AI, physical AI and the infrastructure required to support deployment—including energy generation and semiconductors—are likely to remain priorities. Space technology may also gain attention in selected markets. Government-backed initiatives intended to strengthen regional capability and help companies scale could encourage additional private investment as capital is deployed. Even so, investors are expected to remain selective, emphasizing defensibility, sustainable economics and practical adoption. The exit environment will remain an important watchpoint as companies and investors assess when public markets may reopen more broadly.

While investment into Irish start-ups has been strong over the past number of years, one question that is getting asked in the Irish market at the moment is whether we have a sufficiently broad capital base to propel Irish businesses forward in a world where maybe there’s more international competition – particularly for later stage VC funding. There is loads of capital, but also more competition for that capital given how certain sectors have such a high demand for it.

Gavin Sheehan

Partner, Deal Advisory

KPMG in Ireland