Investments from venture capital funds (VC) remained at high levels in the first quarter of 2026 in Europe, reaching $25.7 billion. In fact, according to the latest edition of KPMG Private Enterprise’s Venture Pulse study, investment activity was driven primarily by multiple mega deals in the Artificial Intelligence sector, while the defense sector also posted strong performance.
However, despite the overall positive picture, investment activity in March was noticeably lower, primarily affected by the uncertainty caused by the conflict in the Middle East.
It is worth noting, however, that globally, investments from VC funds surged to a historic high, reaching $330.9 billion in the first quarter of 2026, driven in part by mega deals in Artificial Intelligence.
The United Kingdom takes the lion’s share
Within Europe, the United Kingdom attracted the largest share of venture capital investments in the first quarter, including the largest funding round to take place in the region.
At the same time, investments in Germany rose from $2.8 billion in the fourth quarter of 2025 to $4.8 billion in the first quarter of 2026, marking the third-highest quarterly performance on record.
On the other hand, investments in the Nordic countries saw a relative slowdown following the seven-quarter high of $3.2 billion recorded in the fourth quarter of 2025.
Record-breaking mega-deals
Mega-deals in Europe reached record levels, with six companies securing funding of over $1 billion each. The United Kingdom took the top spot, accounting for three of the six largest funding rounds, followed by Germany with two and France with one.
Specifically, most mega-deals took place in the fields of Artificial Intelligence and deep tech, with notable examples including the $2 billion funding round for the British company Nscale, the $1.8 billion round for the German company Neura Robotics, the $1.5 billion funding round for the British company Wayve, and the $1 billion funding round for the French company Advanced Machine Intelligence.
Rounding out the list of companies that surpassed the $1 billion mark were Germany’s Cloover with $1.2 billion in funding and the UK’s Kraken Technologies with $1 billion.
Strong interest in the defense and fintech sectors
Overall, during the first quarter, investors continued to show strong interest in a wide range of fintech companies, with valuations in the sector remaining at relatively high levels, despite geopolitical conflicts and changing economic conditions.
Artificial Intelligence (AI) has further fueled investor interest as financial services companies and major fintechs seek to integrate AI into their operations. KPMG estimates that fintechs focused on Artificial Intelligence will continue to attract investor interest in the second quarter of 2026.
At the same time, there was particularly heightened interest in defense and specifically in dual-use technologies, including those that have developed rapidly in Ukraine and also have commercial applications.
Moreover, over the past two years, the defense technology sector has seen particularly strong growth in Europe, with several VC funds creating specialized investment vehicles to channel capital into the industry.
At the national level, governments across Europe continued to increase their defense spending in the first quarter of 2026, emphasizing domestic solutions as well as technologies whose intellectual property remains within the region. This trend is expected to create opportunities in other sectors as well, such as fintech.
What are the forecasts for the second quarter of 2026
As mentioned above, one of the biggest concerns in Europe has been the conflict in the Middle East and its broader implications for the region. If the conflict continues, there may be a noticeable slowdown in investment activity, especially regarding startups that were planning to seek funding in the Middle East or were planning to capitalize on the region’s growth opportunities.
Given the fluid geopolitical situation, investors in Europe are expected to remain highly selective. However, artificial intelligence is expected to remain a key focus, along with defense technology and energy infrastructure.
Finally, the IPO market in Europe is expected to remain sluggish in the second quarter of 2026.
On the mergers and acquisitions (M&A) front, VC-backed companies looking to exit are expected to attract more interest from private equity investors seeking to acquire businesses with a resilient model and positive EBITDA.