Preliminary figures from Invest Europe released on Thursday paint a picture of robust capital deployment across European private markets in the opening six months of 2026. Venture capital channelled €11.5bn into European companies during this period, representing an 11% increase compared to the same timeframe in 2025. The industry body compiled these findings alongside a survey of fund managers and their backers conducted in partnership with consultancy Arthur D. Little.
Across the broader private equity and venture capital landscape, fundraising reached €67.6bn in Europe during the half-year, up 6% from the revised 2025 figure. However, total investment activity declined sharply to €43.1bn, a 35% drop driven primarily by weakness in the buyout segment.
Eric de Montgolfier, Invest Europe's chief executive, attributed the momentum to Europe's appeal as a stable destination for capital. He observed that "In the hands of experienced managers, that capital is flowing into companies that support Europe's strategic agenda, fuel innovation, and boost competitiveness."
Venture growth masks shifting deal landscape
The venture capital record proved particularly striking given that fewer companies actually secured funding during the period. Growth came predominantly from activity in the UK and Ireland, alongside an uptick in both seed-stage and later-round investments.
Meanwhile, buyout investment contracted substantially, falling 42% to €24.5bn. Growth investment declined even more steeply, dropping 48% to €6.8bn. Fundraising dynamics diverged sharply from deployment patterns: buyout funds pulled in €53.6bn, a 29% increase representing approximately 79% of all capital raised. Venture capital funds, by contrast, raised €7.9bn, down 3% year-on-year.
Exit activity also weakened considerably. Divestments at cost fell 40% to €13.2bn, marking the lowest half-year figure since 2020. Stock market listings, however, gained prominence as an exit route, accounting for 13% of all exits compared to 7% a year prior—their strongest showing since the second half of 2021.
Defence and deeptech lead sectoral momentum
Defence sector investment emerged as one of the most dramatic growth stories, more than doubling to €2.7bn from €1.3bn in the first half of 2025. Deeptech companies captured €8.5bn, a 35% surge bolstered by particularly strong activity in the UK and Ireland.
Fund managers' expectations align closely with these investment flows. Three-quarters of surveyed fund managers anticipate increased defence investment going forward, naming it their top sector priority. An additional 53% expect aerospace to attract more capital. Deeptech and artificial intelligence tied for second place among anticipated growth areas, with 62% of managers expecting heightened investment.
Continuation funds—vehicles that allow firms to transition existing portfolio companies into new structures—experienced a sharp pullback. These funds raised €2.4bn, a dramatic 78% decline from the prior year's record €11.3bn.
Geopolitical factors reshaping capital allocation
Survey responses reveal that geopolitical considerations are increasingly influencing investment decisions. In response to US trade policy developments, 43% of fund investors indicated they expect to increase European allocations over the coming three years. Simultaneously, 30% anticipate reducing US exposure. An additional 29% cited Middle East tensions as a driver of greater European investment.
Artificial intelligence dominates the thematic landscape. An overwhelming 82% of fund managers identified AI as their teams' primary focus for the year ahead, superseding exit strategy considerations. The technology now ranks as the leading issue in investment due diligence processes. Industry consolidation appears underway, with 69% of managers reporting that consolidation is already occurring.
Jonas Fagerlund, a partner at Arthur D. Little, characterised the shift in AI's importance: "AI capabilities have moved from 'nice to have' to 'must have' and are transforming GP operations and the companies they support."
All first-half figures remain preliminary, with Invest Europe anticipating that final numbers will increase as additional data becomes available. Recent market signals support continued momentum: Crunchbase data from October indicated that European startups achieved their strongest quarter in four years. This week alone, the European Union unveiled a €525M chip platform, while members of the EIC Scaling Club announced €4bn in fresh capital.
Source: The Next Web
