Serious-minded European founders and investors, we are often told, prefer to focus on purposeful tech rather than the vapid, if enormously lucrative, consumer tech companies popular in Silicon Valley. Judging by Sifted’s latest H1 funding report, there is something more to this than just Europe’s habitual virtue signalling.
Although overall investment in the first half of 2025 dropped 11.5% to €23.8bn, the biggest equity funding rounds came in areas such as defence tech, drug discovery, data centres, energy storage and health. “Against a backdrop of geopolitical tension and capital rotation, Europe is quietly winning in high-barrier, high-impact sectors like defence, biotech and quantum,” said Laura McGinnis, principal at Balderton Capital.
What is also notable is how successful European founders are now helping to seed the next generation of startups.
For example, two of the startups among the top seven biggest funding rounds in the half year have been backed by Prima Materia, the investment fund founded by Spotify’s Daniel Ek. The Swedish entrepreneur is certainly covering the waterfront.
If the purpose of Neko Health, which raised €250m of funding to expand its network of diagnostic clinics, is to prolong life, the goal of Helsing, the Munich-based defence tech company which raised €600m to develop lethal drones, is to shorten it. Helsing, though, would rightly counter that its purposeful mission is to deter war meaning we never have to fight one.
The urgency of resisting Russian aggression, following the full-scale invasion of Ukraine in 2022, has certainly triggered a surge of investment in defence tech. Two of the eight tech unicorns minted in the first half of 2025 are also drone companies: the Portuguese-British Tekever, which is investing £400m in the UK over the next five years, and the German Quantum Systems, which raised €160m.
One other high-profile European entrepreneur, who is helping to nurture the next wave of startups is Sir Demis Hassabis, cofounder of Google DeepMind. Isomorphic Labs, which is applying some of the AI technology developed by Google DeepMind to drug discovery, notched up the second biggest fund-raising deal in the half, raising €556m. Another health startup, Verdiva Bio, which is aiming to develop new weight-loss drugs also pulled in €395m.
One sector that proved an exception to the funding surge for purposeful startups was climate tech, where funding fell 40% in the first half of the year compared with the same period in 2024. However, even here there were some standout investments including the €130m raised by Proxima Fusion, the Munich-based nuclear fusion company.
Faced with an acute energy crunch, the German government is becoming increasingly supportive of the technology, even if it is unlikely that any commercially viable nuclear fusion plant will become operational until well into the 2030s.
The other striking feature of the investment climate in the first half of 2025 was, of course, the white-hot appeal of agentic AI startups. Deal count rose 226% in the half with 130 agentic AI startups raising a total of €1.7bn. Many of these companies are looking to automate specific business processes in particular industries, such as accountancy, law, marketing and healthcare.
But Michael Stothard, principal at firstminute capital (and a distinguished former Sifted editor) suggested that some founders were now looking to use the technology to automate the full stack. “It’s a fundamental shift from enabling these sectors with software to replacing them entirely,” he said.
That momentum has certainly carried through into the second half of the year with Lovable, the latest darling of the Stockholm startup scene, last week raising $200m at a $1.8bn valuation. The vibe coding company, which has been expanding at dizzying speed, claims to have 2.3m users.
Some may regard that as vibe investing.
Some of the companies mentioned in this column will be appearing at Sifted Summit on October 8-9.
Read the orginal article: https://sifted.eu/articles/john-thornhill-sifted-view-vcs-purpose-tech-h1/
