From Fundingtrip.com, we have taken a closer look at the sectors receiving the most funding in investments- and the explanation behind.
Highlights of this post
Let’s start at the end: these are the key highlights of where funding is flowing in 2026. However, we highly encourage you to read the whole article to understand the context and see where the numbers come from:
- AI: 61.3% of European deal value in Q1 2026, amounting to €13.4 billion, went to AI startups, making it the dominant force by a wide margin.
- Defence, security & resilience: European DSR startups raised a record $8.7 billion in 2025, with funding up 55% year-on-year and nearly four times higher than five years ago, well outpacing the broader European VC market, which grew just 16% over the same period.
- Deep tech & life sciences: European quantum startups captured 89% of global VC investments in quantum cryptography in early 2025, and the European Innovation Council is backing the momentum with €1.4 billion in 2026, an increase of nearly €200 million compared to 2024.
Context: What is happening in 2026?
Europe’s venture market opened 2026 on a record-breaking note. According to PitchBook’s Q1 2026 Venture Pulse, the continent saw an unprecedented number of billion-dollar rounds, driven almost entirely by large bets in a small number of high-conviction sectors.
Apparently, investors are not spreading capital broadly: they are rather concentrating it where geopolitical urgency, technological disruption, and public policy all point in the same direction.
The three sectors attracting the most European capital
Artificial Intelligence
AIming high in the last few years, artificial intelligence has become the sector receiving the most funding right now. It is now the primary engine of European venture activity.
PitchBook’s Q1 2026 data puts AI at 61.3% of total European deal value (€13.4 billion) and 38.9% of the number of deals completed. But this is not a single-country story: the UK took the largest national share at roughly $17 billion in 2025 (29% of all European VC), followed by France at $8.5 billion and Germany at $8.4 billion, according to Dealroom.
The fastest-growing AI category is what Dealroom calls “Future of Compute” (AI infrastructure, sovereign cloud, and semiconductor design) boosted directly by the European Commission’s €20 billion InvestAI commitment. Investors are not just betting on AI companies; they are betting on Europe’s ability to build the computing infrastructure to remain competitive, which makes AI funding as much a sovereignty play as a commercial one. According to Affinity’s analysis of European VC, AI investment in Europe surged 24% in deal value year-over-year, reshaping the landscape more broadly.
Defence, Security & Resilience
Defence has experienced the most dramatic funding shift in Europe. A joint report by Dealroom and the NATO Innovation Fund (February 2026) confirmed that European Defence, Security and Resilience (DSR) startups raised a record $8.7 billion in 2025, up 55% year-on-year and nearly four times the level seen five years ago.
This growth significantly outpaced the broader European VC market, which grew 16% over the same period. The drivers are unambiguous: the war in Ukraine has demonstrated the critical role of dual-use technology in modern conflict, and NATO allies’ commitments to raise defence spending have created a demand signal investors are rushing to meet. Projected European defence spending approaches €970 billion by 2030.
Geographically, the UK leads with $2.9 billion raised in 2025, though Germany is closing the gap closely at $2.1 billion. Munich (anchored by AI defence firm Helsing and a growing deep-tech cluster) has cemented its position as Europe’s top DSR hub. KPMG’s Q1 2026 Venture Pulse also notes that defence tech is “gaining acceptance as an investable asset class in Europe,” a major cultural shift for a continent historically wary of military investment. New Q1 2026 data from CNBC shows European defence startups have already raised $854 million in the first months of this year alone.
Deep tech & Life Sciences
Europe’s third major funding theme is deep tech and life sciences, areas where the continent has genuine scientific advantages. Affinity notes that life sciences rank as a close second to AI among European VC sectors, driven by demographic pressures and the surge of AI-accelerated drug discovery.
European quantum startups alone captured 89% of global VC in quantum cryptography in early 2025, with Quantonation closing a €220 million early-stage quantum fund in February 2026. The European Innovation Council has committed €1.4 billion in 2026 (nearly €200 million more than in 2024) specifically to support deep-tech research and high-potential startups. New Q1 2026 fund launches tracked by Vestbee reinforce the trend: capital is flowing into quantum (Quantonation), climate deeptech (2150’s €210M fund), and health tech (Vi Partners’ €161M fund).
The logic is that Europe’s strength in science and engineering (it produces twice as many science graduates as the US and hosts 30% of the world’s leading deep-tech universities) is finally being matched with investable capital.
About the author of this post
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Sara Gavidia
Content Creator
E-learning Specialist
LinkedIn
[email protected]
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Hello! I’m Sara 👋🏻
I’m FundingTrip’s Content creator. I write posts about technology, funding and innovation. If you liked this one, subscribe to our newsletter to receive more updates!
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