The landscape for venture valuations in Europe has been mixed through 2025. The difference between AI and non-AI-related companies has been stark, but not divergent enough to be deemed a tale of two cities.

The broader environment has consisted of increasing valuations across the ecosystem, with the biggest step-ups in Series E+ startups. However, it is clear and well known that across venture, valuations and activity have been buoyed by exponential, hockey-stick-like step-ups for AI-related players.

The big questions looking into 2026 are therefore:
1. Is there an AI bubble?
2. If so, when will it burst?
3. And how resilient is the European venture market without the crutch of bubble-like valuations?

We believe the answer to the first question is yes, but the timing of a correction is unclear.

On one hand, European markets continue to be underpenetrated compared to the US in terms of deal activity, check sizes and density of AI ecosystems. This would suggest there is more room to grow when it comes to European AI deal activity, rounds and valuations.

A correction is unlikely in the first half of 2026 if public market valuations continue to rally, especially in the US, where players such as CoreWeave and Palantir have seen outstanding returns this year.

On the other hand, we believe there may be signs of a correction starting to emerge, at least in Europe.

In Q3, the proportion of down rounds in Europe overall continued to decrease to 14.9% from 15.1% in H1 2025. However, by vertical, AI and machine learning have seen a step-up in the share of down-round deals in 2025. In Q3, this sat at 15%, up from 14.3% in 2024 and higher than broader SaaS, which has seen 12% of deals take a down round so far this year.

 

The whisper of down rounds in the sector, contrary to broader trends, could be a sign of things to come. Which leads to the question of resilience for a non-AI-related European ecosystem.

YTD in Europe, we have seen a crowding out of capital for other sectors, with key areas such as fintech and life sciences losing share of deal activity to AI. However, there are still signs of life, especially in the venture growth part of the market, where unicorn deal value continued to grow in Q3, pacing above 2024. The aggregate unicorn market value has increased nearly 5% so far in 2025, as 14 new names were added to the herd.

By sector, half of the new names sit in the IT space, with two in financial services and healthcare, as well as B2B. One was added in consumer, a sector where no unicorns had been added in Europe since 2022, and previously minted consumer unicorn Oura raised a $900 million Series E at an $11 billion valuation. This is all evidence that non-AI-related startups are still able to scale and attract capital in Europe.

So, while sector bifurcation persists, with AI-related companies now accounting for roughly 40% of deal value in Europe, the ecosystem remains delicately balanced. Any shift in sentiment toward AI valuations could reverberate across the broader venture landscape, testing the resilience of non-AI sectors that have only recently begun to regain momentum.

Read more in our Q3 2025 European VC Valuations Report.

The seven public alt managers we track—Blackstone, Apollo, KKR, Ares, Carlyle, Blue Owl and TPG—who for the most part started as PE shops, have morphed into something much larger: alternative asset managers. These managers have strategies that now span nearly every private market strategy in some capacity.

While PE was the asset class that enabled them to go public and achieve massive scale, other asset classes are helping them sustain growth and reach new heights. Their growth over the last two years has been driven by emerging opportunities, such as digital infrastructure, specifically data centers, and various private credit strategies, especially alternative credit, also known as asset-based finance.

Make no mistake about it, PE isn't going anywhere and is still a core business unit for the majority of these firms. But the lion's share of capital raised is coming from other strategies, specifically private credit, which across these seven managers accounted for 57.3% or $468.5 billion of total capital raised over the last 12 months.

 

Not only are other asset classes fueling this growth, but so too are new fundraising channels, such as the private wealth (retail) channel and the insurance channel. The institutional channels these managers have frequented for years may be reaching their ceiling, prompting these managers to explore ways to fundraise.

With the democratization of private markets seemingly underway and insurers looking to gain exposure to higher risk-adjusted returns historically presented by the private markets, these managers are waiting with open arms, offering to be a one-stop-shop for this new LP base, providing exposure to a multitude of asset classes, all while they continue to expand their product suite, looking to capture even more investors from these new channels.

These managers are not the only ones looking to broaden their strategies and product offerings. Over the course of the last two years, we have seen a wave of GP consolidation, with managers acquiring other alternative managers to expand products in existing asset classes or to gain exposure to new asset classes and offer more diverse offerings to investors

To see where these managers are expanding and what private markets trends they are driving, download the Q3 2025 US Public PE and GP Deal Roundup.