Europe’s startup scene is buzzing, but when it comes to IPOs, the pipeline is still pretty thin. There’s no shortage of early-stage funding or technical talent, but turning that into companies big and bold enough to go public is where things get tricky.

So, what happens? Europe’s most promising scaleups end up heading across the Atlantic when it’s time to go public, adding to the depth of US exchanges instead of their own.

In a conversation with TFN, Ivan Nikkhoo, Managing Partner at Navigate Ventures, explains that Europe’s challenge starts well before companies are ready for an IPO: “Capital remains easy to raise at seed and early stages, while large institutional allocators concentrate capital into established, late-stage funds. What is missing is sufficient capital in the middle – funds designed to support companies as they move from early traction to early scale.”

And that’s not the only hurdle. The bar for moving forward keeps rising. Investors want it all: capital efficiency, mature products, and real enterprise adoption before they’re ready to write bigger checks.

“Many founders are still optimising for early-stage milestones, while Series A investors are underwriting for later-stage outcomes. As a result, companies can get started easily, but far fewer are able to progress, leading to longer fundraising cycles and lower conversion rates across the UK and Europe,” Nikkhoo explains.

Nikkhoo points out five traits common to the few that succeed: deep industry knowledge, positive market trends, scalable business models, proven product-market fit, and strong capital efficiency. Europe simply doesn’t have enough companies that hit all five at once.

Why the IPO centre of gravity is still in the US

The shortage of mid-stage capital means there are fewer IPO-ready companies in Europe. While US markets have strong pipelines, Europe’s capital markets are still fragmented and cautious.

Nikkhoo notes, “The centre of gravity for IPO markets remains firmly in the US. That is largely driven by infrastructure, depth of capital and the pipeline of companies that are realistically positioned to go public in the near term.”

Europe is showing some green shoots, but let’s not call it a comeback just yet. That imbalance has ripple effects: a healthy IPO market means more liquidity for investors, which then gets recycled into new funds and fresh startups.

Strategic exits over IPOs: Europe’s default path

If IPOs are tough, where’s the liquidity coming from? For many founders and investors in Europe, the answer is getting clearer by the day.

Florian Löbermann, Partner at GET Fund, says the IPO window in Europe is still far from healthy, and that the market has effectively reset its expectations.

“The IPO window in Europe remains tight, and investors need to adjust to a new reality: exits will continue to come from strategic acquisitions. These deals are smaller and more selective than public listings, making it crucial for startups to map potential acquirers early and build relationships well before an exit.”

Meanwhile, the liquidity squeeze is forcing LPs to rethink their capital allocation. Secondary transactions and continuation funds are stepping in to fill the gap. Just look at Permira’s continuation fund for TeamViewer or Earlybird’s secondary sale in UiPath, proof that European investors can still find returns without waiting for a public listing.

Europe’s default exit route right now isn’t an IPO, but a trade sale to a strategic buyer, usually at a smaller scale than the blockbuster public listings we see in the US.

The data: US rebound vs Europe’s cautious reopening

The numbers tell the same story. Niilo Pirttijärvi, co-founder of Inven AI, a specialised deal-sourcing platform, says, “The US IPO market bounced back strongly after 2022, while Europe is still cautious.” He points out that Europe had only about 25 late-stage ($50M+) rounds in 2024, compared to more than 120 in the US.

“Based on IPO activity, the US has seen a much stronger rebound since the 2022 market slowdown, while Europe hasn’t recovered at the same pace. Still, 2025 shows an uptick in European IPOs, suggesting the window is reopening but more cautiously than in the US.”

The gap is even more obvious when you zoom in on late-stage funding rounds that usually feed future IPO hopefuls.

“When we look at larger late-stage funding rounds ($50M+ Series B–K), which often feed future IPO candidates, the pipeline remains significantly stronger in the US than in Europe. Big funding rounds have seen a clear uplift in the US, but not in Europe, indicating a stronger upcoming IPO pipeline in the US.”

Still, Pirttijärvi believes the region has bright spots. “Standouts like Lovable, Isomorphic Labs, and Flatpay could become IPO candidates. But overall, the US continues to capture more of the scale, momentum, and growth-stage funding.”

Relative pricing and Europe’s structural handicap

Even when European companies reach listing size, valuations often push them toward the US or private buyers. John Messer, founder and Managing Partner of Copilot Capital, explains: “Even though there are early signs of stabilisation in European public markets, we are not yet seeing a meaningful reopening of the IPO window for software businesses, as the key constraint remains relative pricing.”

Underneath, liquidity pressures are growing: “Investors can’t hold assets forever, and as pricing adjusts, we’ll see slow improvement. But private markets will likely lead exits for a while.”

Messer also highlights a positive trend: growth funds focused on bootstrapped B2B software, a model brought over from the US. These funds fill the gap between VC and PE by supporting sustainable, profitable companies that don’t follow the “hypergrowth or bust” approach.

This new wave of growth funds in Europe could be the missing link in the funding ladder.

Fragmentation is Europe’s biggest challenge

Carolin Wais, Partner at Plug and Play, calls for reform on a continental scale: “Europe needs one pan-European stock exchange for growth companies. Fragmentation across national exchanges weakens liquidity and ambition. Without a unified market, the US will stay the default for global tech IPOs.”

At the capital allocator level, the liquidity drought is changing behaviour. John Markell of Armentum Capital notes that LPs are shifting from venture to private credit and secondaries to shorten fund cycles.

But a slow IPO market is only one pressure point.

“A slow IPO market is only one area that is affecting fund life and LP appetite to invest in venture. Exit horizons are further away than they were several years ago, and returns aren’t there, given the long hold periods, so LPs are seeking alternatives. The secondary market and private credit have unquestionably benefited as LPs seek liquidity from private investments. Many LPs have moved capital from venture to private credit, given how quickly debt funds turn over relative to equity funds,” Markell notes.

The lack of growth-stage capital is still the ecosystem’s biggest problem. Too few investors are writing large checks for private companies ready to scale without turning to the US or public markets.

So, what’s next for European founders looking for an exit?

Most VCs I spoke with expect trade sales, especially those powered by AI, to be the main exit route in the near future.

Ventech Partner Claire Houry predicts industrial buyers and PE-backed rollups will lead liquidity events: “For liquidity events in 2026 in Europe, I would bet more on trade sale than IPO. And industrial buyers would be driven by either profound market transformation (AI-driven) and for large incumbents like in the old days, a way to accelerate, i.e., SEMrush acquisition by Adobe, driven by GEO market development or Sana Labs (AI company building the next generation of enterprise knowledge tools) acquisition by Workday or market consolidation led by PE-backed company to create an end-to-end solution: in MarketingTech: Brevo (General Atlantic & Oakley buying a majority stake) or AB Tasty merging with VWO, majority owned by Evertstone, a Singaporean PE fund”

For founders, that means thinking about acquisitions early, building relationships with potential buyers, and ensuring your product fits seamlessly into larger platforms.

Without deep mid-stage funding, unified public markets, and competitive pricing, Europe’s biggest wins will keep heading for trade sales or US listings. Until Europe builds the muscle to support its own late-stage pipeline, it’ll keep exporting innovation, and the US will keep reaping the rewards.