This week, a report caught my attention.

Not because it was loud or trying to make a point — but because it quietly confirmed something that’s been building for a while.

The European Deep Tech Report 2026.

And in a market still adjusting to higher rates, geopolitical tension, and the after-effects of the 2021 cycle, it offers one of the clearest signals I’ve seen:

Deep Tech is no longer a niche part of venture. It’s becoming the centre of gravity.

Funding reached $20.3bn — now accounting for 32% of all VC investment in Europe, more than double its share a decade ago. More importantly, it’s held up. While much of tech remains materially below its 2021 peak, Deep Tech has only marginally retraced.

That divergence matters.

It signals a shift away from abundance — and back towards scarcity, towards assets that are harder to build, harder to replicate, and ultimately more defensible.

But this isn’t just a funding story. It’s structural.

A growing share of Deep Tech companies is emerging directly from research environments—universities, labs, and scientific institutions. The founder profile is different: more technical, more academic, often less commercial at the outset.

Historically, that was seen as a limitation.

Now, it’s starting to look like an advantage.

Because the context has changed.

If you zoom out, the real driver here isn’t venture — it’s sovereignty. COVID, supply chain fragility, energy shocks, geopolitical fragmentation… they’ve all pointed in the same direction.

Europe can’t rely on external capability in the same way it used to.

The response is now visible in capital allocation. Across chips, AI, defence, and compute infrastructure, funding is being deployed at a level Europe hasn’t consistently seen before. This is no longer just startups building products — it’s governments, corporates, and investors aligning around capability.

And that’s when things start to compound.

Consolidation is the other side of the same coin.

While Deep Tech is reshaping what gets built, another shift is happening in parallel — and it reinforces the same thesis.

Enterprise software consolidation is back.

Global enterprise SaaS M&A reached $270.6bn in 2025 — the strongest year since the 2021 peak. Activity accelerated into Q4, with both strategic buyers and financial sponsors paying meaningful premiums for category-defining platforms.

But the pattern within the data is more revealing than the headline.

Capital isn’t spreading evenly. It’s concentrating.

The highest valuations are reserved for platforms that sit deep within workflows — particularly those with demonstrable AI-native capabilities. Not surface-level tools, but infrastructure embedded directly into how businesses operate.

Less optional. More mission-critical.

Deep Tech and enterprise SaaS consolidation are pointing to the same conclusion: the market is repricing control.

Assets that own a workflow, a process, or a capability command a premium. Everything else is being rationalised.

We’re moving from a market that rewards growth to one that prices defensibility.

Access isn’t the same as underwriting.

If consolidation tells you where capital is going, secondaries tell you how it’s behaving.

Venture secondary volume exceeded $160bn globally in 2024 — a record — and momentum has carried into 2025. Companies like SpaceX, Anthropic, and Stripe have traded at eye-catching implied valuations in secondary transactions, opening access to private assets that would otherwise be out of reach.

But there’s a tension emerging.

In many cases, companies themselves haven’t authorised these transactions. The connection between buyer and underlying asset is becoming more abstract. And the narrative increasingly centres on access — not fundamentals.

We’ve seen this dynamic before.

In 2020 and 2021, SPACs promised efficient access to private markets. Capital flooded in. Discipline did not. The result wasn’t a failure of the idea — it was a failure of structure, where excess capital overwhelmed a finite set of quality opportunities.

There are early signs that parts of the secondary market are beginning to echo that pattern.

When access becomes the product, underwriting tends to disappear.

A shift in what “good” looks like

Taken together, these are not isolated trends.

They’re different expressions of the same underlying shift:

• Deep Tech is redefining what gets built
• Consolidation is determining who owns it
• Secondaries are revealing how capital behaves late in the cycle

And collectively, they point to a market that is becoming more selective, more concentrated, and more grounded in real capability.

From an investment perspective, this changes the definition of quality.

We are moving away from asset-light, rapid-scaling models toward more capital-intensive, slower-to-build businesses that are significantly more defensible.

Time horizons extend. Execution risk increases. And operator capability becomes central.

Because ultimately:

Capital is no longer the differentiator. Execution is.

Europe’s unfinished business

For Europe, the opportunity is real — but incomplete.

The region is producing world-class science and engineering. Isomorphic Labs, spun out of DeepMind, is now one of the most closely watched AI drug discovery platforms in the world. ARM was designed in Cambridge. The science base is not the problem.

The problem is what happens next.

Late-stage capital remains heavily influenced by non-European investors. A significant share of value continues to be realised through US or Asian acquirers — not European ones. Google sold ARM to SoftBank. The pattern is familiar.

That model is starting to be challenged — but it hasn’t fully broken yet.

The bigger picture

This isn’t just a trend in venture.

It’s a shift in how value is created — and who ultimately controls it.

Europe won’t win by replicating Silicon Valley. It wins by leaning into what it already does well — science, engineering, and industrial capability — and building the structures around that to scale and retain value.

If that happens, this doesn’t remain a $20bn funding story.

It becomes the foundation of Europe’s next industrial cycle — and determines whether it participates in value creation, or controls it. 

Have a great week!

Full credit to the European Deep Tech Report 2026 and PitchBook Q4 2025 Enterprise SaaS M&A data.