(Editor’s note: This post on new tech and startup trends is part of our Tech Tuesday series. Dispatches covers tech because so many of our highly skilled entrepreneurs are engineers, physicists and entrepreneurs.)
The landscape for startups looks very different in the first quarter of 2025 from how it did a year ago, particularly for those looking to make their mark on the tech industry in Europe. Donald Trump’s long-promised tariffs have arrived, while the United States is also set to withdraw many of its financial and military interests from the European continent, as the country’s investors turn inwards in response to their new president’s protectionist policies.
Europe’s tech industry will be looking to play catchup in certain areas for which it has long relied on Silicon Valley as a primary source of innovation and investment, as it seeks greater economic and technological independence from the US. Meanwhile, the arrival of Chinese-based generative AI may just have burst the Western bubble that blew up during the past three years around this sub-sector of high-tech automation.
In this context, there are certain changes in the ecosystem of European startups since 2024. Overarching trends remain much the same, as new startups look to build on recent developments, and the demands of the market haven’t changed for the most part. However, the changing condition of the world market has given rise to a different set of priorities for businesses, consumers and investors alike. On this basis, here are the industry sectors most likely to benefit from startup innovations in the coming year.
AI is still king, but generative AI has peaked for now
The exponential growth of AI will continue in 2025, as all aspects of working life will continue to be transformed by automation, from production-line robotics to data analysis.
Among Silicon Republic’s 25 European startups to watch this year, seven of them are entirely focused on an AI-powered product.
There’s a near-infinite space open to further developments in the AI sector as startup ideators work through a seemingly endless list of tasks and functions which are still yet to be made more productive, efficient or useful through automated processes.
On the other hand, the proliferation of generative AI startups that followed the launch of OpenAI’s ChatGPT in 2022 could be over for now. While generative AI undoubtedly has a range of uses that will continue to expand, the launch of Chinese AI startup DeepSeek has demonstrated that this technology can now be replicated with relatively little investment, and without access to the advanced, high-performance microprocessors over which Silicon Valley continues to hold monopoly.
Consequently, the generative AI bubble has burst as investors no longer see it as the golden egg it once was, and the stock of Silicon Valley’s biggest high-performance chip producer Nvidia has tanked. Attention has turned to other areas of tech in which further AI developments could be useful, and there is a greater diversification of investments in AI across the industry.
Biotech is growing faster than ever
Startups have made huge advances in the field of biotech in recent years, and this trend looks to be continuing in 2025. Oasys Now, Draupnir Bio, LaNua Medical, Nua Surgical and Axial3D are just five examples of European biotech startups who’ve already secured funding for this year. They’re working on a variety of healthcare innovations, from the automation of clinical trials and medical imaging, to pharmacology and new technology for surgical procedures.
Rising healthcare costs are an urgent priority for governments across the continent in light of a prospective European recession. Medical technology that can save costs and time in the long-run as well as saving lives will be even more highly sought-after, in both the public and the private sector.
Smart biomaterials is another revolutionary innovation, the crossroads between deep tech healthcare.
The Netherlands is particularly active in this space. Smart BioMaterials Consortium, or SBMC, in Eindhoven has the mission of accelerating the development of biomaterials for regenerative therapies. That is, biomaterials that aid in the body healing itself such as absorbable stents and special “scaffolds” that coax cells into creating replacement tissues and implants the body’s immune system won’t reject.
Climate tech is even more in-demand
It’s not just health tech that’s going to be prioritized more than ever in 2025. Startups will find the field of tech targeted at climate change particularly fertile ground for investment. The increase in protectionist measures being taken by virtually all of the world’s major economies is going to raise the prices of fossil fuel imports further in 2025. With Europe’s huge trade deficit in oil and gas, it’s going to find itself in an especially difficult position.
European fossil fuel imports have already jumped in price several times over the past four years, due to the economic bullwhip that occurred in the second year of the Covid-19 pandemic, and then sanctions imposed following Russia’s invasion of Ukraine. Yet things will only get worse with the decline of world trade precipitated by Trump’s protectionist agenda.
Startups finding ways to generate energy and run industrial production more sustainably is no longer just a general imperative in the global struggle against climate change. It’s also become a short-term imperative for the economies of European countries. German startup Dryad Networks is one example of a startup that combines both these imperatives, by using a solar-powered AI system to detect wildfires.
Photonics and quantum computing are major growth areas
The diversification of investments in AI software will also likely have an effect on computing hardware and infrastructure. The photonics revolution in computer processing has already started, and with European startups such as Ephos and Swave photonics, it looks set to take a giant leap forward in 2025.
This next-gen processing technology uses light (photos) to transfer data instead of integrated circuits. It’s both faster and more energy efficient than conventional chips, CPUs and GPUs.
What’s more, this year will be a big one for quantum computing in general. In addition to Ephos, which uses photonic connections in the quantum-based computer chip it’s prototyping, European startups such as Riverlane, Pasqal and Equal1 will be racing to develop some of the world’s foremost quantum processors by the end of this year.
Quantum computing uses the hard-to-grasp concept of quantum entanglement, qubits and other quantum properties to solve problems beyond the ability of even the most powerful conventional computers.
Finance and digital security are taking on new importance
With the world market shrinking and trade barriers being raised, efficiency and security will take on even more importance in the finance sector during 2025. That’s why both the fintech and cybersecurity industries will become areas of even more significant startup investment than they have been over the past two decades.
Two startups that have already made a splash in these areas are Cytidel and Scayl, the latter of which will also play a key role in the financing of other European fintech firms moving forward. Twenty twenty-five is certain to be a challenging year for economies across Europe. But its challenges will also present new opportunities for startups in the right fields with the right ideas.
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Alex Beaton
Alex Beaton is a writer from London, UK. His published works include a guide to starting a business in Warsaw, a fictionalised account of his time living in Egypt, and a 2013 report of the political situation in Bulgaria. He has also written extensively about his travels in France, Portugal, Italy and Malta.
