It was only last year when European tech investment meant cautiously recovering from the
past. Capital held up, but deal volume fell to one of the lowest levels in a decade. As a
result, investors became more selective. A narrower set of companies received larger
checks, leaving everyone else with less room to compete.
In Q1 of 2026, that logic has sharpened. Zubr Capital’s view is that this is not a broad
reopening of the market, but a deeper concentration of capital around sectors investors now
treat as strategically important. Those include AI infrastructure, defence and dual-use
technology, and deep tech with industrial relevance. The difference now is that Europe’s
venture market is no longer just filtering for quality — it is increasingly filtering for strategic fit.
Q1 2026 Shaped by a Selection of Mega-Rounds
The numbers for early 2026 show a clear concentration of capital. Wavve closed its €1 billion
Series D. The French frontier AI lab AMI raised about €890 million, which most consider a
giant Seed round with a €3 billion pre-money valuation. Nscale secured €1.1 billion in new
infrastructure financing, compared with roughly €700 million from a blend of equity and debt
secured by Mistral. These four companies accounted for over €3.5 billion in the quarter by
themselves.
Such deals didn’t happen in a vacuum. PLD Space raised €180 million, 9fin closed €148
million, Allica Bank raised €131 million, and Wonderful hit €129.8 million (at a €1.7 billion
valuation). Upvest combined €78 million in equity with a €30 million debt facility into a single
package. Taken together, €100M+ rounds were a defining feature of the quarter, not a one-
off spike.
The trend continues with the Dutch iron fuel company RIFT closing €113.8 million. Only a
part of that funding came from private equity, with the remainder tied to EU Innovation Fund
support. This points to a broader structural shift. Some of the most ambitious European bets
are increasingly financed through hybrid structures rather than conventional VC alone.
So much activity in Q1 2026 was shaped less by a broad return of risk appetite and more by
capital being focused on a small number of large, high-conviction financings.
The Sectors Defining Europe’s New Capital Concentration
Many of the Q1 2026 sectors attract capital and are starting to look similar from an
investment perspective. When you consider how AI infrastructure, defence, dual-use
technologies, and industrial deep tech look on paper, they appear sharply different.
However, most share similar characteristics that the current European funding environment
rewards.
These sectors are capital-intensive, often tied to real-world systems and aligned with
industrial and strategic priorities. As the market seeks larger, higher-conviction bets, these
characteristics make them easier to underwrite at scale. The result is that European capital
isn’t spreading evenly. It’s clustering around companies that combine technological depth
with infrastructure-like relevance.
AI: From Models to Infrastructure, Agents, and Physical Systems
AI in Q1 2026 is not solely based on foundation models. Most deals are flowing into
companies with a stack that is deepening in both directions. It extends downward into
infrastructure and outward into the physical and operational systems where AI is beginning
to do real work.
The infrastructure layer includes several important areas of activity. Encord closed a €50
million Series C for physical AI data infrastructure — the pipelines and tooling that support
large-scale deployment. Interloom raised €14.2 million at Seed for enterprise AI knowledge
infrastructure, while Tower.dev raised €5.5 million to build infrastructure for AI-driven data
engineering workflows. These deals might not be the most visible, but they reflect how
investors are supporting the underlying scaffolding of the AI stack.
Where the trends are the clearest is in the agentic layer of the quarter. Nexus, backed by
General Catalyst and Y Combinator, raised €3.7 million at Seed for enterprise AI agents.
Flexzo AI closed €10.3 million for an agentic AI workforce platform. Riplo raised €2.6 million
for an AI operating system focused on consulting. Stacks raised €19 million in Series A
funding for enterprise finance AI. All these deals point to a consistent pattern, demonstrating
how AI is moving from assisting human decision-making to taking on operational tasks more
directly.
The most important extension of funding in Q1 is AI used in physical systems. Trener
Robotics raised €26 million in Series A funding for a platform that trains robot skills. Dexory
closed €9.8 million for warehouse intelligence that blends robotics with real-time data.
FLEXOO added €11 million for sensor-driven physical AI in industrial settings. From a macro
perspective, these rounds signal a shift from the purely software-first AI wave. Capital is now
flowing into solutions that integrate AI into systems that perceive, decide, and act in the real
world.
AI in Q1 2026 feels different from a year ago because of the convergence of AI in
infrastructure, agentic, and physical layers. The category is growing, but is also becoming
more layered, more operational, and more closely tied to industrial systems.
Where Defence and Dual-Use Tech Gain Momentum
In defence, Q1 2026 moved from a single landmark deal to activity across the full stage
spectrum. For example, Harmattan AI’s nearly €200 million Series B, backed by Dassault
Aviation, signals that defence-linked AI is now attracting strategic capital on a larger scale.
Frankenburg Technologies raised €30 million at Series A for missile defence, further
reinforcing that trend. The same is the case for a cluster of early-stage bets on Twentyfour
Industries, Occam Industries, and Mutable Tactics, all focused on drone autonomy and AI-
driven defence platforms across Germany and the UK.
The stage spread matters. Defence has moved from a small number of specialist bets to
appearing consistently from pre-Seed through growth rounds, often at the intersection of AI,
robotics, and autonomy. The entire sector has shifted from legitimization to sustained
investor momentum.
Industrial Deep Tech: Hardware, Compute, and Energy Systems
The third concentration point is the least visible, but also the most foundational. Industrial
deep tech — compute hardware, advanced manufacturing, and energy infrastructure — is
the physical layer that the rest of Europe’s strategic technology agenda runs on.
At the compute layer, Lace Lithography raised €34.5 million for chipmaking equipment and
Optalysys closed €26.6 million for photonic computing. These are not software companies
with hardware components — they are capital-intensive, long-cycle hardware businesses of
the kind that has often sat outside mainstream venture investment preferences.
The industrial layer follows the same logic. Isembard raised €43 million for software-defined
factories, embedding intelligence into manufacturing at the process level. Additive Drives
closed over €25 million for 3D-printed motor technology at the intersection of advanced
manufacturing and electrification.
In energy, Terralayr’s €112 million Series A for grid-scale battery storage was one of the
quarter’s largest rounds outside the AI mega-tier. Photoncycle raised €15 million for
seasonal energy storage, targeting one of the harder unsolved challenges in the energy
transition.
What connects these rounds across three different categories is a shared capital profile: they
are large, long-horizon bets tied to physical systems that cannot be built incrementally. In a
market increasingly filtering for strategic fit, that profile is attracting larger, higher-conviction
rounds at scale.
Signals investors should not miss, according to Zubr Capital
All Q1 2026 data suggest that most of the significant capital is concentrated in a small set of
Western European markets, but the underlying investment themes are far more
geographically distributed. Defence, AI infrastructure, robotics, and deep tech companies
receiving such funding come from a broad swath of the region, spanning the UK, France,
and Germany to Estonia (Frankenburg Technologies), Lithuania (WhiteBridge.ai, Axiology),
Poland (Nomagic), Latvia (Deep Space Energy), and Bulgaria (Mandel AI).
Zubr Capital sees this as a signal that capital is clustering around sectors and capabilities
rather than following a purely geographic logic. Investors looking to take advantage of such
funding should prioritize thematic alignment over geography when uncovering new
opportunities.
At the same time, hybrid capital has become structurally important. Q1 2026 reinforced the
patterns of 2025. European tech financing has moved beyond traditional venture equity, with
more companies combining equity with debt, grants, or public funding. For investors, this
makes capital structure a more important part of the underwriting equation. In many cases,
companies that can coordinate multiple financing channels may be better positioned to scale
in a tighter market.
One final note worth considering is how AI is moving beyond models into more operational
systems. An underappreciated signal in Q1 2026 is the speed with which AI is now
integrated into applied systems. Trener Robotics, Dexory, FLEXOO, Allonic, Nature Robots,
and Kilter all point to growing investor interest in companies applying AI in industrial
systems, physical environments, and robotics. To Zubr Capital, this demonstrates a shift
beyond foundation models. Businesses applying AI directly to real-world processes could
represent the next wave of value creation.