State of European Business Technology 2025: How AI is empowering the Support Functions from "Cost Centres" to "Performance Centres"

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Finch Capital [https://finchcapital.com/]'s annual State of European Business Technology report [https://finchcapital.com/research] spotlights a major theme: Europe's AI Rewiring of Support Functions (i.e. HR, Finance, Ops, Legal and IT). The report reveals a decisive shift in how modern companies build and scale efficiently, harnessing AI to unlock deeper insights and significant performance gains. As growth gives way to profitability, businesses are increasingly focused on improving margins and productivity through AI-driven solutions - delivering value and insights to the front office and transforming support functions from "cost centres" into "performance centres." What was once considered "back-office software" has become strategic infrastructure, powering automation, data-led decision-making, and value creation across all business functions.

From an investor's perspective, Finch Capital sees this transition as a defining moment where efficiency, profitability, and intelligent automation converge to drive the next generation of enterprise leaders.

* AI-led startups captured 50% of total business technology funding in 2025, marking a historic shift where automation and data systems fuel most innovation.
* Median pre-money valuations have climbed +2.5 times since 2018, surpassing 2021 peaks and signalling renewed investor confidence in AI-driven efficiency.
* While deal activity fell 25-35% YoY across HR & Payroll, Finance & Ops, Legal & Compliance and IT & Data sectors, total deal value remained resilient at 2.4Bn (Q3 2025), due to funding accelerating in AI-led companies, which represent 35-60% of deal volume across categories.
* The IT & Data sector raised 1.7Bn in 2025, up 30% YoY, as enterprises modernise infrastructure and race toward "AI readiness."
* France leads in deal value (49%) for the second consecutive year, driven by Mistral AI, while the UK leads in deal volume (33%), followed by Germany (17%) and France (12%), reflecting differing ecosystem maturity across markets.
* The median disclosed exit value reached 49M, up 65% from last year's 18M, with most transactions occurring in the mid-market buyout segment, reflecting sector maturity and liquidity strength.

Finch Capital today released the second edition of its State of European Business Tech report, unveiling a decisive turning point for the region's technology ecosystem. The 2025 edition, titled Europe's AI Rewiring, shows that artificial intelligence has moved beyond hype, becoming the backbone of European enterprise productivity, competitiveness, and value creation.

Europe's AI is redefining Business Technology

AI now accounts for half (50%) of total Business Tech funding, marking a structural shift toward automation, data-led decision-making, and intelligent infrastructure. The report signals the emergence of what Finch calls "Business 4.0": a new era where companies redesign operations around AI as a core capability rather than an experimental add-on.

"We're witnessing the moment where AI stops being a buzzword and becomes infrastructure," said Aman Ghei, Partner at Finch Capital. "European companies are not just automating tasks; they're redesigning how work gets done. This shift from efficiency to strategy marks the beginning of the Intelligent Enterprise era."

Europe will catch up to the US within five years

The report [https://finchcapital.com/research] identifies a narrowing gap between Europe and the US. Europe's AI funding trajectory today mirrors where the US was four years ago, suggesting that the region could achieve the US's 2025 status quo by 2030 if current momentum continues.

France continues to lead deal value (49%), driven by Mistral AI's landmark rounds, while the UK dominates deal volume (33%), ahead of Germany (17%) and France (12%). This balance of innovation density and funding scale underpins a stronger ecosystem than at any previous stage of Europe's tech evolution.

Big AI exits are coming

While IPO headlines remain rare, Europe's mid-market buyout scene is thriving, with a median disclosed exit value of 49 million, a testament to both market maturity and liquidity depth. The report forecasts a wave of larger AI-driven exits over the next cycle, particularly in applied AI sectors such as risk & compliance, finance, and IT infrastructure.

This trend signals that European AI champions are entering scale-up and consolidation phases, paving the way for the continent's next generation of unicorns.

AI value won't come from technology alone

The report warns that only 5% of companies currently capture substantial business value from AI, not due to technological limits, but because of organisational inertia.

According to Finch Capital, "AI value creation will come from the workforce as much as from the algorithm." Success will depend on companies building AI-ready cultures: agile, data-fluent teams grounded in trust between humans and intelligent systems.

By 2030, 30-40% of G&A roles are expected to be automated, reshaping how companies operate across HR, finance, ops, legal, and IT. The winners will be those who embed AI into decision-making and organisational design, not just into their tech stacks.

Europe's AI bubble or the beginning of a new equilibrium

Valuations across European Business Tech have surged 2.6 times since 2018, surpassing 2021 peaks after a brief correction in 2023. This acceleration shows that Europe is entering an AI-driven valuation bubble, but one built on far stronger fundamentals than previous cycles. While deal volumes fell 25-35% YoY, total deal value is on the rise as capital concentrated around selected AI leaders' candidates.

Finch Capital's analysis suggests that a correction is inevitable, yet unlike the short-lived hype of 2021, this bubble is underpinned by real enterprise adoption, productivity gains, and maturing liquidity. The short-term overheating, in other words, reflects a long-term structural transformation.

"We're clearly seeing speculative pressure in parts of the market," said Aman Ghei, Partner at Finch Capital. "But this time, the foundations are real. AI is reshaping how businesses operate, not just how they raise capital. The bubble will likely cool, but what remains will be the core of Europe's next decade of innovation."

Sector Highlights

IT & Data - The fastest-growing Business Tech vertical, raising 1.7Bn (+30% YoY), with 61% of funding directed to AI-led companies. Capital is consolidating around next-generation infrastructure and "AI readiness" tools, i.e., data governance, cloud management, and productivity co-pilots.

Finance & Ops - Funding reached 683M (-25% YoY), with AI-related investments representing 35% of deal volume, as automation reshapes spend management, audit, and treasury functions. Digital procurement platforms captured the lion's share, driven by enterprise demand for measurable ROI in efficiency and compliance.

Legal & Compliance - The sector raised 536M (-26% YoY), with 56% of funding linked to AI, underscoring a decisive pivot toward legal workflow and regulatory automation. The report focuses on the rise of AI-driven IP management startups, attracting 15-30M seed and Series A rounds, and is reshaping this once slow-moving category into a hub of intelligent efficiency.

HR & Payroll - The HR & Payroll segment raised 394M (-24% YoY), with 44% of deals involving AI, cementing the function's evolution from administrative back office to strategic performance driver. Capital is concentrating on people analytics and performance management platforms that enable predictive insights into workforce engagement, retention, and productivity.

About Finch Capital

Growth Equity for European Business & Financial Technology.

Finch Capital backs ambitious founders building the next generation of financial and enterprise technology leaders. The firm invests 5-15 million in companies generating 2-15 million ARR, helping them scale profitably while maintaining control. Its portfolio includes over 50 companies, such as Fourthline, Goodlord, eFlow, ZOPA, AccountsIQ, NomuPay, and Lavanda.

Media Contact

mike@finchcapital.com

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