The investment case for European software companies is gaining strength as the region experiences steady growth and changing market dynamics. In 2024, software spending in Europe increased by 11%, with Gartner forecasting a nearly 9% rise this year, well ahead of overall EU economic growth. Europe is home to nearly 13,000 software firms generating over $10 million annually, including about 4,000 exceeding $50 million, according to Crunchbase. These companies have often grown under different constraints than their Silicon Valley peers, focusing on sustainable growth and early profitability. These aren't weaknesses; they are unique value drivers that require tailored strategies.
Three main forces are driving this momentum: increasing cloud adoption, heightened demand for technological sovereignty, and a shifting funding landscape. In Germany alone, cloud usage is climbing, with 46.5% of businesses already using the technology and 11.1% planning adoption. At the same time, regulatory complexities, such as the EU AI Act, are encouraging local preference and giving competitive advantages to firms that can navigate compliance. The true challenge isn’t duplicating Silicon Valley’s fast-paced, risk-friendly culture. It’s whether investors can understand that distinct innovation models need distinct funding approaches and allocate capital appropriately. For investors, Europe is now a key driver of software growth, not just an alternative.
