For the fourth consecutive year, Austria’s startup ecosystem has moved deeper into contraction. What initially looked like a cyclical correction after the pandemic-driven boom has now become a structural decline. In 2025, Austria reached a new low point—at a time when many European peers are already regaining momentum.
According to the latest Startup Barometer published by EY Austria, total venture capital invested in Austrian start-ups fell to just €253 million in 2025, a dramatic 56% decline year-on-year. This marks the sharpest drop in Europe and the fourth annual decrease in a row.
From an international perspective, the message is clear: Austria is no longer merely lagging—it is diverging from the European recovery trend.
A Market in Retreat, Not Reset
Deal activity in Austria remained almost flat, with 148 funding rounds compared to 151 in 2024. But this apparent stability is misleading. The average deal size collapsed to €2.3 million, down from €4.3 million a year earlier and far below the €11.6 million average seen during the 2021 peak.
Even more concerning is the near-complete absence of growth capital:
- Only four rounds exceeded €10 million
- Zero mega-rounds above €100 million since 2023
- The largest deal in 2025 reached just €50 million
In global venture terms, these figures signal a market that can still create start-ups—but struggles to scale them.
Austria increasingly resembles an early-stage incubator whose most promising companies are forced to look abroad once serious growth capital is required.
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Europe Moves Forward—Austria Moves Backward
The contrast with the broader European ecosystem could hardly be starker.
Across the EU, venture investments increased by around 5% in 2025, reaching more than €66 billion, despite fewer deals overall. Countries that actively mobilised institutional capital and strengthened growth-stage financing are now benefiting from renewed investor confidence.
Austria, by comparison, ranks among the worst performers in Europe, firmly positioned in the lower third of all analysed markets. This underperformance cannot be explained by market size or a lack of entrepreneurial talent—it is primarily a policy and structural failure.
While other countries adjusted regulatory frameworks and unlocked pension and insurance capital, Austria remained stuck in political inertia.
The Scale-Up Gap Is Now Structural
The most alarming signal lies in the funding structure itself. Austria still produces a steady flow of seed and early-stage rounds—but the bridge to scale-up financing is broken.
Rounds between €10 million and €50 million, which are critical for international expansion, are now rare exceptions. Without them:
- Internationalisation is delayed
- Innovation pipelines slow down
- High-quality jobs are created elsewhere
From a global investor’s viewpoint, Austria increasingly lacks credibility as a location for building category-defining companies.
AI Dominates—But Cannot Carry the System Alone
Artificial intelligence remains the clear bright spot. In 2025:
- 38% of all invested capital flowed into AI-driven start-ups
- 36% of all funding rounds involved AI companies
- In the second half of the year, almost every second deal was AI-related
This mirrors global investment trends—but it also exposes Austria’s vulnerability. A single technology vertical is now carrying a disproportionate share of the ecosystem. While AI is a powerful growth engine, concentration is not resilience.
If the broader funding environment continues to shrink, even AI will not be enough to stabilise the system.
Sustainability: Strong Signal, Weak Volume
Sustainability-focused start-ups reached a record 29% share of total invested capital. However, this is largely a statistical effect caused by the overall market contraction. In absolute terms, investments in sustainable ventures fell sharply.
Internationally, sustainability capital is increasingly directed toward scalable, industrial-grade solutions. Austria risks missing this wave if funding volumes remain too low to support global ambitions.
Vienna Dominates—Regional Ecosystems Remain Fragile
Vienna continues to dominate Austria’s startup landscape, accounting for:
- 58% of all funding rounds
- 71% of total invested capital
Outside the capital, regional ecosystems remain thin, highly deal-dependent, and vulnerable. From a European perspective, this level of geographic concentration signals an immature national ecosystem, not a diversified innovation economy.
The Core Problem: Policy Execution, Not Potential
Austria’s fundamentals remain strong: highly educated founders, solid research infrastructure, and competitive technological capabilities. Yet these strengths are increasingly neutralised by systemic weaknesses:
- High non-wage labour costs
- Excessive bureaucracy
- Uncompetitive employee participation models
- Limited access to institutional venture capital
- Slow implementation of announced reforms
The long-discussed fund-of-funds model—designed to mobilise pension and insurance capital—remains unimplemented. In international comparison, this delay is no longer excusable.
A Decisive Moment for Austria’s Start-up Future
2025 is not just another weak year—it is a strategic inflection point.
If Austria continues on its current path, it risks becoming a peripheral innovation market: good at starting companies, but incapable of scaling them. In a global race for technology leadership, that is not a sustainable position.
Other European countries have shown that recovery is possible—with the right incentives, capital structures, and political will. Austria now faces a simple but uncomfortable choice:
Reform decisively—or fall structurally behind.
For international investors, founders, and talent, the clock is ticking.
