Europe's AI boom has a plumbing problem. Capital is flooding into a small group of artificial-intelligence companies at record scale, but the traditional route for that money to come back out, the public listing, has nearly shut. Investors and founders are increasingly using secondary transactions to cash out instead. These are private sales of existing shares, and they are becoming a structural part of how European venture capital works rather than a stopgap.
A record-low year for listings
The starting point is a stark number. Only 19 venture-backed companies went public in Europe in 2025, according to PitchBook data 2. That is described as a record low 3. Founders, early investors and the limited partners behind venture funds all want some of their paper gains turned into cash. With so few listings, many companies are staying private for longer than anyone planned 2.
Law firm Orrick's review of 2025 European deal terms reaches a similar conclusion from the transaction side. The year did not bring a broad reopening of IPOs. Some companies revived dual-track processes, preparing for a listing and a sale at the same time, but most of those pushed their flotation plans into 2026 1.
Secondaries move into the mainstream
What has filled the gap is the secondary market. Tech Funding News describes this as a $226 billion market that is booming because the IPO window remains closed 2. Orrick's data shows how far the practice has spread into ordinary fundraising. Some 21% of equity financing deals in 2025 included a secondary sale component, as funds looked for ways to return capital 1.
This matters because it changes what a funding round actually is. When roughly one in five rounds lets some existing holders sell, a raise becomes partly a liquidity event too. Early backers and employees can take money off the table without waiting for a listing that may be years away.
Mergers and acquisitions are the other release valve. Orrick reports that M&A, secondary and reorganization transactions in the UK alone came to $570.5 million across 17 deals. Both private equity firms and corporate buyers returned to the market 1. Its summary is cautious: liquidity is coming back slowly, and secondaries and strategic buyers are doing most of the work, not public markets 1.
Why AI concentration sharpens the squeeze
The AI angle explains why the shortage feels so acute. AI now accounts for about 75% of European funding, and that capital is highly concentrated. Some 73% of European AI money goes to just 38 companies that have raised rounds of $100 million or more 3. Mega-rounds above €100 million now make up more than 60% of all European venture deal value, up from roughly 37% a year earlier. AI's share of deal value has more than doubled since 2020 3.
The result is a growing pile of highly valued AI companies with no clear way to return capital. In AOL's framing, new AI unicorns are accumulating faster than the routes to liquidity, and the cycle that normally recycles capital into new startups looks strained 3.
The three accounts largely agree on the facts, all anchored to the same 19-IPO figure. They differ in tone. Orrick, writing from inside the dealmaking process, frames the picture as "green shoots" and a slow recovery 1. Tech Funding News and AOL put more weight on the scale of the crunch and the strain on the system 23. Orrick's figures are also partly UK-specific, so they should not be read as a full European tally 1.
Reading the shift
My reading is that secondaries are no longer a temporary workaround. They are becoming a permanent feature of European venture finance, and AI's concentration is the main reason. When a few dozen companies absorb most of the capital at rising valuations, few public markets could take all of them on a normal schedule. Secondaries let those valuations stay private while still releasing cash.
That has trade-offs. Private secondary pricing is less transparent than a public listing, and secondary sales return capital to existing holders rather than raising new money for the company. Secondaries can relieve pressure on limited partners and employees. They cannot fully replace the broader price discovery and capital recycling that an open IPO market provides.
The test is 2026. If the deferred dual-track listings actually happen 1, secondaries may settle into a supporting role. If they slip again, Europe's AI sector will rely even more heavily on private markets to manage its liquidity, and the concentration of capital in a handful of large AI firms will make that dependence harder to unwind.
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