2025 grew to become one other yr of ready for a lot of the European personal fairness market. A 105 per cent enhance in deal-making in Q3 versus Q2 confirmed that top-quality property continued to transact, however sluggish progress and valuation uncertainty meant many traders held onto ‘B-grade’ property for longer than anticipated. This created a bottleneck that affected all the ecosystem.
There’s nonetheless important dry powder throughout European funds, and LPs are more and more eager to see it deployed somewhat than preserved. As pricing expectations soften and purchaser and vendor positions converge, exits and secondary transactions are prone to speed up.
Exit challenges imply zombie funds are all over the place, reaching an all-time-high AUM of $824 billion in 2024 and anticipated to succeed in $1 trillion by 2030.
Funding in innovation, worldwide enlargement and industrial functionality will outline the subsequent cycle.
Regardless of expectations of a stronger rebound, 2025 grew to become one other yr of ready for a lot of the European personal fairness market. A 105 per cent enhance in deal-making in Q3 versus Q2 confirmed that top-quality property continued to transact, however sluggish progress and valuation uncertainty meant many traders held onto ‘B-grade’ property for longer than anticipated. This created a bottleneck that affected all the ecosystem. Restricted companions waited for liquidity, normal companions delayed new fund cycles, and founders usually discovered themselves navigating longer intervals between funding rounds or exits.
But personal fairness is inherently cyclical. Each reset brings renewed urge for food and recalibrated expectations. For entrepreneurs main high-growth companies, 2026 is shaping up much less as a continuation of hesitation and extra as a yr the place alternative re-emerges. That is very true for corporations that may display operational self-discipline alongside progress potential.
Crunch time for exits – and what meaning for founders
No matter macroeconomic noise, many traders are approaching some extent the place they merely can not maintain sure property for much longer. Liquidity strain is turning into a extra highly effective power than persistence. There’s nonetheless important dry powder throughout European funds, and LPs are more and more eager to see it deployed somewhat than preserved. As pricing expectations soften and purchaser and vendor positions converge, exits and secondary transactions are prone to speed up.
For founders, this issues. A extra lively exit setting doesn’t solely profit corporations already getting ready on the market. It additionally unlocks capital recycling, which in flip will increase urge for food for brand new progress investments. IPO markets are anticipated to stay selective somewhat than absolutely open, however strategic acquisitions and secondary buyouts are probably to supply extra real looking near-term routes. Companies that may present sturdy unit economics, clear market positioning and management maturity will stand out shortly when consumers start transferring once more.
Out of the sandbox: B2B and vertical AI goes mainstream
The extraordinary inflow of capital into AI has produced outstanding corporations, however it has additionally inflated expectations. A cooling interval within the second half of 2026 seems probably, with extra selective funding and slower funding cycles. For founders, the implication is obvious: differentiation issues. Constructing vertical, application-layer options that leverage present infrastructure affords a extra resilient path than competing straight with hyperscale suppliers. Traders are more and more rewarding defensibility, retention and profitability over progress at any price.
Many profitable AI implementations will not be rising from purely AI-native start-ups, however from established SaaS companies with deep sector experience. Our personal portfolio displays this, as each Relesys, the frontline retail app, and PriceShape, which gives real-time retail pricing knowledge, have AI pushed merchandise in beta with main prospects. What makes these merchandise totally different is that they’re not developed by native AI companies, however by B2B and vertical SaaS specialists. With deep, actual information of their prospects and demand, they’re leveraging AI to boost their present choices, mixing and matching from the very best applied sciences accessible. Aggressive benefit more and more comes from understanding buyer workflows and embedding automation the place it drives tangible outcomes somewhat than summary innovation.
The quiet digitisation of the excessive road
The anticipated collapse of bricks-and-mortar retail by no means absolutely materialised. As a substitute, the excessive road has stabilised right into a hybrid mannequin the place on-line and offline experiences reinforce each other and proceed to ship worth, for consumers and retailers. Retailers are not targeted solely on survival; many are investing in optimisation and profitability.
For technology-led progress companies, this represents a big alternative as retail stays one in all Europe’s largest but comparatively under-digitised sectors – a uncommon mixture of scale and alternative. Instruments that combine communication, analytics and workforce engagement into day-to-day operations are gaining traction as a result of they resolve sensible challenges round retention, efficiency and buyer expertise. Corporations like Relesys, PriceShape and others like them will grow to be ubiquitous on the excessive road within the coming yr.
AI hackers, inner danger and the cybersecurity alternative
The acceleration of AI adoption additionally introduces new vulnerabilities. Cybersecurity is quickly turning into one of many defining themes of the approaching yr, with AI corporations ramping up funding to get forward of the hackers. Issues intensified after Anthropic reported that its expertise had been ‘weaponised’ in August by cybercriminals, highlighting how superior instruments can be utilized for each innovation and exploitation. For scaling companies the place velocity usually outweighs course of, this presents a cloth operational danger, however danger additionally creates alternative.
Coaching platforms, safe coding instruments and AI-governance options have gotten important somewhat than optionally available. Corporations like SecureFlag, a safe coding coaching platform, which just lately launched programmes targeted on managing worker AI utilization, are tapping right into a fast-growing demand for structured safety schooling. For founders, investing early in AI governance can grow to be a differentiator somewhat than a compliance burden.
Rising managers and operator-led capital
Exit challenges imply zombie funds are all over the place, reaching an all-time-high AUM of $824 billion in 2024 and anticipated to succeed in $1 trillion by 2030. However somewhat than an existential disaster, that is driving a shift in energy in personal fairness, away from the massive funds in direction of rising managers.
Regardless of 2025 fundraising being the bottom in a number of years, rising corporations comparable to Goldenpeak, which closed its debut fund of £375 million in simply over 12 weeks, and Kester Capital, whose fourth fund reached £425 million in solely barely longer, have been flying. Newer personal fairness corporations are sometimes operator-led and sector-focused, prioritising operational worth creation over monetary engineering, constructing companies suited to success within the present market. There are positive to be extra of those in 2026, with LPs, administration groups and gifted traders leaping onboard.
Founder versus skilled CEO – sooner than anticipated
As valuations rise and offers grow to be extra aggressive, management functionality is below larger scrutiny. Consequently, conversations about transitioning from founder-led management to skilled CEOs are occurring earlier within the firm lifecycle. There’s little doubt that prime founders deliver imaginative and prescient and cultural DNA that are very important to early enterprise progress. However as soon as organisations attain roughly 150 to 200 staff, the skillset required to scale usually shifts towards course of administration, governance and operational rigour. For a lot of founders that isn’t their skillset, or what they take pleasure in, so it is important to speak truthfully about what is smart for each side.
This isn’t about changing founders, however about aligning management with construction with scale ambitions and exit timelines. Many founders proceed to thrive as product visionaries or govt chairs. What’s altering is the timing and openness of those discussions, significantly the place traders are targeted on getting ready companies for eventual exits.
One constant theme: intentional progress
If there’s a single defining message for 2026, it’s progress with intention. Reaching key efficiency milestones has been tougher lately, however each traders and administration groups are decided to vary that trajectory. Funding in innovation, worldwide enlargement and industrial functionality will outline the subsequent cycle.
Markets at all times reopen. Once they do, companies with sturdy operational foundations and credible natural progress will likely be finest positioned to capitalise. For entrepreneurs main high-potential corporations, the approaching yr is much less about ready for good situations and extra about getting ready for momentum when it arrives.
John Messer is co-founder and managing associate of CopilotCapital.
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