Europe has experienced a density of challenges in recent years: pandemic, geopolitical tensions, energy and inflation shocks, fragile supply chains and an economy that has noticeably lost momentum, especially in Germany. With our startup customers, I experience how strongly this mixed situation influences financing processes and decision-making cycles. 2026 could be the year in which this environment calms down somewhat – not as a new boom, but as a phase of reorientation. The question for founders is less how much capital could flow, but rather under what conditions financing can be achieved.
Conversations between startups and investors show that the market appears cautious, but not closed. Capital could flow selectively in 2026 – in an ecosystem where technology, application and industry are often closely linked.
Technology meets application: Europe’s structural advantage
Europe is not a classic software-only market. Innovation occurs where technology meets real processes – for example in energy, health, mobility and security. Many investors I speak to are increasingly paying attention to whether business models are compatible with these structures. 2026 could therefore be a year in which those models that fit into European realities have an advantage.
Resilience as a silent factor in investment decisions
Since 2022, geopolitical and economic dependencies have been increasingly incorporated into investors’ considerations. It is primarily about resilience: the question of how dependent central business models are on global supply chains, energy prices or foreign technologies – this affects areas such as AI, energy, health, or infrastructure.
It doesn’t automatically lead to more funding, but it could influence which business models receive capital. Startups that work at interfaces with industry or strengthen basic technological functions could benefit from this.
Industry-related partnerships as an alternative or supplement to classic VC logic
Many technologically sophisticated models require users, pilot customers or co-development partners – structures that exist in large numbers in Europe. Industry partnerships could become more important than maximum capital intensity for many startups because they enable earlier feedback, increase credibility and reduce risk in scaling. For some models, the combination of industrial demand and moderate capital might even make more sense than a quick VC round.
What founders will be able to afford less in 2026
- Unclear market narratives
Teams that cannot precisely explain why their model works in Europe often lose the attention of investors more quickly than those with outstanding issues.
- Lack of prioritization
In a capital-limited environment, plans that realistically show what can be achieved in the next 12 to 18 months and why those steps are relevant are more compelling.
- Surprises in due diligence
Not every number has to be correct. But surprises that show that you don’t know your own drivers are harder to compensate for than any uncertainty in a forecast.
What investors will pay particular attention to in due diligence in 2026
During due diligence, I rarely experience that everything fails due to individual problems. Friction often arises when a company conveys an image that cannot later be maintained. Three observable topics regularly play a role:
- Inconsistent sales and performance data
What is important is not the absolute level of the key figures, but rather their traceability. If sales, delivery and invoicing do not fit together clearly or if key figures such as ARR are defined differently, gaps arise in the “Quality of Earnings” which lead to queries. It makes sense to have clear definitions of central key figures, uniform reporting standards, regular coordination and a “single source of truth” that all teams have access to.
- Documentation as a basis, not as an option
An incomplete data space is rarely the problem. It becomes problematic when documents do not provide a consistent picture and decisions are not documented in a comprehensible manner. Investors don’t expect everything to be perfect, but they do expect the picture to remain coherent. It is therefore worthwhile to maintain a clear structure in the data room early on, in which central contracts, KPIs and decision-making principles are stored in a comprehensible manner.
- Forecast competence instead of forecast perfection
Assumptions do not have to be exact. It is more critical when a team is surprised by its own numbers or shares documents without commenting without showing what considerations lie behind them. It is a warning signal for investors if they have to point out aspects that should actually be familiar to the company. Teams can prevent this by regularly carrying out plan-actual comparisons and commenting on their forecasts with the underlying assumptions.
Aside from classic VC rounds: Founders should know these models
If you don’t understand your cash flows, you have little scope for external financing. Key figures such as DSO (Days Sales Outstanding), DPO (Days Payable Outstanding) and DIO (Days Inventory Outstanding) show how quickly money flows in and out of the company, and therefore how much capital is actually available. On this basis, various financing components could be combined in a sensible order in 2026:
- Operational foundation & working capital
First, payment terms, inventory levels and receivables management should be stable. The more transparent and predictable the cash flow, the greater the scope for external financing.
- Public funds
These include development loans, guarantees and grants from development banks or programs. They can accompany early growth phases and are often cheaper than purely private financing.
- Industry-related models
- Vendor Finance: Suppliers finance part of the investment or grant longer payment terms.
- Factoring: Open receivables are sold to a financing partner in order to obtain liquidity more quickly.
- Fine Trading: An intermediary buys goods from the supplier and gives the startup longer payment terms.
- Sales-related and debt-capital-like models
- Revenue-based financing: Repayment is made as a proportion of current sales, not in rigid installments.
- Venture debt: Debt capital that focuses more on growth and existing investors than on classic collateral.
Classic bank financing usually remains theoretical in the startup context because it is more based on EBITDA and collateral than on pure growth prospects.
2026 as a year of differentiation
From my observations and conversations, there is much to suggest that 2026 will be a year of differentiation: not a broad upswing, but an environment in which business models that are based on European realities have better opportunities. That doesn’t mean every startup will benefit. But it could mean that those models that have an impact where Europe has structural strengths will become more visible.
A round of financing remains a tool, not a goal. What matters is how clearly a team can state what contribution it wants to make and what next steps are realistic. To achieve this, Europe needs entrepreneurship that works close to real problems and markets: ambitious but grounded.
About the author
Kolja Heskamp is co-founder and managing partner of torq.partners and has been working as (interim) CFO alongside high-growth (tech) startups for years. In over 200 mandates – from early stage to scale-up – he has seen why financing rounds fail or fail and how teams can prepare for them. In addition, he taught the module “Finance in Early-Stage Startups” in the MBA program at Bonn University.
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