The Federal Reserve has been cutting interest rates due to cooling inflation, resulting in lower capital costs that benefit both U.S. and European companies.

As interest rates decline, European tech startups are expected to gain from increased access to venture capital funding.

The resilience of the U.S. market and initial interest rate decreases have led to increased venture capital deployment and positive valuation trends in Europe.

If the Federal Reserve continues to cut interest rates in 2025, the current trend in venture lending may change, potentially increasing optimism in IPO and M&A markets.

A resurgence in equity funding is anticipated if limited partners of VC funds experience cash windfalls, allowing startups to grow more aggressively and reduce their reliance on debt.

Despite rising borrowing costs, a shift towards venture debt has occurred among European startups, driven by a need for funding amid declining equity rounds.

Future investments are likely to target AI-native applications and 'Service-as-a-Software' businesses that automate manual processes, indicating a shift in the type of startups receiving funding.

Significant capital is expected to flow into companies focused on technological innovation, particularly in artificial intelligence, space tech, and defense tech sectors.

However, the global financial landscape remains unpredictable, with risks such as geopolitical tensions and potential inflationary policies impacting future rates.

The U.S. market significantly influences the global financial landscape, impacting industries worldwide, including the European tech market.