The circular economy is entering a new phase, marked by a market that is more demanding, selective, and oriented toward projects capable of scaling. This is reflected in the “Report on Financing for Circular Startups in Europe in 2025,” prepared by TheCircularLab. Investment stands at €4.9 billion across 377 deals, a figure signaling a reorganization of capital within the ecosystem.
The adjustment marks a maturity milestone. After a 2024 driven by large funding rounds that pushed investment up to €12.2 billion, the market returns to more sustainable levels and a more balanced operation. While the number of deals falls by 43% year over year, this evolution does not reflect waning interest, but a different logic in capital allocation. Investment concentrates in a smaller number of projects, but with greater development and fit within value chains.
In this context, equity consolidates as the main source of financing, surpassing 50% of the total, reinforcing a model in which capital prioritizes solutions with greater runway. This reconfiguration also extends to the ecosystem base: early stages show a 37% decline in pre-seed and seed, while corporate participation and support programs fall by around 50%. A move that raises the bar from the outset and redefines access to financing terms.
José Luis Moreno, Innovation Manager at Ecoembes, explains: “The main challenge this cycle shift leaves behind isn’t in the large deals, but in what happens in the early stages. When funding for pre-seed and seed drops and the role of corporations and support programs diminishes, what’s at stake is the ability to generate the solutions we’ll need in the coming years. That’s why, at Ecoembes, we work to drive innovation from the early stages, supporting the development of solutions that enable progress toward a stronger, scalable circular economy model.”
Federico Cristoforoni, cofounder of Net Zero Insights, asserts: “The 2025 data point to a market in adjustment, not a retreat. Although funding volumes have declined, the composition of capital offers a more nuanced reading: equity again consolidates as the main financing instrument, and the circular value chains that already attracted investment last year are again drawing market interest. This continuity reflects a structural conviction: investors are being more selective, but continue backing the same areas. In a year especially challenging for Climate Tech as a whole, this stability is meaningful.”
Spain evolves in line with Europe and consolidates its ecosystem
The Spanish market reflects the same transition. Investment totals €87.3 million in 2025, down 37%, in line with the European landscape. However, this adjustment coexists with an increase in exit activity, rising from one to five in the last year. An evolution that points to an ecosystem beginning to close the investment cycle, in which startups not only raise financing but begin to consolidate their development and generate returns.
Priority areas remain stable. Sectors such as batteries and mobility lead in capital volume, while areas linked to food, water, and resources concentrate the greatest number of deals. This continuity confirms that, beyond the adjustment, the circular economy continues to solidify as a strategic space for innovation.
Innovation: From Potential to Execution Capability
This new context does not slow innovation, but it redefines its conditions. The drop in early stages and the reduced participation of supporting actors raise the bar from the outset, shaping an ecosystem in which solutions advance with a higher degree of development before obtaining financing. Innovation is no longer measured solely by its potential and is increasingly evaluated by its execution capability.
Solutions that progress are those capable of integrating into value chains, meeting regulatory demands, and scaling in real-world environments. This shift places the circular economy on a plane increasingly tied to business competitiveness, where operational viability becomes a decisive criterion.
Packaging: Where Circularity Becomes Operational
In this scenario, packaging consolidates as one of the areas where the transition to the circular economy becomes clearer. In 2025, it mobilized close to €590 million, maintaining its dynamism despite a more selective environment.
Investment concentrates mainly in materials, design, and production, accounting for 85.5% of activity, reflecting a shift of capital toward solutions that act at the source of the process. Primary packaging accounts for 78.4% of the deals, consolidating as the most visible and regulated point in the value chain.
In this context, biopolymers lead innovation, representing 68.4% of deals, while compostable and biodegradable solutions maintain a meaningful share and coexist with reusable and recycled models.
