After taking so long to get to the second quarter results, I thought I might be a little faster this quarter!! The third quarter of 2025 continues the general pattern for the year–kind of a meh year, not awful, not really good. The private investment world includes both venture capital firms and private equity. The line between the two is blurred, but venture capital is more tilted toward smaller companies and earlier financing rounds. Total deal activity in the third quarter of 2025 for venture firms was 4208 funding rounds with a value of $81 billion; and year-to-date there have been 12,422 transactions valued at $250 billion. These numbers are basically in line with historic ones, but are heavily skewed to a few bid funding rounds, primarily in artificial intelligence. Those transactions accounted for a whopping 64% of all deal value.
On the other end, we see a declining deal number and value for the early stage fundings that actually launch and sustain companies. In health care, life sciences transactions are decreasing in number and deal value, although valuation metrics have picked up. The coasts, particularly the West Coast, continue to get an outsized share of venture funding. Perhaps due to the difficulty some companies have in getting venture funding, use of debt by these companies has increased. On the positive side, exits creating liquidity for venture-backed companies have increased in 2025, but again this is heavily weighted toward tech. That might increase fundraising by the venture capital firms, which currently is at extremely low levels.
Looking at the private equity side of this investor world alone, $331 billion was invested across 2347 transactions in Q3 2025. This is pretty much in line with recent activity, but the total is slanted to a few very large deals, primarily in artificial intelligence and other technology. Of this investment, only 20% goes to growth/expansion for smaller companies. Health care services, health care technology and health care products are receiving a low percentage of all investments.
PE exits, which fuel the cycle, were somewhat muted, $125 billion worth in 464 transactions. This was down compared to the prior quarter but up 19% from 2024. There continue to be few IPOs, with those that occur tending to be very large. Valuation metrics for exits are in-line with the last few years. On the fundraising side, only 244 new funds were initiated, garnering $214 billion. This is a decrease from the prior year period. There continues to be a very large amount of uncalled but committed capital in past funds, however, ensuring that there is lots of “dry powder” for investment. (PE Report) (NVCA Report)
My concern would be that it is difficult for the smaller companies that really drive innovation and hiring to compete for funding in this environment, where everyone things they are going to hit a huge home run with AI investments. And those AI investments are unlikely to generate the return investors think it will, meaning there will be less exit value for re-investment. A more broad-based investment environment would be better for our economy.
