The big picture for venture capital activity for the last couple of years has been a lot of activity around artificial intelligence but for everything else investment rounds have been slow, with valuation concerns, and exits have been reduced from the norm. Everyone seems to be waiting for a breakout on initial public offerings or more acquisitions of venture-backed companies. In terms of metrics for 2025, AI dominated, accounting for 40% of total transactions, but an even larger 60% percent of all money invested. (NVCA Report)
In the fourth quarter of 2025, there were an estimated 4482 financing rounds with a total value of around $96 billion. For the year there were over 16,000 financings with a total deal value of about $394 billion, but again, look at the proportion that went to AI. These numbers were the highest in four years, so overall activity appears to be up after a bit of a post-epidemic lull. Late-stage transactions showed the biggest increase, again reflecting the heavy weighting of overall deal volume to a few very large financings of established companies. As an example, AI company Anthropic raised a $15 billion round. Corporate venture capital arms participated widely in the transactions.
Geographically, the West Coast picked up 64% of all financing value, an increase to its already pre-eminent position. Use of venture debt financings increased over the last two years. Health care deal count is pretty stable, no large increase overall, although some sub-sectors saw movement up or down over the year. Life sciences, including biotech, is experiencing some hesitation, although the financings that were completed were generally larger in 2025.
Overall, the venture capital market has some weird dynamics. The value of investments made picked up slightly in 2025, while the amount of uncalled but available capital from the investors in the VC funds has plateaued for four years. Exits are still constrained and the investors are in essence seeing negative cash flow, as distributions to them from exits exceeds capital calls for new investments. That makes it hard to raise new funds. In addition, the obsession with AI is huring investment in other sectors. When the VC financing arena isn’t hitting on all cylinders and is so unbalanced, it hurts the economy, as new companies are not just important for innovation, but provide many well-paying jobs.
Likely driven by the low exit value, raising of new funds was very low in 2025, with a mere 537 new funds raising only $66 billion; the lowest number of transactions in over a decade and the lowest amount raised in 7 years. This won’t get better until investors begin to get much larger distributions, as venture capital firms are completely dependent on recycled investments. Overall return metrics are very subdued, with investors able to get better returns from the stock market.
There are some expectations that the exit market will be better in 2026, both in terms of acquisitions and public offerings, but I am dubious, given the extended valuation of the stock market and various geopolitical and national political uncertainties. Until that exit market gets better, and until the AI fervor passes, it is likely to be an uneven venture capital world and new and growing companies will be struggling to get traction. The only good news is that venture firms do have substantial “dry powder” or uncalled capital committments, so they can continue to make investments.
