The most notable event in the VC/PE world in the first half of 2026 was obviously the SpaceX initial public offering, by far the largest exit ever for private institutional investors and one that eventually will make a lot of people quite rich. Similar offerings from artificial intelligence companies are expected to create more huge returns for these investors. That money will get re-invested at some point, hopefully not all in artificial intelligence. As we have noted before, the cycle is important–wealthy people. companies and institutional firms invest in a VC or PE fund, the fund invests in startup and growing companies, the companies hopefully do well, the fund exits the companies by sale to another company or public offering, money is returned to the investors, who likely re-invest in another fund, and so on. The amount of wealth and the number of jobs created by this process is staggering. Government can’t do anything like this, no matter what the idiot Mamdani says.
2026 is on pace to be a record exit value year, due to SpaceX, but also other companies going public or being sold. So the ultimate investors in the funds behind Space X and the AI companies likely to exit via IPOS soon are doing well. But the broader market for liquidity is weak and there were only a few investors in these large exits. So the overall exit end of the funnel is not great and those big exits soak up a lot of the money available for exits. The time that funds are having to hold and operate companies they invested in is lengthening. (PB Report)
Despite these worries, the front end of the cycle looks good. Already through the first half of 2026, total amount invested by VC firms exceeds all of 2025. But again, a few very large rounds of new capital, mostly into AI and AI-related companies, have distorted the numbers. About $413 billion was invested by venture funds in the first half of the year, but 85% went to AI companies, and total financing rounds fell in the second quarter. Valuations of companies are also very high, which causes problems if they don’t meet very high growth objectives. It is going to be very hard for all those companies to provide a decent return to the VC funds.
On the front end, fewer funds are raising new capital, but the ones that are raising, are getting similar amounts of money inflow, which is a positive. Many of these new raises are AI or tech-specific of course.
Health care is affected by these broader trends, as biotech companies in particular struggle for adequate funding in the shadow of AI, and AI is eating up a lot of exit value. But merger and acquisition activity has picked up in health care and at almost 20% of the economy, it is hard to ignore the potential for innovative health care companies. And of course we do have a lot of health care companies pimping their association with AI.
If you have an interest in understanding this very important aspect of the US economy, I encourage you to read these reports.
