The venture capital industry is currently operating in two separate realities. On one hand, venture capital firms (GPs) are struggling to raise new funds as limited partners (LPs) pull back. On the other, the capital that is being deployed is being funneled into a small number of massive, AI-centric companies.
The Fundraising Drought: Why $66.1 Billion?
The drop to $66.1 billion—down from the $222.9 billion peak in 2022—is primarily driven by a stalled “liquidity flywheel.”
- The IPO Drought: With very few successful exits in 2024 and 2025, venture firms have been unable to return cash to their LPs. Without these “distributions,” LPs lack the liquid capital to recommit to new venture funds.
- Flight to Quality: Investors are concentrating their capital in a few established “tier-one” firms like Founders Fund and Lightspeed, leaving emerging and first-time managers struggling to close new vehicles.
- Extended Cycles: The median time between fundraises for VC firms has exceeded three years for the first time in recent history.
2025 US Venture Capital at a Glance
| Metric | 2025 Performance | Year-Over-Year Change |
| VC Fundraising (to firms) | $66.1 Billion | -35% |
| Total VC Deal Value (into startups) | $274 Billion | +30% |
| AI Sector Funding Share | ~64% | Record High |
| New Fund Closures (count) | 537 Funds | 10-Year Low |
The AI Exception: A Surge in Deployment
In stark contrast to the fundraising slump, actual investment into startups grew in 2025. This was almost entirely driven by the “AI Supercycle.”
- Concentrated Capital: Five major companies—OpenAI, Anthropic, xAI, Project Prometheus, and Scale AI—raised a combined $84 billion in 2025, accounting for 20% of all venture funding.
- OpenAI’s Record: The year saw the largest private funding round in history: OpenAI’s $40 billion raise in Q1 2025.12
- The Bifurcated Market: While AI-related startups are seeing “red-hot” valuations, startups in SaaS, fintech, and consumer sectors continue to face stagnation and “down rounds.”
Outlook for 2026: Searching for a Bottom
Market analysts suggest that the fundraising environment will not recover until the “exit window” truly reopens.
- 2026 IPO Hopes: The market is watching for potential listings from SpaceX (recently valued at $800 billion), Anthropic, and Klarna to restore liquidity to the ecosystem.
- Consolidation: The number of active venture firms is expected to continue shrinking as smaller funds that fail to raise new capital are forced to close their doors.
- Sovereign Wealth Shift: AI giants are increasingly bypassing traditional VC firms altogether, raising capital directly from sovereign wealth funds and massive corporate partners.
“The fundraising climate is no longer just challenging; it’s transformative. We are seeing a structural shift where only the most proven managers can secure capital while the rest of the market waits for an IPO spark.” — PitchBook Analysis
