1. Growth Phase: 2018 - 2021
- 13.5 % CAGR (2015 - 2020), with total VC volume reaching US $330 b in 2020.
- In 2021, Q2 alone raised US $157 b globally. This marked a record high across North America, Europe, and parts of Asia.
- Mega-deals peaked, driving growth but also introducing concentration risks.
2. Correction: 2022 - 2023
- VC funding declined, falling from over $530 b in 2022 to around $340 b in 2023.
- Deal counts dropped by ~25 % in 2024; for instance, in the UK, deals fell from 6,885 to 5,256, though total investment remained stable at £16.5 b.
- Funds raised for new VC vehicles decreased, with Q1 2024 recording the lowest total since Q2 2019 at $75.9 b across 7,520 deals.
AI and CleanTech sectors remained resilient bright spots despite broader slowdown.
3. Stabilization and AI Surge: Late 2024–Mid 2025
- In Q4 2024, VC activity rebounded to a seven-quarter high, primarily driven by AI megadeals such as Databricks' $10 b raise. Secondary funds also exceeded $100 b.
- Q1 2025 saw approximately $80 b in VC activity, propelled by a $40 b OpenAI deal. Although deal volume declined, average deal size increased significantly.
- H1 2025 reached $205 b, a 32 % year-over-year increase. Over $70 b went to just 11 unicorn megadeals.
- AI startups commanded 53 % of global VC, and 64 % in the U.S.
- Corporate venture capital (CVC) doubled its investment to $129 b in H1 2025, with deal counts up 25 % year-over-year.
Snapshot Table: VC Volume vs. Deal Counts (2019–2025 H1)
Why These Changes Happened
- Investor Caution and Macroeconomic Turbulence Regulatory shifts, inflation, and geopolitical instability reduced LP appetite and delayed exit timelines.
- AI Megadeals Dominating Volume A small number of outsized raises - like those by OpenAI and Anthropic - are skewing the funding landscape heavily.
- Rise of Secondary Transactions With traditional exits delayed, investors turned to secondary funds, which raised over $100 b in 2024.
- Corporate Venture Capital Gaining Ground CVCs such as Microsoft and Meta stepped in as consistent funders, focusing on strategic AI bets.
- Geographic Imbalance The U.S. leads with over two-thirds of global VC in H1 2025. Europe lags but shows GreenTech growth. Asia-Pacific, especially China, saw steep declines in 2023 VC activity.
What Lies Ahead: 2025 - 2027 Outlook
AI is expected to account for more than 50 % of VC dollars through 2026. However, some cooling is anticipated-generative AI funding may drop from $22 b in 2023 to ~$12 b in 2024 (excluding megadeals).
2. Gradual Recovery in Exit Activity
Exit values in Q2 2025 reached $67.7 b, showing signs of improvement though still below 2021 levels.
3. Continued Fundraising Challenges
LPs remain cautious, focusing on fund returns (DPI) rather than committing to new vehicles. Fundraising may stay suppressed through 2026.
4. Return to Sector Diversification
Following the AI peak, VCs are likely to revisit CleanTech, biotech, and cybersecurity opportunities, especially in Europe and Asia.
5. CVC Will Be a Stabilizing Force
Corporations will continue making strategic bets, potentially providing a safety net during fundraising downturns.
Two-Year Scenario Table
Key Takeaways
- AI remains essential, but diversification is increasingly attractive.
- Secondary funds offer liquidity solutions in a slow exit environment.
- CVC is emerging as a strategic and steady capital source.
- Exit recovery is critical to new fund formation.
- Geographic focus must be intentional, particularly in slower markets like EU and APAC.
References and Further Reading
Data Analyst for Tech Startups | Driving Growth through Analytics & Optimization | SQL • Python • BigQuery • Looker Studio | Remote
4wThis is an incredibly insightful and comprehensive retrospective on VC trends! The breakdown of the AI surge and CVC's stabilizing role is very valuable.
Invest & Build for Good | Author 📖
1moVenture Beyond
Strategic Sales and GTM Leader | AI & Automation Evangelist | Driving $MM Growth in Tech | Sales as a Service |
1moThoughtful post, thanks Dr. Rakesh