Venture Capital: Industry Trends Q2 2025

Venture capital in Q2 2025 is undergoing a deep structural reset. AI has moved from a hot trend to the core driver of investment logic, pulling capital across every sector, from SaaS to space tech. 

In this in-depth Venture Capital Q2 2025 trend analysis, we observed 7 trends:

1) AI Isn’t a Vertical Anymore, It’s the Core of Venture Capital Strategy
2) U.S. Venture Capital Regains Its Global Stronghold
3) Fundraising Hits 5-Year Low as Capital Consolidates Around Mega-Funds
4) Exit Market Reawakens as IPOs Regain Momentum and Valuations Climb
5) India and Japan Emerge as Bright Spots Amid Asia’s VC Slowdown
6) Valuation Pressures Shrink Seed and Early-Stage Venture Activity
7) Venture Capital Accelerates into Space, Defense, and Infrastructure-AI

Trend 1: AI Isn’t a Vertical Anymore, It’s the Core of Venture Capital Strategy

AI continues to dominate the venture capital landscape in Q2 2025, not just as a hot sector, but as the gravitational center of investor activity across all verticals. 

AI Platforms – Lion share of Funds

AI-led software startups attracted the majority of the quarter’s largest global deals. These included Scale AI’s massive $14.3 billion raise, Anduril’s $2.5 billion round, Thinking Machines’ $2 billion in funding, and Safe Superintelligence’s $2 billion injection. The sheer size and frequency of these rounds point to a funding environment that is coalescing around scalable, defensible AI platforms.

$100 million and above – AI Startups

60% of all global mega-rounds ($100 million and above) in Q2 involved AI companies, up sharply from just 40% a year earlier. The shift isn’t limited to late-stage funding either. 

U.S.-based AI startups alone raised $28.6 billion, with early-stage AI companies now commanding 3–4x higher valuations than non-AI peers in comparable segments. What’s more, this AI-driven recalibration is forcing a shift across adjacent sectors.

SaaS, Fintech, and Healthtech – No AI, No Funding

SaaS, fintech, and Healthtech startups are feeling pressure to embed AI capabilities, not just to remain competitive in their markets, but to stay relevant in fundraising conversations. Investors are increasingly filtering pitch decks for tangible AI integration, not just strategy. 

This moment represents a deep structural shift in VC strategy. For the first time since the SaaS wave of the 2010s, a single technological paradigm is reshaping not just what investors fund, but how they evaluate potential across the board. Venture firms that fail to adapt, whether by developing domain expertise in AI or evolving their investment theses, risk being left behind.

Trend 2:  U.S. Venture Capital Regains Its Global Stronghold

After several quarters of cautious recovery, the U.S. has reasserted its dominance in the global venture capital landscape with U.S.-based startups raising $53.2 billion during the quarter, a 16% increase over Q1 figures and a clear signal of revived investor confidence. This surge represented 52% of all global venture funding, reaffirming the U.S. as the undisputed anchor of venture-backed innovation.

Americas – 70% of Global VC Funding Volume

The broader Americas region drew in 70% of global VC volume, with the U.S. leading the charge thanks to late-stage activity in critical verticals such as enterprise AI, defense technologies, and space infrastructure. Notably, the number of U.S. deals reached 3,425 in Q2, with particularly strong performance in traditional startup hubs like California and New York, as well as continued momentum in Texas.

Long-Term Infrastructure Investment and National Priority

The sectoral breakdown reveals what’s powering this resurgence. Venture firms are funneling capital into areas tied to national resilience and long-term infrastructure, particularly AI platforms tailored to enterprise functions, next-generation aerospace and defense solutions, and energy-grid automation. These sectors, many of which overlap with broader industrial transformation themes, are proving more resilient to macro volatility and better aligned with both public and private sector priorities.

Regulatory Moats – Key to US VC Fund Concentrations

The strategic focus on deep tech, infrastructure, and security also reflects a broader rebalancing in U.S. venture strategy. Whereas the 2010s were defined by consumer-centric growth, Q2 2025 shows the U.S. doubling down on dual-use technologies and scalable systems with high regulatory moats. As a result, the country is not just attracting more capital—it is defining the next phase of global VC direction.

Trend 3:  Fundraising Hits 5-Year Low as Capital Consolidates Around Mega-Funds

Weakest Fundraising Since 2019

Beneath the surface of steady dealmaking, the venture capital fundraising environment is showing clear signs of structural stress. In the first half of 2025, global fundraising fell to just $48.8 billion, its weakest midyear total since 2019. 

Fundraising - 40% Year-on-Year Decline

Only 88 venture funds closed in the U.S. during Q2, raising a total of $13.2 billion. That figure represents a 40% year-over-year decline and signals growing hesitation among limited partners (LPs) amid an uncertain macroeconomic backdrop. Yet the funding shortfall is not spread evenly. 

Mega-Funds – Taking in Most Global VC Funds

Capital is increasingly gravitating toward large, established firms. Mega-funds, those sized at $1 billion or more, accounted for over 62% of total global VC fundraising in Q2. In contrast, first-time fund managers, seed-stage investors, and regional GPs are facing growing headwinds, with many unable to reach target closes or even secure meaningful commitments.

This concentration reveals a deeper bifurcation in the venture capital ecosystem. As macro conditions tighten and exit timelines remain elongated, LPs are opting for perceived safety, reallocating commitments toward firms with proven track records, established portfolios, and institutional credibility. The result is a two-tiered system: at the top, a handful of marquee firms continue to raise and deploy massive capital pools with minimal friction; below them, smaller and emerging managers are increasingly boxed out, struggling to scale or survive.

Time to Close Funds – Lengthened 

The average time to close for new funds has lengthened, with many managers pushing fundraising timelines into 2026 or pausing new fund launches altogether. The chilling effect is particularly acute at the early stage, where the ecosystem relies most heavily on new entrants for experimentation and geographic diversification.

Future Innovation outside AI – At Jeopardy

Ultimately, while Q2 2025 saw continued investment into AI, defense, and infrastructure technologies, the pipeline of future innovation may narrow if capital remains disproportionately concentrated. The challenge ahead will be balancing efficiency at the top with renewal at the base.

Trend 4:  Exit Market Reawakens as IPOs Regain Momentum and Valuations Climb

Q2 2025 – IPO empowers Rebound in Exit Value

After more than two years of sluggish exit activity, Q2 2025 delivered a meaningful rebound in liquidity across the venture capital landscape. According to the PitchBook–NVCA Venture Monitor, total VC exit value hit $24.7 billion across 271 deals, marking a 45% quarter-over-quarter increase and the strongest exit environment since late 2021. This revival was driven in part by the long-awaited return of IPOs, which had largely dried up since the market correction in 2022.

Pharma and Robotics – IPO Resurgence

High-profile public listings helped reignite confidence. Zeta Bio raised $3.8 billion and Aether Robotics secured $2.1 billion, both exceeding their initial pricing targets and signaling that investor appetite for growth-stage innovation is slowly recovering. These IPOs not only met valuation expectations, they outperformed them, creating momentum that many analysts believe could extend into Q3, especially as interest rates show signs of stabilizing and economic forecasts improve.

M&A – Resurgence in Healthcare and Software

CB Insights corroborates this upward trajectory, reporting a 53% surge in M&A deal value during the quarter. Strategic buyers, particularly in AI and biotech, are aggressively pursuing targets to integrate next-gen capabilities or consolidate market share. This trend is especially pronounced in healthcare and software, where exits are now seen as viable again after nearly eight quarters of deferral and valuation mismatches.

The composition of exits is also shifting. While M&A remains the dominant form, IPOs now represent a growing share of exit value, a reversal from the last two years when private-to-private transactions were the default. PitchBook notes that median exit valuations have begun to climb, with late-stage companies in AI, biotech, and clean energy now securing stronger multiples due to renewed investor interest and reduced volatility.

Additionally, the resurgence in exits is creating a feedback loop for the broader VC ecosystem. As LPs receive more distributions, they are more willing to recommit to new funds, potentially easing the fundraising crunch discussed in Trend 3. The IPO window is still narrow, but it's open, and firms are lining up to capitalize while conditions remain favorable.

Trend 5:  India and Japan Emerge as Bright Spots Amid Asia’s VC Slowdown

Chinese startups – Lowest fundraising Quarter Since Early 2010

Venture capital activity in Asia-Pacific continues to be defined by stark contrasts. While total funding in the region dropped to $12.8 billion in Q2 2025, one of its lowest quarterly totals in more than a decade, pockets of resilience are beginning to shine through. 

The broader decline was heavily driven by China’s sharp contraction, where regulatory pressures and geopolitical uncertainty continue to discourage both domestic and foreign investment. Chinese startups attracted just $4.1 billion in the quarter, marking the lowest total since the early 2010s.

India and Japan – Emerge in Asia

Yet this regional gloom was not evenly distributed. India and Japan have emerged as outliers, showing renewed investor confidence, particularly in verticals aligned with global tailwinds. 

India – FinTech, logistics and Deep Tech

India raised $3.5 billion across 355 deals, up from $2.8 billion in Q1. Healthtech and SaaS led the charge, with notable investments into PB Healthcare and several AI-enabled enterprise platforms.  The deal flow in the country remains diversified, with fintech, logistics, and deep tech attracting repeat capital from both global and domestic funds.

Japan – Leading in Robotics, Mobility and Industrial AI 

Japan, often a quieter VC market, recorded its largest-ever robotics funding round in Q2. ThinkForge’s $620 million Series D attracted attention from both corporate and institutional investors, reflecting a growing appetite for advanced automation solutions in response to demographic pressures and industrial modernization. The deal was especially notable in a region where late-stage capital has historically been hard to mobilize at scale.

This divergence underscores a broader fragmentation within the Asia-Pacific venture scene. While Greater China grapples with investor retreat and policy opacity, countries like India and Japan are drawing targeted, sector-specific capital based on clearer growth narratives and more favorable regulatory conditions. In Japan’s case, strong corporate balance sheets are enabling larger strategic investments, particularly in frontier technologies like robotics, mobility, and industrial AI.

This shift marks a reorientation of venture capital flows within Asia—from monolithic China-centric dealmaking toward a more diversified, multi-hub model. Investors are no longer treating Asia as a single market; instead, they are becoming more selective, prioritizing clarity, governance, and sectoral momentum.

Trend 6: Valuation Pressures Shrink Seed and Early-Stage Venture Activity

While late-stage and mega-deals dominated headlines in Q2 2025, the foundation of the venture ecosystem, seed and early-stage investing, saw a sharp contraction. Early-stage deal volume dropped by 18% year-over-year, marking one of the steepest declines in recent quarters. The pullback reflects a growing wave of caution among investors, many of whom are applying far stricter due diligence and prioritizing capital efficiency over rapid scaling.

Valuation Reset – 12% Decline in Seed-Stage Deals

Valuation resets are at the heart of this slowdown. Median pre-money valuations for seed-stage deals fell to $9.4 million, a 12% decline compared to a year ago. Series A medians also declined, landing at $27.6 million, as investors recalibrated their pricing models in response to tighter exit markets, lower public comps, and a less forgiving macro environment. Founders, especially first-time entrepreneurs, are finding it harder to justify the premium valuations that became standard during the 2020–2021 cycle.

Net-new Investor – 11 Quarter Low

Net-new investor participation at the seed stage has dropped to an 11-quarter low, reflecting a marked preference for follow-on bets over new relationships. Rather than deploying capital into unfamiliar teams or experimental business models, many investors are choosing to double down on existing portfolio companies with clearer traction or stronger product-market fit. The result is a contracting funnel of capital at the bottom of the venture pipeline, just as demand for startup funding remains high.

New Founders in AI-enabled Saas or Climate Tech are Struggling

This dynamic is particularly challenging for new founders. Even in high-growth areas like AI-enabled SaaS or climate tech, sectors that are attracting top-tier VC interest, emerging teams are struggling to meet the revised benchmarks for traction, team maturity, and defensibility. The bar for what constitutes a “venture-backable” company has risen, and capital is no longer chasing every early-stage opportunity.

Loss of Innovation and Geographic Reach

The implications are long-term. A weakened seed-stage environment today could lead to a thinner Series A and B pipeline in 2026 and beyond. While the ecosystem continues to mature at the top, its base is becoming narrower and more selective, risking a loss of innovation diversity and geographic reach.

Trend 7:  Venture Capital Accelerates into Space, Defense, and Infrastructure-AI

A decisive shift is underway in venture capital strategy: from consumer-centric models toward capital-intensive hard tech platforms that anchor the next generation of AI, national security, and industrial infrastructure. 

Q2 2025 marked a tipping point. 

4 out of the Top 10 Global VC Funds – in Defense or Space Tech

Four of the top 10 largest global VC rounds were in defense or space tech, including Anduril’s $2.5 billion raise, Impulse Space’s $680 million round, and Stellar Grid’s $440 million infusion. These mega-deals underscore how investor appetite is moving beyond cloud-native software and into the physical systems powering global transformation.

Industrial AI and Energy Infrastructure - $9 Billion in Q2 2025

Industrial AI and energy infrastructure startups attracted more than $9 billion in Q2 alone. Companies like Element Logic, which builds autonomous supply chain systems, and DeepGrid, which develops AI-enhanced energy infrastructure, are leading this investment wave. This level of capital commitment reflects a broader recalibration in venture priorities, one where scalability is measured not only in lines of code but in megawatts, satellite bandwidth, and autonomous defense systems.

This movement is driven in part by macro themes: geopolitical risk, AI compute demands, and decaying physical infrastructure across developed economies. 

Venture Funds Aligning with Public Sector demand

Venture firms are now looking for differentiated bets that align with public sector demand, strategic policy goals, and long-term infrastructure build-outs. These investments are typically more capital-intensive and slower to mature, but they promise deeper moats and broader societal impact, qualities that increasingly appeal to LPs seeking durability in a volatile market.

VC Playbook – Shifting from Direct to Consumer to Asset-Heavy Businesses

Importantly, this pivot marks a clear break from the DTC-heavy playbooks of the 2010s, where venture capital often chased rapid user growth and lightweight digital models. In contrast, today’s standout deals are asset-heavy, often dual-use (civilian and military), and deeply integrated with AI systems at the edge. They also position VCs to influence critical future capabilities, from sovereign compute infrastructure to orbital logistics.

In short, venture capital is no longer just funding apps; it’s building the infrastructure for AI, autonomy, and resilience in energy infrastructure. And the firms that recognize this pivot early are likely to define the next decade in VC funding.

Key Findings

The U.S. has reasserted global dominance, mega-funds are tightening their grip on capital flows, and exit markets are finally reopening after years of stagnation.

Fragility in Seed and Early-Stage Funding

Yet this momentum masks real fragility beneath the surface. Seed and early-stage activity is shrinking under valuation pressure. 

India and Japan Rising

LPs are consolidating commitments around a few proven firms, and Asia’s VC landscape is fragmenting as China retreats and India and Japan rise.

Capital Heavy Bets

Meanwhile, VCs are shifting toward capital-heavy bets in defense, industrial AI, and infrastructure, leaving behind the consumer models of the last decade. Across all these changes, one thing is clear: venture investing is no longer about chasing trends; it’s about aligning with systems that will shape the next era.

References

• Q2 2025 PitchBook-NVCA Venture Monitor Data Pack, NVCA
• Q2’25 Venture Pulse Report – Global trends, KPMG
• Q2 2025, Global VC First Look, Pitchbook
• Venture Monitor, Pitchbook
• State of Venture Q2’25 Report, CBINSIGHTS