The venture capital sector in the United States has shown signs of cautious optimism in the first half of 2025, according to PitchBook’s US Venture Capital Outlook: Midyear Update.
Despite persistent headwinds, including a high demand/supply imbalance for capital and the impact of recently imposed tariffs, the report highlights positive developments and adjusts earlier forecasts to reflect current market dynamics.
This midyear analysis provides a comprehensive look at dealmaking, exits, fundraising, and emerging trends shaping the VC ecosystem for the remainder of the year.
The report notes that 2025 began with several high-profile wins for the VC industry.
CoreWeave’s successful initial public offering (IPO), a $32 billion acquisition, and OpenAI’s massive $40 billion funding round signaled initial optimism.
These marquee events, however, masked underlying challenges.
The demand for capital continues to outstrip supply, creating a challenging environment for founders, particularly those outside the artificial intelligence (AI) sector.
New commitments to VC funds totaled just $10 billion in Q1 2025, putting the year on pace for the lowest annual fundraising total in a decade.
This scarcity of capital has intensified competition for deals, with many startups facing flat or down rounds at lower valuations.
The introduction of tariffs has further dampened sentiment, delaying several anticipated IPOs and exacerbating an already poor liquidity environment.
The report suggests that these tariffs, combined with ongoing capital constraints, will likely prolong the challenging market conditions through the end of 2025.
Despite these hurdles, PitchBook analysts remain moderately positive, citing a robust inventory of mature unicorns and improving exit opportunities as potential catalysts for a gradual recovery.
Dealmaking in 2025 has been characterized by a stabilization at the seed and early-stage levels, driven by the availability of dry powder (uninvested capital).
However, not all deals have been favorable for founders, with some involving dilutive structures or significantly reduced valuations.
The report confirms earlier predictions of an increasing share of insider-led rounds, as investors prioritize supporting existing portfolio companies over new investments.
Aggregate post-money valuations have continued to decline, and the number of active US unicorns has also decreased, reflecting a more conservative approach to valuations amid market uncertainty.
Late-stage and venture-growth-stage companies face particularly acute challenges, with a capital demand-supply ratio exceeding historical averages.
PitchBook estimates that achieving 2016–2020 average deal values would require monthly deal values of approximately $15 billion for late-stage companies and $7 billion for venture-growth-stage companies.
While these targets are ambitious, an anticipated uptick in exit activity could help restart the VC flywheel, providing liquidity to reinvest in new opportunities.
Exit activity is projected to increase in 2025, with a moderate rise in large tech IPOs expected to boost exit values.
Approximately 40% of US unicorns, representing over $1 trillion in value, have been held in portfolios for at least nine years, creating pressure for general partners (GPs) to deliver returns to limited partners (LPs).
The report predicts that distribution yields, which measure the proportion of VC fund net asset value distributed annually, will rise for the first time since Q3 2021, reversing a trend of historically low distributions.
A loosening of restrictions on mergers and acquisitions (M&A) under the incoming administration could further facilitate exits, fueling reinvestment into the VC ecosystem.
Fundraising, however, remains a pain point.
The projected $90 billion in capital raised for 2025 represents an improvement over 2024’s $71 billion (through mid-November), but downside scenarios estimate as low as $70 billion.
Upside projections reach $110 billion if market conditions improve earlier than expected.
The report emphasizes that stable macroeconomic conditions, including low unemployment and decelerating inflation, will be critical to sustaining public market performance and encouraging private companies to pursue public listings.
AI continues to dominate investor attention, leaving founders in other sectors struggling to secure capital.
The report highlights a growing focus on AI-driven technology companies, as evidenced by deals like Vista’s purchase of Acumatica.
However, sectors such as life sciences and clean technology are also gaining traction, reflecting a broader shift in investment priorities amid global political risks and economic uncertainty.
PitchBook’s midyear update paints a picture of a VC market navigating a complex landscape.
While early 2025 showcased blockbuster deals, structural challenges like capital scarcity and tariff-related delays persist.
The report’s cautious optimism hinges on improving exit activity, a robust unicorn inventory, and favorable macroeconomic conditions.
For founders and investors, adaptability and strategic patience will be key to capitalizing on opportunities in the second half of 2025.
As the VC industry continues to transform, PitchBook’s data-driven insights provide a critical roadmap for stakeholders aiming to thrive in an evolving market.