Fundraising for US venture-capital firms fell 35% in 2025, marking the weakest stretch in at least six years as investors pulled back and concentrated capital in a smaller number of established firms, according to a report by The Wall Street Journal.

Data from PitchBook show venture firms raised $66 billion last year, down about 70% from the record set in 2022, WSJ said.

The decline underscores a prolonged liquidity crunch in private markets.

With initial public offerings scarce and exits limited, startups that raised large sums during the boom years have opted to stay private, delaying returns for investors and tightening the flow of capital into new funds.

IPO drought weighs on capital flows

The lack of IPOs has become a major drag on fundraising.

Public listings have historically returned cash to limited partners, enabling them to recommit capital to new venture funds.

With that cycle stalled, investors have become more selective.

“The fundraising climate is challenging,” said Beezer Clarkson, a partner at Sapphire Partners, which invests in venture funds. Investors are prioritising relationships with proven managers rather than backing new firms, a shift typically seen during weaker market cycles, Clarkson said.

That dynamic has strengthened the largest venture firms while leaving emerging managers struggling.

Lightspeed Venture Partners, an investor in Anthropic, raised more than $9 billion across new funds in December, one of the year’s largest hauls.

Founders Fund, led by Peter Thiel, closed a $4.6 billion fund in April.

Smaller and first-time managers, by contrast, have found the environment increasingly unforgiving.

AI boom reshapes venture landscape

The fundraising slump has coincided with a surge in capital flowing directly into AI startups, often bypassing traditional venture firms.

Cash-hungry AI companies are increasingly turning to sovereign-wealth funds, family offices and hedge funds to finance large rounds.

Funding for US AI startups reached a record $222 billion in 2025, more than double the level seen a year earlier, according to PitchBook.

The total includes OpenAI’s $40 billion raise, a $4 billion round for Databricks and $2.3 billion for AI coding tool Cursor.

The boom has been driven by mega-rounds of $100 million or more, which accounted for about 70% of US venture funding last year, according to Crunchbase.

December alone saw AI identity-security platform Saviynt raise $700 million, while companies such as Fervo Energy, Boom Supersonic and generative AI platform Fal also secured large investments.

Concerns over quality and concentration

Despite the volume of deals, some investors warn that not all AI funding will translate into lasting value.

Analysts note that intense competition has narrowed differentiation among AI-focused startups, raising the risk of a shakeout.

For many investors, concentrating capital in fewer companies is a deliberate strategy aimed at capturing outsized returns rather than spreading smaller bets across the market.

Relief could come if public markets reopen. A potential wave of IPOs next year, including listings by SpaceX, OpenAI and Anthropic, could restore liquidity and revive venture fundraising.

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