5 Venture Capital Trends to Watch in 2025

1) AI’s gravity well: more dollars, fewer deals, and extreme concentration

AI is still the center of the venture universe—but the 2025 story is concentration. In H1 '25, AI accounted for the majority of U.S. deal value, supercharged by a handful of mega-rounds and strategic checks from Big Tech and corporates. Gartner-scale platform bets (model labs, frontier compute) are giving way to large rounds in applied AI (agentic workflows, vertical software, AI infra like data tooling and vector databases), but capital remains clustered at the very top and with brand-name firms. (NVCA, Axios, CB Insights)

At the same time, fund formation has polarized. A small set of franchises captured a majority of new VC dollars in H1 '25, raising the bar for emerging managers and pushing more founders to prioritize partners’ distribution and follow-on capacity. For founders, that means fewer, longer shots at “tour-de-table” rounds—and for investors, deeper reserves for “multi-asset” AI exposure. (PitchBook)

2) Liquidity engineering goes mainstream: secondaries, continuation funds, and NAV loans

The exit logjam hasn’t vanished, so GPs are manufacturing liquidity. Continuation funds, tender offers, and NAV-backed credit have become standard tools to return cash, extend holds on winners, and finance follow-ons—especially in sectors where the public window is still choppy. LPs get optionality; GPs get time. The practice spread from buyouts into growth and late-stage VC, and 2025 secondary volumes and capital formation remain robust. Expect more multi-asset continuation vehicles around breakout AI, cybersecurity, and infra assets, alongside tighter governance and fairness processes. (Bain, William Blair)

Regulators and LP groups are probing conflicts (valuation, fees, cross-fund transfers), and lenders are scrutinizing NAV leverage as rates and macro risk stay elevated. Choose counterparties carefully and bake in third-party pricing, minority LP roll-over rights, and transparent waterfalls. (The Times)

3) Venture debt 2.0: early-stage usage up, fundraising for debt funds mixed

Post-SVB, venture debt has been rebuilt by a broader lender set (banks in partnership models, specialty finance, private credit arms). Startups are using debt earlier to extend runway without valuation resets; by mid-2025, early-stage borrowers accounted for roughly a third of venture-debt dollars and were on pace to surpass prior highs. Yet fundraising for venture-debt funds lagged in 2024–25 as institutional LPs favored larger, diversified private-credit strategies—so terms can be uneven and diligence tougher. Expect tighter covenants, higher pricing, more amortization, and warrants reserved for later-stage risk. (PitchBook, The Wall Street Journal, Silicon Valley Bank)

Net-net: debt is back as a core planning lever, but capital can be “patchy.” Founders should run multi-track processes (bank + non-bank), and investors should model sensitivity to covenant trip-wires and rate volatility. (Silicon Valley Bank)

4) Defense, industrials, and climate tech are in a durable up-cycle

“American Dynamism” and its global analogs are now core venture theses: dual-use aerospace/defense, critical infrastructure, advanced manufacturing, grid and storage, and new nuclear are seeing sustained investor interest and large strategic co-investments. Europe, the U.S., and parts of the Middle East are catalyzing demand through defense modernization and energy security; 2025 has brought sizable financings in counter-drone, air defense, and autonomy. Meanwhile, climate/energy transition remains a long-cycle allocation focus, even as FOAK/scale-up financing gaps persist. (Andreessen Horowitz, Financial Times, IEA, CTVC by Sightline Climate)

For venture investors, the playbook blends “software-eats-atoms” with policy fluency and project/asset financing. Expect more blended capital stacks (project finance + venture), milestone-based tranched equity, and corporate partnerships that de-risk offtake and qualification. (KPMG)

5) A selective exit window: IPOs stir, M&A improves, but DPI remains gated

The IPO market is thawing—deal count is subdued, proceeds are rising, and a “shadow backlog” is building. U.S. offerings picked up in Q2 '25, with investors showing renewed appetite for profitable category leaders (AI infra, fintech infrastructure, healthcare IT) while many startups still “wait for better weather.” Strategic M&A has improved off 2023 lows, highlighted by record security and infra exits, providing an alternative to public listings. Still, most LP programs remain DPI-light versus 2021 expectations, keeping pressure on managers to mix exits with secondary and structured solutions. (S&P Global, EY, PitchBook)

On the company side, more boards are running dual-track processes (confidential S-1 + strategic outbound) to preserve optionality. Expect valuation discipline from public investors, greater scrutiny of AI revenue quality, and preference for durable margins over top-line growth. (EY)