Venture Capital 2026

Global Overview 2026

After the record year of 2021, the global venture capital (VC) industry and the broader growth company ecosystem spent several years recalibrating to higher discount rates, uncertainties associated with geopolitical tension, slower exits, and more selective deployment of capital. In 2025, however, the market staged a meaningful recovery. Global VC investment rose from USD391.9 billion in 2024 to more than USD512 billion in 2025, a volume that puts 2025 on the podium (third place) among the years on record by invested capital. Of these, capital injected in Series D+ financing rounds, the median size of which amounted to approximately USD100 million in the Americas, accounted for more than one third of total capital invested.

That recovery was not broad-based either across industries or growth assets: transaction activity remained comparatively soft in terms of deal count, capital was concentrated in fewer and larger transactions, and AI-related financings accounted for a disproportionate share of the rebound. Defence technology emerged as another notable sector with significant transaction volume. As such, a total of 45,019 VC-related transactions affecting growth companies globally ‒ comprising financing rounds as well as M&A transactions, and IPO exits ‒ amounted to a further 1.84% decline from the 45,861 transactions recorded in 2024.

What 2025 demonstrated is not a return to the conditions of 2021, but rather the deepening of a trend towards a more bifurcated market that had previously become observable: exceptional companies, especially in AI and AI infrastructure, were able to raise very sizeable rounds on attractive terms, while the market generally continued to operate with greater discipline on valuation, profitability expectations and governance. Similarly, the aggregate exit value increased markedly by 62.9% to USD549.2 billion. At the same time, fundraising at the fund level remained weak, with some characterising 2025, with its total volume falling to a mere USD118.4 billion, as the year with the slowest pace of fundraising in a decade.

In terms of geographical distribution, North America led global VC deployment by a wide margin (USD336.2 billion), reflecting a sharp year-on-year acceleration. Europe followed with USD84.5 billion, recording a modest increase, while Asia remained comparatively subdued overall at USD76.8 billion, although markets such as Japan, India, Australia and Singapore showed resilience or improvement even as China continued to weigh on regional aggregates.

Across North America, venture capital investment remained overwhelmingly concentrated in the US, representing nearly two-thirds of global start-up funding. 2025 was marked by a succession of exceptionally large rounds, led by OpenAI’s USD40 billion raise, representing one of the largest private funding rounds of all time, followed by Anthropic (USD13.0 billion in Q3), Scale AI (USD14.3 billion), xAI (USD10.0 billion) and Project Prometheus (USD6.2 billion). Series D and later-stage rounds represented close to half of total deal value, highlighting a pronounced concentration of capital in mature companies. Collectively, the five funding rounds referenced above accounted for approximately 16% of total global venture and growth capital deployed in 2025.

Micro-geographically, the US remained anchored by large-scale AI and infrastructure financings such as OpenAI (USD40 billion), Scale AI (USD14.3 billion), Anthropic (USD13 billion), xAI (USD10.0 billion) and Project Prometheus (USD6.2 billion), while Europe’s larger rounds continued to come from fintech (Revolut), AI (Mistral AI, Nscale), deep-/defence-tech (Helsing) and healthtech (Oura). In Q4 2025, for example, Europe’s results were materially helped by Revolut’s USD3 billion round, while Asia’s quarter included large financings for DayOne and Firmus Technologies. These examples underscore the extent to which 2025 capital formation was concentrated in established category leaders or in sectors seen as strategically significant.

Key Trends

AI dominating the global venture capital market

In 2025, AI moved from being the leading venture theme to becoming the principal driver of the market’s recovery. In the US, AI-related deals accounted for a clear majority of venture deal value (65% as of Q3 2025), and the year’s largest financings centred on renowned AI model and infrastructure players.

Leading both in the US and globally was OpenAI, which secured a USD40 billion investment led by SoftBank, with further large-scale AI financings involving Scale AI, Anthropic, xAI and Project Prometheus (as outlined above). While the US continued to dominate major AI financings, Europe recorded several substantial rounds, including Mistral AI (USD1.5 billion) and Nscale (USD1.1 billion). Beyond these markets, activity was more selective in scale: as prominent examples, Singapore-based DayOne raised in excess of USD1 billion, and Australia’s Firmus Technologies secured USD327 million.

This concentration of capital has reinforced a “winner-takes-most” theme even within the AI sector, in which scale advantages in computing, data access and distribution translate into outsized financing capacity for a limited set of platforms. From a transactional perspective, the rise of AI has also increased deal complexity and shifted diligence priorities. Investments in AI businesses increasingly intersect with regulatory, data governance and national security considerations, particularly where access to sensitive data, advanced computing capabilities or dual-use technologies is involved.

Megarounds as the central driver of capital flow in a bifurcated market

Fuelled by, albeit not limited to, these tailwinds in artificial intelligence, 2025 has also been characterised by an unprecedented concentration of venture capital in so-called “megarounds”, defined as financing transactions of USD100 million or more. According to market data, the share of total venture funding allocated to such rounds reached record levels, with approximately 60% of global venture capital and around 70% of US venture capital flowing into USD100 million-plus transactions. This degree of concentration marks a significant departure from prior cycles and underscores the extent to which capital deployment has become skewed towards a small number of very sizeable financings. While the 2021 investment peak was shaped by a relatively broad distribution of capital across a range of sectors and company stages, 2025 was defined by prominent financings exceeding USD10 billion, a threshold that no single venture round approached during the period that was previously considered a market high.

As capital flowed towards these later-stage opportunities, investment activity at earlier stages has softened: while global seed-funding volume was broadly flat, the number of seed rounds has declined markedly, indicating that seed rounds have become larger on average but less frequent. These concentration dynamics saw many growth businesses facing a higher bar around unit economics, recurring revenues and credible pathways to profitability. In transaction execution, this flight to quality translated into tighter commercial and financial diligence and, in some cases, a greater willingness by investors to condition the deployment of funds on governance protections or performance milestones.

Valuations and liquidity events recover amid uneven geographic distribution

Applying an overall perspective, valuations across growth-stage financing rounds recovered to, and in several cases exceeded, 2021 levels in the US and Europe, while Asia recorded a more moderate uplift in pre-money valuations. In 2025, unicorn financings globally expanded sharply and moved close to its 2021 peak, and the number of valuation step-ups in Series D+ financing rounds, which had collapsed in 2023, returned to pre-correction levels.

Liquidity partially followed suit. The aggregate global exit value rose to USD549.2 billion in 2025 (from USD337.0 billion in 2024), well below the peak levels recorded in 2021. The rebound, however, was uneven across regions. Again, North America accounted for the majority of the recovery, with exit value almost doubling from USD160.2 billion to USD303.5 billion, effectively driving most of the global expansion in liquidity. Asia also recorded a meaningful improvement, with exit value rising from USD98.5 billion to USD150.2 billion, reflecting renewed activity in selected markets despite continued regional volatility. By contrast, Europe saw only a modest increase, with exit value moving from USD71.0 billion to USD76.5 billion, underscoring that liquidity conditions across the continent remain comparatively constrained and have yet to return to pre-correction levels.

In a prioritisation of innovation capabilities, global corporate VC participation increased significantly (by 41%) in terms of deal value and helped push deal value materially higher even where deal counts remained subdued. IPO activity improved in a number of key jurisdictions – notably the US, Hong Kong and India – but the momentum stalled in Q4 as a result of the US government shutdown and persistent macroeconomic uncertainty. As an example, in Hong Kong, IPO fundraising reached approximately USD37.4 billion in 2025, marking a multi-year high, exceeding the aggregate total of the preceding three years.

For VC funds, a tightening fundraising environment is prone to concentration

Fundraising remained one of the weakest points in the VC ecosystem. Although portfolio-company financing activity recovered significantly in 2025, fundraising at the level of limited partners (LPs) fell to USD118.4 billion globally, down from USD219.0 billion the year before, after years of lackluster distributions. The slowdown reflected extended holding periods, constrained liquidity, portfolio rebalancing and increased performance scrutiny, while public markets and fixed income yields provided attractive alternatives.

Valuation resets across significant parts of the venture ecosystem coupled with capital-intensive megarounds in a narrow set of sectors were among the drivers for a preference on the part of LPs to concentrate commitments among a limited number of established asset managers that were able to raise billion-dollar vehicles, entrenching an allocative bias toward scale and brand rather than breadth of deployment.

On the part of general partners (GPs), two themes were particularly pronounced: in the long term, the undercurrent towards large, highly priced positions may be challenging to offset within any diversified fund, should performance disappoint (“bubble risk”). More immediately, secondary transactions and SPVs continued to provide interim liquidity solutions in respect of pre-existing positions, yet these mechanisms serve as complements rather than substitutes for primary fundraising momentum. A durable recovery in fundraising will ultimately depend on a sustained reopening of exit opportunities and the current state of the market at the VC fund level suggests that a broad-based return to an expansive fundraising environment remains conditional rather than inevitable.

Secondary transactions gaining momentum while alternative investments become a fixed part of the VC toolkit

Private secondary transactions, including structured tender offers and investor-led liquidity programmes, have become a core component of the venture ecosystem and shifted from a niche mechanism to a strategic and structural tool for venture investors, founders, employees and other stakeholders. In 2025, the private secondary market reached approximately USD226 billion in transaction volume, marking an all-time high. As a prominent example, in December 2025, Trade Republic, the Germany-based consumer financial services platform, completed a EUR1.2 billion secondary transaction at a EUR12.5 billion valuation, allowing early shareholders to realise liquidity while adjusting the investor base with long-term global players prior to an expected IPO, without raising any new capital. The persisting trend is driven by a combination of factors, including prolonged periods of illiquidity, realisation pressures among LPs seeking portfolio rebalancing and preferences among founders and early employees to capture (partial) value creation. On the buy-side, an opportunity to enter later-stage companies with more established business models and tangible exit pathways may prove appealing for a different set of investors.

Secondary transactions now encompass a range of structures and occur at different levels, each due to distinct motivations and investor profiles. In direct secondaries, early investors, founders and employees tend to sell to secondary investors, either bilaterally or through company-facilitated liquidity events such as tender offers. At the fund level, limited partners may seek to transfer interests to secondary buyers to rebalance portfolios or realise liquidity prior to fund maturity. GP-led structures are often driven by the fund manager’s transfer of a portfolio company into a new vehicle backed by (new) secondary capital, granting existing LPs an option to cash out or roll their exposure into the new vehicle, effectively resetting liquidity timelines and supporting continued growth under alleviating exit pressures.

From a regulatory perspective, a number of prominent venture capital firms have deepened their engagement in the secondary market by registering as investment advisers with the US Securities and Exchange Commission (SEC). Historically, most VC firms relied on exemptions from full registration, typically operating as exempt reporting advisers (ERAs). However, the growth of secondary-focused strategies – particularly where firms manage dedicated secondary funds or engage in more frequent and structured secondary transactions – has led some to register as fully registered investment advisers (RIAs). Registration places the adviser within the full framework of the US Investment Advisers Act, enabling it to operate under a more comprehensive regulatory regime when managing funds and executing secondary transactions. This development reflects both the increasing institutionalisation of the secondary market and a strategic response to longer holding periods and the need for more structured liquidity solutions within the venture life cycle.

Beyond secondaries, alternative means of financing have deepened their footing in the VC ecosystem: Venture debt deal value in the US stood at a record USD62.4 billion. As the debt financing is typically underwritten against the company’s ability to complete a subsequent equity financing or realise a liquidity event, availability and pricing of venture debt tend to track broader equity funding conditions. In Europe, the European Investment Bank (EIB) has emerged as a key provider of growth financing through venture debt, guarantees and quasi-equity instruments. In August 2025, it launched its TechEU programme aimed at deploying up to EUR70 billion in debt and equity financing into European technology companies between 2025 and 2027 and expects to mobilise EUR250 billion by 2027, with a focus on areas such as artificial intelligence, digital infrastructure, cleantech and other innovation-driven sectors.

Ramifications of Trends in Deal Terms

Deal terms reflect a shifting market

Deal terms in 2025 and into 2026 reflect a market that remains bifurcated between the previously discussed highly competitive, capital-abundant segments and a broader environment characterised by selectivity and investor discipline. On the one hand, AI-driven megadeals and financings for category-leading companies have often been executed on comparatively founder-favourable terms, including simplified governance structures and limited downside protections, reflecting intense competition among investors for a small number of high-conviction assets where “standard” economics tend to prevail. On the other hand, outside these top-tier segments, the market continues to exhibit features of a capital-constrained environment.

In this broader segment of the market, with growth companies frequently operating under tighter liquidity conditions and, in some cases, facing compressed fundraising timelines, investor leverage has remained elevated in a significant number of transactions. This has translated into more investor-friendly terms, including more sizeable equity stakes and, in certain cases, increased or cumulative dividend rights (ie, guaranteed returns such as compounding interest forming part of the liquidation preference irrespective of financial performance). In purchase or subscription agreements (other than US-style stock purchase agreements), there is a discernible tendency for founders to stand behind certain representations and warranties if they are perceived to disproportionately be affected by the underlying matters such as related party transactions. However, founders assuming full liability for most or even all business-related representations remains the exception rather than the rule. In parallel, the allocation of board observer seats has increased, evidencing a stronger investor focus on ongoing visibility and engagement at the portfolio company level.

By contrast, anti-dilution protections have remained largely standardised across the board. Full ratchet anti-dilution continues to be rare, with the vast majority of financings relying on broad-based weighted average mechanisms. Similarly, liquidation preferences continue to follow established market norms: a non-participating 1x liquidation preference with a conversion right remains the prevailing structure, although participating preferences have been observed more frequently, particularly in early-stage contexts, or situations involving pricing pressure or execution risk. Increases in preference multiples above 1x remain limited and typically confined to distressed or highly negotiated scenarios.

On the other hand, certain terms have recalibrated in favour of companies. Reserved matter-related consent rights in convertible financings, for example, have declined significantly in Europe (from 42% in 2023 to 15% in 2024), reflecting a reversion to the principle that holders of convertible instruments, as non-equity investors at the time of investment, typically do not benefit from extensive control rights. At the same time, convertible investors have secured an expansion in information rights (present in 49% of convertible financings in 2024), underscoring the importance placed on transparency notwithstanding a more limited formal governance position.

The increasing relevance of secondary transactions has begun to influence deal dynamics and structuring considerations more broadly, including as part of a financing of growth enterprises. Two recurring issues were particularly notable in venture secondary execution. First, pricing is frequently negotiated at meaningful discounts to reported valuations, reflecting limited price discovery, stale primary round benchmarks and persistent information asymmetries. While such discounts provide downside protection for buyers, they may also create internal tension where primary valuations have not recently been tested. Secondly, contractual transfer restrictions require early and careful analysis – including rights of first refusal, pre-emption rights and tag-along or drag-along provisions – as they can materially affect deal feasibility in the context of a secondary if not addressed upfront.

Continued trend towards standardised documentation

Documentation for equity-based financing continues to move towards standardisation across geographies, with key model documents originating from the US National Venture Capital Association (NVCA), the British Private Equity and Venture Capital Association (BVCA), the German Start-up Association (Bundesverband Deutscher Startups e.V.) and the Simple Agreement for Future Equity (SAFE) (as described in more detail further on in this introductory article). Similar initiatives can be observed in many jurisdictions, including:

• Canada (Canadian Venture Capital and Private Equity Association, or CVCA);
• Singapore (Singapore Venture and Private Capital Association, or SVCA);
• Switzerland (Swiss Private Equity and Corporate Finance Association, or SECA); and
• China (China Venture Capital and Private Equity Association, or CVCA).

NVCA

The NVCA is a trade association that represents the VC industry in the US. It has been publishing model documents for VC financing rounds since 2003, which have become the industry standard for practitioners and are frequently used even in bespoke and sizeable transactions. The set of documentation is regularly updated once a year to reflect evolving market norms. Today, NVCA documents affect key deal terms and market practice beyond the US.

BVCA

Similarly, the BVCA provides model documents for early-stage investments. The BVCA documents tend to be utilised for post-seed early-stage investments in the UK, particularly in Series A funding rounds ‒ with the aim of facilitating the adoption of an industry-standard legal framework for such investments.

German Standards Setting Institute

The German Standards Setting Institute (GESSI) is a joint project of Business Angels Germany e.V. and the German Start-up Association, which equips (registered) start-ups, business angels and investors with templates for their essential legal documentation, including convertible loans, term sheets and financing-round agreements. However, these templates have yet to gain significant traction in German market practice.

SAFE

Widespread in adoption ‒ among early-stage companies, in particular ‒ is the so-called model SAFE agreement. SAFE governs a financial instrument in the early-stage financing context and was originally established in 2013 by renowned incubation hub Y Combinator. The template contemplates equity-like financing in exchange for yet-to-be-issued shares, providing founders with flexibility and control with reduced paperwork. Prior to conversion, the investor’s claim is limited to prospectively issuable preference shares ‒ the rights to which are defined in the subsequent financing round. Funds carry no coupon or Paid-in-Kind (PIK) interest in the absence of a predefined maturity. In recent market practice, SAFEs have increasingly been used beyond very early-stage financings, including in larger seed and bridge contexts, often with a greater degree of standardisation around ancillary terms such as most-favoured-nation (MFN) provisions and side letters.

Key features in SAFE agreements include a valuation cap, which refers to a predetermined maximum for equity upon conversion and discounts investors receive off the price per share paid by new investors in a subsequently priced equity round (with around 20% being the norm). It became the go-to option for US early-stage start-ups, owing to its simplicity and focus on future growth potential, and is gradually replacing traditional convertible loan structures as the preferred financing option.

Drawbacks that come with the use of the SAFE structure include lack of protection or control rights on the part of investors and, with regards to the founding team, a potential underestimation of their collective dilutive effect if used vis-à-vis multiple investors consecutively.

Proposal for a harmonised EU corporate form (“EU Inc.”)

With the objective to reduce legal fragmentation, facilitate cross-border scaling and improve access to financing for start-ups and growth companies, the European Commission, in March 2026, presented its proposal for a harmonised “EU Inc.” corporate form (the so-called “28th regime”), which would introduce an optional, EU-wide legal framework for companies operating across member states. The proposal envisages fully digital incorporation within 48 hours at a cost below EUR100, no minimum share capital requirements, and a single set of rules for incorporation, governance and share transfers, while continuing to coexist with national employment and social law regimes. The European Commission seeks to reach a final agreement with the European Parliament and the Council by the end of 2026.

Increasingly exacting foreign direct investment standards

A persistent misconception in venture transactions is that minority investments are free of regulatory risk. In reality, increasingly exacting merger control and foreign direct investment (FDI) regimes are extending their reach to (cross-border) minority financings and can materially impact deal execution. This trend is evident not only in the US but also in EU countries such as Germany, and it increasingly requires transaction parties to address investment screening risk at an earlier stage of deal structuring and diligence rather than treating it as a post-signing issue.

CFIUS

The scope of the US Department of the Treasury’s (“Treasury”) Committee on Foreign Investment in the US’s (CFIUS) jurisdiction expanded significantly with the enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA) in August 2018. FIRRMA expanded CFIUS jurisdiction to include not only transactions by or with any foreign person that could result in foreign control of a US business, but also certain non-controlling but non-passive investments – whether direct or indirect (for example, through an investment fund) – by foreign persons in certain types of US businesses whose operations involve critical technologies, critical infrastructure, and/or sensitive personal data (a TID US business). FIRRMA also expanded CFIUS jurisdiction to include (i) certain investments in US real estate that do not otherwise involve a US business; (ii) changes in rights that a foreign person has with respect to a US business in connection with an existing investment, if that change could result in a covered control transaction or a covered investment; and (iii) transactions designed or intended to evade CFIUS jurisdiction.

Pursuant to the post-FIRRMA CFIUS regulations, a CFIUS filing is mandatory in certain limited circumstances involving foreign investments in TID US businesses (i) that produce, design, test, manufacture, fabricate, or develop certain critical technologies, and/or (ii) by foreign persons with significant foreign government ownership. For all other transactions subject to CFIUS jurisdiction, a CFIUS filing is voluntary. However, there is no statute of limitations on CFIUS jurisdiction, so unless parties have obtained CFIUS clearance for a transaction, CFIUS has the authority to contact the parties regarding the “non-notified” transaction and initiate a review of the transaction (and potentially impose mitigation measures) even years after the transaction has closed.

Recent developments reflect heightened concern regarding Chinese investment. Since 2025, President Trump has blocked two transactions, both of which were non-notified transactions by Chinese companies that CFIUS identified for review post-closing: (i) Suirui Group’s 2020 acquisition of Jupiter Systems (a developer and supplier of advanced audiovisual equipment), and (ii) HieFo Corporation’s 2024 acquisition of EMCORE Corporation’s digital chips business.

President Trump’s “America First Investment Policy” memorandum issued in February 2025 contains a number of CFIUS-related policy objectives, including: (i) an enhanced focus on restricting Chinese investment in “strategic” sectors (including technology, critical infrastructure, healthcare, agriculture, energy, and raw materials); (ii) an expansion in the scope of “critical technologies” that can necessitate a mandatory CFIUS filing; (iii) the establishment of a “fast-track” review process “to facilitate greater investment from specified allied and partner sources in US businesses involved with US advanced technology and other important areas”; (iv) in consultation with Congress, an expansion of CFIUS’s jurisdiction to review “greenfield” investments; and (v) the encouragement of “passive investments from all foreign persons”.

In May 2025, the Treasury announced its intention to create an optional Known Investor Program (KIP) to collect information from foreign investors in advance of a formal CFIUS filing to streamline the review process. The Treasury launched a confidential pilot programme involving “a representative sample of foreign investors” who frequently file with CFIUS. A Request for Information issued by the Treasury in February 2026 outlined the contemplated eligibility criteria and anticipated information requirements for the KIP. Eligibility criteria are expected to focus on a foreign investor’s past and planned future interactions with CFIUS, as well as connections to sanctioned parties and/or adversary countries. Information to be collected from eligible foreign investors would include detailed documentation and information relating to (i) legal and organisational structure; (ii) personnel, governance and operations; (iii) the nature of the foreign investor’s business; (iv) engagement with the US government and compliance posture; and (v) “verifiable distance” from adversary countries.

The CFIUS inbound investment review process operates alongside the Treasury’s new Outbound Investment Security Program (OISP), which took effect on 2 January 2025. The OISP regulations require US persons to notify the Treasury of certain outbound investment transactions and prohibit certain other outbound investment transactions, in each case involving persons of “countries of concern” that engage in “covered activities” involving certain sensitive technologies and products in the semiconductors and microelectronics, quantum information technologies, and AI sectors.

The Treasury is required to promulgate regulations implementing the new COINS Act, signed in December 2025 and expanding the list of countries of concern, no later than March 2027. The Treasury has emphasised that, until that time, parties should continue to act in full compliance with the existing OISP regulations.

Foreign investment screening

Over recent years, foreign direct investment screening has become more prominent within the EU, reflecting a broader recalibration of economic security considerations. At the EU level, the framework for FDI screening is governed by the European Investment Screening Regulation (EU) 2019/452, which introduced, among others, a co-operation mechanism allowing member states and the European Commission to exchange information and raise concerns in respect of notified transactions. As many member states only recently introduced FDI screening or tightened their regimes, different experience levels and structural divergences, both in terms of sectoral scope and procedural design, have resulted in varying timelines, substantive thresholds and deviations in the degree of predictability, thereby increasing execution complexity for cross-border investors and target companies alike.

In response to these challenges, and as part of the European Economic Security Strategy, the EU advanced a revision of the Investment Screening Regulation in 2025. The proposed changes seek to strengthen the effectiveness of the screening framework by ensuring that all member states have a screening mechanism in place, enhancing co-ordination, information sharing, and introducing a harmonised minimum sectoral scope. Areas such as semiconductors, artificial intelligence, critical medicines, dual-use and military items are identified as requiring mandatory scrutiny across the EU. The revised Regulation is expected to enter into force by mid-2026, followed by an implementation period of up to 24 months during which member states will need to adapt their national screening regimes.

Outlook for 2026

Capital selectivity keeps shaping markets

Entering 2026, the venture market remains structurally selective, with investors deploying at scale only where business fundamentals and institutional readiness align. While 2025 brought a recovery in headline investment volumes, that rebound was highly concentrated and did not materially relax underlying investor discipline generally. This dynamic is unlikely to ease or even reverse in the near term. Hyperscalers are expected to invest well in excess of USD600 billion cumulatively into AI-related infrastructure this year alone, further anchoring capital flows around computing, data centres and model development.

A further trend expected to gain traction in 2026 is the use of structural solutions to isolate investable assets. Investors are increasingly backing spinouts, subsidiaries and ring-fenced vehicles to access capital-intensive or high-quality business lines without underwriting entire platforms. This is illustrated by dedicated infrastructure vehicles and project-level SPVs such as “Stargate” (backed by Microsoft, OpenAI, SoftBank and Oracle), where capital is deployed into data centre and computing infrastructure rather than the operating company. Similarly, CoreWeave has made extensive use of SPVs and asset-backed financings tied to GPU clusters and contracted revenues, with investors including Blackstone, Magnetar and Coatue underwriting discrete infrastructure pools rather than the broader corporate balance sheet.

On the other hand, capital can be expected to remain constrained for much of the broader growth ecosystem. This dynamic is reinforced by continued fundraising challenges at the VC fund level, with overall capital formation remaining below prior-cycle levels and increasingly concentrated among a smaller number of large managers.

Exit opportunities

The balance of evidence suggests that 2026 could bring an improved exit environment for top-quartile, IPO-ready companies, while leaving intact a structural reluctance among many very large private businesses to list. The year 2025 has been instructive: after a prolonged slowdown, this year delivered several record-breaking private financings and valuations, and a growing cohort of sizeable private companies. Prominent examples include SpaceX, OpenAI, ByteDance, Anthropic and Stripe, all of which are widely viewed as potential IPO candidates. This accumulation of scale creates meaningful latent supply for public markets, provided macroeconomic conditions and investor sentiment remain supportive over the coming 12–24 months. At the same time, increasing geopolitical tensions in the Middle East, Europe and the South China Sea are likely to keep public markets sensitive to timing, valuation discipline and sector exposure, limiting the IPO window to a relatively narrow set of issuers.

M&A is expected to remain the primary liquidity channel for a broader set of venture-backed companies. Strategic acquirers and private equity sponsors continued to drive activity in 2025, with global M&A exit value for growth companies showing a 40% recovery year-on-year, although remaining below peak levels. Transaction flow is expected to remain focused on businesses with defensible technology and proven economics, while mid-market targets may continue to encounter longer processes and more conditional execution environments.

Transaction structuring has evolved accordingly. Share-for-share components have re-emerged more prominently, particularly in strategic combinations where valuation alignment is critical – as illustrated by transactions such as the integration of xAI with SpaceX. Buyers and sellers are increasingly adopting hybrid consideration structures, including cash/equity elections, staged acquisitions and contingent consideration mechanisms such as revenue- or ARR-based (Accounting Rate of Return) earn-outs, particularly in technology transactions where future performance remains key for valuation. While these structures can facilitate execution, they do introduce complexity and execution risk.

At the same time, issuer behaviour tends to have shifted more permanently. Some of the most sizeable private companies are increasingly willing to reject the lure of immediately obtainable stock quotes for longer, supported by the availability of late-stage capital and structured secondary liquidity. Whether this dynamic will continue to reduce pressures to list and reinforce private-market liquidity solutions, or whether 2026 will “break the wave” in terms of the growing exit-ready cohort globally, is challenging to predict.

The state of AI investment

The current investment cycle also raises questions around capital intensity and valuation sustainability in artificial intelligence. The build-out of computing infrastructure, data centres and training capacity has resulted in very substantial cost bases. Market commentary has increasingly focused on the financial profile of leading platforms, including reports of substantial projected losses and extended timelines to profitability, as well as broader speculation around the long-term sustainability of current spending levels.

Beneath the concentration in foundation models, a broader opportunity set is emerging. Application-layer and vertical AI companies (for example, enterprises embedded in industry-specific workflows) are increasingly viewed as offering more predictable monetisation and defensible data advantages. There are emerging indications that this may lead to a gradual broadening of capital allocation within AI. For 2026 and in the medium term, one key challenge is therefore not technological relevance but capital allocation discipline. Investors are increasingly focused on distinguishing between durable infrastructure and forward-loaded valuation, with greater scrutiny on cash generation, customer stickiness and independence from ecosystem-driven demand.

Broadening the capital base: defence, fintech and healthtech

Beyond AI, defence, fintech and healthtech continue to attract substantial and stable levels of venture investment.

Defence technology has consolidated its position as a structurally relevant segment of the venture market, supported by geopolitical developments and increased government spending. This trend is particularly pronounced in European countries such as Germany, where public funding initiatives and defence spending commitments at both EU and national level have significantly increased in recent years. In addition to direct budgetary commitments, more flexible and accelerated public procurement processes – introduced in response to heightened geopolitical tensions – have lowered barriers for emerging technology providers and enabled faster adoption cycles. This has improved the commercial viability in the venture-backed defence space, particularly in areas such as autonomous systems, cybersecurity and critical infrastructure.

Fintech and healthtech likewise remain core pillars of venture activity. Both sectors benefit from long-term structural drivers, including digitalisation, regulatory evolution and demographic trends. In healthtech in particular, increasing focus on longevity, preventative care and human performance is expanding the addressable market and broadening the range of investable business models. Even in a more selective funding environment, scaled platforms with credible growth trajectories and governance frameworks will likely continue to attract capital, while earlier-stage companies benefit from sustained thematic investor interest.

Sustained momentum in venture dealmaking

Subject to geopolitical developments, and notwithstanding concerns in respect of exuberance in parts of the market and fundraising challenges for growth managers, venture deal activity can be expected to remain broadly resilient through 2026. Improving exit visibility, combined with the deployment of committed dry powder and sustained strategic interest in AI and adjacent sectors, supports a more stable transactional environment than in recent years.

At the same time, the scale of recent megadeals should not be interpreted as evidence of a broad-based recovery. Rather, they reflect the continued availability of large pools of conviction capital for a limited number of ventures. This dynamic is expected to coexist with an active market for secondary transactions and other structured liquidity solutions, which have become integral to portfolio management.

Directionally, the VC market is likely to be shaped by trends such as further concentration in category leaders, greater reliance on secondary liquidity alongside traditional exits, sustained discipline on valuation, governance and exit rights outside top-tier assets and a gradual broadening of investments related to or based on the existing AI infrastructure.