The state of venture capital: Exits have increased, but uncertainty remains

Far from the bright expectations that started the year, the VC industry is staring at a muddled picture for Q2 2025. While the Q2 2025 Pitchbook NVCA Venture Monitor shows that exits are slowly increasing, and six unicorns finally went public (although many at lower valuations than their last private fundraisings), deal activity is mixed, with smaller deals slumping across the board. However, later-stage and growth-stage values have surged, accounting for an overall flat-to-down performance. Fundraising is similarly bifurcated: although overall performance is poor, top firms dominate the industry.

The VC fundraising scenario continues to reflect the ongoing LP liquidity crisis. In H1 2025, $26.6 billion was raised across 238 funds, a performance that landed the fund count lower than at any other time in the past decade.

Moreover, the median time to close a fund has risen to 15.3 months for H1 2025, up from 2024’s 12.6 months. This is the longest time for funds to be in the market in more than a decade and reflects LP reluctance to commit capital due both to the asset class’s poor performance and the ongoing lack of liquidity.

The market continues to split between elite firms and everyone else. A mere 12 VC firms raised more than half of H1's total, and the top 30 raised 75%. First-time managers, meanwhile, continue to struggle. Those new funds that did receive support—a mere 11 raised $50 million or more in H1—largely had teams from well-regarded firms, continuing LPs' ongoing preference for experienced managers.

Exit activity is hinting at a recovery. Q2’s 394 exits produced $67.7 billion, the highest quarterly total since Q4 2021. In addition, six unicorns went public in Q2, compared to the lone example, Coreweave, that had an IPO in Q1. Most of these companies, though, have accepted reality and are listing at valuations lower than their private peaks, prioritizing the provision of liquidity to shareholders and raising additional capital over clinging to the extreme valuations from their past. Moreover, post-listing performance varies widely: crypto-company Circle’s first-day close was up 117.8%, but of the other five, only one (Hinge Health) experienced a positive first-day close.

Acquisitions generated $32.2 billion in Q2, providing exits for 229 companies. VC-backed companies were significant buyers of their earlier-stage fellows since they have substantial capital and find the “buy vs. build” decision defaults toward the former.

Activity in Q2 was either “meh” or bad for standard VC deals. Deal value slumped to $69.9 billion, a 24.8% drop from Q1. Q2’s deal count of 4,001 is roughly unchanged from the prior quarter.

Continuing the split-view perspective, though, larger, later-stage venture growth companies did extremely well in H1 2025. Fueled by Q1's $40 billion transaction from OpenAI and Q2's five AI deals in excess of $1 billion each, H1 2025's venture growth deal value reached $83.9 billion and 499 deals. If the pace holds, the annualized performance for venture growth would greatly exceed its 2021 record, regardless of the inclusion of Open AI’s $40 billion infusion.

Even within the early- and later-stage segments, the market continues to be split between promising and struggling operations. Those with strong fundamentals and good execution plans receive large checks, boosted by those founders who are trying to delay returning to an uncertain market by raising more money up front. Median deal sizes rose across the board in Q2, but small deals fell to a decade-long low, demonstrating LP preference for companies that have demonstrated traction.

Although 2025 started with bright hopes for deregulation and a favorable business climate, the ongoing uncertainty about rate cuts, inflation, tariffs, and war has created a challenging environment. Down-round IPOs further diminish the attractiveness of public listings, leaving acquisitions and secondary market sales as the major options for liquidity. Secondaries, despite their recent growth, remain a niche market. As long as exit activity continues to be subdued, fundraising will stay depressed, and dealmaking will slow except for the best-performing companies.