Venture Capital Dominated by AI Right Now
PitchBook and the National Venture Capital Association recently released their Q1 2025 report. I love tracking this kind of information because I tend to think it has implications for all founders out there. Here are a five takeaways that I thought were interesting from the report:
First, Venture investments have continued on the 2024 pace, so things are steady. What is not steady is AI which has consumed 71% of all capital investments in Q1. Of course the bigger rounds by OpenAI etc tend to skew things but you can’t remove it from the sample.
Second, there have been a few companies who opted out of the Q1 chaos to delay their public listings. This caused public listings to be even less prevalent than last year. Notable companies in eCommerce include Klarna and ShipBob which both seemed to delay their planned IPOs. Speaking of exits, they hit their highest value since Q4 2021although 40% of that number was generated by a single IPO, CoreWeave. Not coincidentally, it’s an AI company.
Third, venture capital used to historically be a 5 to 7 year horizon for venture capitalists, with 10 years being the average lifetime of a fund.. Not anymore. The average timeline for a startup from first round of funding to exit is now stretched to 12 years or more in some cases. This means companies are staying private much longer.
Fourth, and speaking of companies staying private longer. How are investors and founders getting paid out without exits? That’s what are called secondaries. Secondaries are when a new investor comes in to put in money and cash out previous investors and also importantly - employees. One of the most famous examples of this has been Stripe recently which seems to never want to go public. Whereas late-stage growth rounds used to have a secondary component about 20-30% of the time just a few years ago, now that figure is over 50%. A huge shift in investor and founder behavior to unlock trapped liquidity.
Fifth, and finally, acquisitions have started to become slightly more concentrated in early-stage companies. Pre-seed and seed stage acquisitions used to represent about 30% of all acquisitions. Now these two categories represent over 45% of all acquisitions.
