What’s Next for Venture Capital and Private Equity?
While deal volumes are yet to recover fully, we’re seeing a resurgence in deal value and a recalibration of strategies across both venture capital and private equity. Simultaneously, exit strategies are evolving, and fundraising faces new challenges. From mega-deals in AI to a new breed of smaller, but more specialized funds, the signals are clear: the next chapter is already being written.
Deal Dynamics: Bigger Bets, Fewer Plays
In venture capital, early-stage deals remain dominant, accounting for the majority of global VC activity in 2024. But the volume of deals is shrinking. The average ticket size for early-stage deals sits at $7.7M, while growth rounds hover around $49M.
At the other end of the spectrum, large-scale raises are back on the radar, led by AI companies, thus signaling that the AI hype is far from over, it is still driving capital allocation at scale.
On the PE side, the story is similar but amplified. Deal value jumped nearly 25% in 2024 and Private equity megadeals surged in 2024, with 18 deals either completed or announced, more than double the previous year and the fourth-highest level on record since 2000. The momentum was driven by falling interest rates, improving M&A conditions, and more realistic seller expectations.
But 2025 has seen a shift. Geopolitical uncertainty, particularly around U.S. tariff policies is weighing on dealmaking. Bain & Company projects a 16% decline in buyout deal value for Q2 2025, with April alone marking a 24% drop compared to the previous quarterly average.
At the same time, smaller deals are making a comeback. PE firms are increasingly focusing on transactions under $50 million, reflecting a cautious investment strategy amid economic uncertainties.
Exit Markets: Slowly Coming Back to Life
After a dry spell, the IPO window is slowly opening. U.S. IPO exit value hit $28.4B in H1 2024, thus almost matching full-year 2023. Reddit and Astera Labs led the way, hinting at a thaw.
At the same time , another exit trajectory is on the rise, 71% of exit dollars in 2024 came from a new secondaries.
While it is positive that the market has liquidity, the trend, if it continues, could have some unintended and unfortunate consequences where portfolio companies are passed along and, therefore, focus more on looking suitable for resale rather than building long-term value. Of course, these are not always mutually exclusive growth patterns, but still, something to watch out for.
PE firms are grappling with a backlog of unsold investments, with approximately 30,000 companies valued at $1.8 trillion remaining unsold. Distributions to investors have dropped to 11% of net asset value, the lowest since the 2008 financial crisis.
Despite these challenges, exit activity in the U.S. PE market reached its highest level in two years by Q3 2024, indicating a strategic focus on returning capital to investors.
Dry Powder and Fundraising: Diverging Paths
Fundraising is increasingly polarized. VC raised $102B globally in 2024 down from a peak of $314B in 2022 according to McKinsey. For PE, capital raised dropped over 20%, with Q1 2025 marking a 65% fall in buyout capital alone.
Yet firms are still sitting on record levels of dry powder, nearly $4T globally, with $1.2T earmarked for buyouts. That’s capital ready to be deployed, but with tighter scrutiny and longer timelines.
From blockbuster to niche buster: The rise of specialized funds
Specialized VC and PE firms are poised to play an increasingly influential role in the future of private capital. As the industry shifts from a growth-at-all-costs mentality toward value creation and risk management, focus and domain expertise become major competitive advantages.
Institutional investors are becoming more selective, with limited partners (LPs) increasingly allocating to sector-focused funds that match their own investment theses. According to McKinsey, LPs are showing a preference for managers with niche strategies that can deliver returns through specialization, not just access to deals
Their sector focus allows them to source proprietary deals, analyze deals more effectively and with deeper insight, and actively support portfolio companies with hands-on operational insight.
In a more mature and competitive capital landscape, narrow focus will often outperform broad ambition. Specialized firms can move faster, take smarter risks, and create more value in sectors where execution matters as much as capital.
Their role won’t just be complementary to generalist funds, it will be foundational to shaping the future of innovation and growth in both VC and PE markets.
Where Do We Go from Here?
Venture capital is becoming more concentrated around clear winners, especially in deep tech and AI. Private equity is entering a more disciplined cycle, where operational value creation will matter more than financial engineering.
We’re heading into a market where size still matters, but timing, precision, sector knowledge and operational expertise will matter more.
