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New Trend: VC Funding Recovers in 2025
Venture Capital (VC) funding has been constrained in the last 2 years because of slower exits which limit capital return. There is a slow down in the number of new funds and new VC firms. The larger, established VCs are getting a majority share of investment placement. Pitchbook’s US Venture Outlook for 2025 discusses “the gradual recovery in exit activity anticipated in 2025 points to a possible reversal. Healthier M&A volumes and the thawing of the IPO market are expected to unlock LP liquidity, providing momentum for new fundraising cycles.”
Despite liquidity challenges, VC bets have been going “all-in” on Artificial Intelligence (AI) startup funding. This trend is continuing into 2025 with AI-first startups as well as startups focusing on the specialized applications of AI in industries such as healthcare, legal, and finance. Investors are looking for startups that have an AI-first approach to solving problems that historically have challenged traditional businesses. For example, in healthcare AI will lead drug discovery and help doctors get to a diagnosis faster.
New Insight: VC Investment Priorities in AI and Beyond
If VC funding does start to loosen in 2025, what are the investment priorities in AI and beyond? Here’s what to expect.
1. AI & Automation Dominate Investment
VC funding will continue to pour into AI, particularly AI agents, generative AI, and automation.
Companies focusing on AI infrastructure, AI chips, and AI-driven enterprise solutions will attract major funding.
Startups leveraging AI for productivity tools, content creation, and software engineering will be hot targets.
2. Climate Tech & Sustainability
Clean energy, carbon capture, and battery storage startups will see increased investment.
Water tech, alternative proteins, and circular economy startups will gain traction.
ESG (Environmental, Social, and Governance) metrics will be critical for funding.
3. Deep Tech & Space Exploration
Quantum computing, semiconductors, and biotech will continue attracting VC dollars.
Space tech startups working on satellite infrastructure and asteroid mining will gain attention.
4. Healthcare & Longevity
Increased funding in biotech, gene editing (CRISPR), and anti-aging technologies.
Psychedelic medicine and mental health tech will continue gaining mainstream investment.
Personalized medicine and AI-driven drug discovery will see significant capital inflow.
5. Fintech 2.0 & Embedded Finance
A shift towards decentralized finance (DeFi), blockchain innovations, and embedded finance.
Growth in B2B fintech, real-world asset tokenization, and alternative lending platforms.
Crypto investment will stabilize, focusing on regulatory-compliant Web3 startups.
6. Consumer Tech & Social Media 3.0
AI-generated social platforms and new creator monetization models will emerge.
Growth in VR/AR-powered experiences and spatial computing driven by Apple Vision Pro and competitors.
Decentralized social media and blockchain-based platforms will gain interest.
7. Defense Tech & National Security
With rising geopolitical tensions, VCs will pour money into defense startups.
Growth in AI-powered cybersecurity, drone warfare, and autonomous defense systems.
Investment in alternative energy sources for military applications.
New Action: Corporations Leverage VC Investments
Corporate innovation can count on VCs continuing to help startups push the boundaries of AI and other advanced technologies. Corporate innovators are in a position to take advantage of the venture funding by teaming up with startups, testing the technology in real-world scenarios and co-funding development to align with corporate strategies and objectives for growth.
Here are three specific actions to consider.
Make Strategic Investments: Many established companies are setting up CVC arms to strategically invest in emerging technologies that align with their long-term growth strategies. This trend is particularly relevant in areas like AI, sustainability, and healthtech.
Accelerate Innovation with Emerging Technologies: As VC funding for AI technologies skyrockets, many corporates are integrating these innovations into their operations. Corporations might adopt AI-driven solutions for tasks like customer service, logistics optimization, or even product development. VCs often fund startups with groundbreaking AI technologies, knowing they will eventually become part of larger corporate strategies.
Collaboration in New Products and Services: Both corporate innovation and VC funding are driving the rise of new business models, such as subscription services or experience-based offerings. As industries face rapid changes, corporate innovation strategies include disruptive technologies. VC funding ensures these startups have the resources to scale, while corporates look to integrate these innovations into new products and services quickly.
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