The State of the Venture Capital Market in Q2 2025

As we reach the close of Q2 2025, it’s clear the venture capital (VC) landscape is undergoing a profound shift. Drawing from insightful reports by Stout, Gov‑Lab, and Crunchbase, this article dives deep into market dynamics, sector trends, fundraising activity, and how AngelsPartners.com is positioned to support startups navigating these complex times.

1. Overview: Modest Recovery, Lingering Caution

1.1 Global Funding Trends

Global venture investment ticked up year‑over‑year, reaching $91 billion in Q2—an increase from $82 billion in Q2 2024—but still below the Q1 2025 peak of $114 billion  .

• A significant share (~30%) of Q2 capital was concentrated in just 16 mega‑rounds of $500 million+ each, including a standout $14.3 billion raise by Scale AI  .

• The US led the charge, with $60 billion (two‑thirds) of total VC going to North American companies, and $145 billion poured into US/Canada in H1—up 43% YoY  .

1.2 US VC Market: Cooling Activity

Stout reported a sharp decline in US deal-making—deal count dropped 45.2%, and capital investment plunged 65% QoQ in Q2  . Secondary market transactions similarly fell to their lowest levels since early 2024.

Takeaway: While global funding shows year-over-year resilience, Q2 saw a marked pause in US deal flow, driven by investor caution and reduced exit liquidity.

2. Fundraising & Secondary Markets

• Fundraising picked up: Total VC fund sizes in Q2 were $14 billion, a 28.7% QoQ increase, though the total number of vintage and closed funds declined sharply, by nearly 92% YoY  . Negative median IRRs (-7.8%) persisted into late 2024, highlighting ongoing fund performance challenges  .

• Secondary activity slowed: Secondary deal volumes reverted sharply, halting the upward trend of prior quarters (). Less activity in this exit channel means less liquidity and more pressure on both limited partners and funds.

3. Sector Breakdown: AI Still King, with Healthcare & Fintech

3.1 AI & Deep Tech

• AI/ML continues to dominate, accounting for high-value mega‑rounds and capturing 6.3% of votes in Gov‑Lab’s Q2 trends survey  .

• Investors are also eyeing Deep Tech & Robotics (6.7%) while deploying AI‑powered VC tools (4.4%)  .

3.2 Healthcare & Biotech

• Healthcare and biotech garnered $14.8 billion, making it Q2’s second‑largest sector  .

• Regulatory and M&A trends continue shaping investor confidence  .

3.3 Financial Services (Fintech)

• Fintech attracted $10.8 billion, ranking third in sector funding ().

• Gov‑Lab flagged fintech growth (4%) and crypto/DeFi (4.4%), though also noted increased cybersecurity concerns (6%)  .

4. Macro Themes & Investor Sentiment

Gov‑Lab’s survey of 100+ GPs and LPs revealed key sentiment drivers:

1. Geopolitical uncertainty (7.5%) – top concern, impacting cross-border deals and supply chain stability  .

2. Cybersecurity threats (6%) – a top‑4 issue influencing diligence ().

3. Startup talent growth (4.4%) – still seen positively  .

4. Rising LP diversity and emerging managers – each at 4%, reflecting structural shifts in the VC ecosystem  .

5. Valuation & Exit Landscape

• Valuation trends: Median pre- and post-money valuations continue their long-term upward trajectory (~10% CAGR since 2015), but Q2 saw a sharp correction in late-stage (Series E) valuations—down ~39% QoQ  .

• Exit scarcity: A lack of IPOs and sluggish M&A have hampered exit potential, resulting in a backlog of late-stage companies without clear paths to liquidity ().

6. How AngelsPartners.com Helps Startups Navigate Q2 2025

In this turbulent environment, startups need tailored support more than ever. At AngelsPartners.com, here’s how we’re stepping up:

• Strategic positioning for AI, DeepTech & Healthcare: Given investor interest, we help founders refine messaging, product-market fit, and go-to-market strategies.

• Valuation preparedness: With valuations in flux, our advisory services ensure realistic and market-aligned expectations for seed to Series A stages.

• Navigating diligence and cybersecurity: We guide portfolio companies through tightened due diligence, bolstering their compliance and security postures.

• Exit strategy sharpening: For later-stage companies, we craft alternative exit plans—secondary sales or M&A positioning—amid an exit-light market.

• Fundraising support for emerging managers: We connect promising fund managers with diverse LPs, leveraging AngelsPartners.com’s global network and expertise.

7. Outlook & Strategy for Q3 2025

7.1 Strategic Priorities

• Focus on resilient sectors: AI, HealthTech, FinTech, DeepTech remain robust funding areas, deserving extra attention.

• Optimize for smaller, high-impact rounds: With megadeals still dominating, smaller startups must emphasize growth and differentiation.

• Address macro risks: Build regional diversification, political scenario planning, and robust cybersecurity frameworks.

7.2 Ecosystem Implications

• Recovery in exits is essential: As mega‑round pressure builds, renewed IPO and M&A activity will be critical for all ecosystem players.

• Emerging managers to gain ground: Rising LP appetite for newer, diverse managers suggests opportunity—despite fewer overall funds.

• AI-enabled VC emerges: Tools enhancing deal sourcing and portfolio insights will accelerate adoption across firms  .

8. Conclusion

Q2 2025 presented a complex VC landscape: a modest global funding increase, U.S. dealmaking slowdown, heightened macro risk, sector divergence, and scant exit options. Yet, for adaptable founders and investors—particularly those embracing AI, healthcare, fintech, and deep tech—significant upside remains.

At AngelsPartners.com, we empower startups to navigate this challenging terrain by aligning strategy with market realities, optimizing capital raises, and preparing for future exits. Whether you’re launching your seed round or scaling past Series B, we’re here to guide you through Q3 and beyond—turning these storm clouds into strategic opportunities.

Quick Stats at a Glance

• $91 B global VC in Q2 2025 (+11% YoY); $114 B in Q1 ()

• $14 B VC fundraises in Q2 (+29% QoQ), but fund count down ~92% YoY ()

• AI & Deep Tech continue to attract mega-rounds; healthcare ($14.8 B) and fintech ($10.8 B) see strong activity ()

• Geopolitical uncertainty tops concerns; cybersecurity remains a major risk 

• Late-stage valuations correcting; secondary and exit markets remain constrained ()

If you’re a founder, investor, or part of a VC shop—reach out to me. Let’s deepen your fundraising strategy or craft the perfect exit roadmap. The VC landscape is evolving rapidly—together, we can lead the way.