The venture capital sector is poised for a long-awaited return to dealmaking, fund deployment, and exit opportunities in 2025. For several years, the VC space has been plagued by high interest rates and inflation, an IPO backlog, and a funding dryspell, emblematic of dicey macroeconomic conditions.
Data from the National Venture Capital Association (NVCA) illustrates a massive backlog in VC exits. Of the over 1,300 companies with valuations of $500 million or more, only 40 completed successful exits in 2024. An uptick of deal volume in 2024 offered a glimmer of hope for recovery, as deal value surpassed $209 billion across 15,260 deals.
With top expert insights from the AlphaSense platform, we explore the key factors and trends shaping the VC environment for the year ahead, notably: a rebound in IPO and deal activity, the ongoing dominance of AI and generative AI investment, ESG startup funding, blockchain and decentralized finance, and sectors such as biotechnology ramping up activity.
Rebound in IPO and Deal Activity
Wellington Management’s 2025 Private Equity outlook forecasts a resurgence in IPO activity based on historic peak trends, and a strong historic trajectory positioning IPO activity up nearly 40% following presidential election years. Deregulation is also expected to prime the IPO and deal environment.
While lingering concerns around tariffs and global policy pose macroeconomic uncertainty, experts widely agree that 2025 will mark a widespread return to IPO and deal activity, following years of low activity.
ESG Startup Funding
VC investors are increasingly prioritizing ESG factors in their strategy and decision-making process. Startups that provide sustainable solutions, including clean technology and renewable energy, are being prioritized to address the growing demand for sustainability integration.
The Open Network Lab (Onlab) has modeled a successful sustainable model for venture investment. Onlab is a seed accelerator program founded by Digital Garage in 2010, and the first comprehensive seed accelerator in Japan. It provides extensive support to burgeoning startups and has provided a framework for future initiatives. Through its program, Digital Garage has supported over 150 seed-stage startups, with three companies achieving IPOs and attaining unicorn status.
Biotech Funding
Healthcare and biotech have experienced ongoing funding dryspells, with public funding down 56% for biotechnology companies in January of this year. However, according to broker research from the AlphaSense platform, robust VC funding helped offset an otherwise down month for biotech funding. January VC funding came in at $3.4 billion, up 76% year-over-year, marking the second best result on record (the first being March 2021 with $3.8 billion of funding).
Healthcare and biotechnology will likely continue to attract VC investment in 2025, with the potential for groundbreaking drug therapies and technologies.
A biotechnology expert expressed optimism that funding rounds are making a return:
“Interest rates are coming down. The immediate kneejerk reaction to credit becoming much tighter seems to have passed. To be honest, I’m not sure of the larger macroeconomic factors behind it, but just talking to people in the industry, talking to a few colleagues I have in VCs, this seems to be the word on the street… The start of 2025 is when things are actually starting to pick up again.”
A Senior Director at Adaptimmune Therapeutics emphasized investor expectations even at the VC level, and the importance of developmental progress and value-add for startups:
“The regulations are ultimately getting more and more complex for a reason obviously. That has an element of increasing the associated cost of the activity. On the other end, the companies are all trying to cost-contain because essentially that’s what the markets are demanding and then also that’s what their shareholders are demanding. If you are a GSK or a Pfizer or even an even smaller start-up biotech, exactly the same criteria is applied across. Ultimately, that’s what common sense demands to make sure that the most development is achieved with the amount of funds available for a company.”
With AlphaSense’s Generative Grid tool, investors can create a side-by-side view of leading expert perspectives on trending sectors, such as biotech, to extract a streamlined, instant view of relevant expert insights on particular industry developments.
Dominance of AI Investment
Since the launch of OpenAI’s ChatGPT tool in 2022, the VC sector has significantly multiplied its investment in the booming technology. According to a recent EY report, venture capital investment in generative AI exceeded $45 billion globally in 2024, which is nearly double the amount in 2023 ($24 billion) and more than five times the total VC investment in 2022 ($8.7 billion).
As AI models continue to evolve, experts anticipate that startups will build on existing AI models and broaden the window of investment:
“I think hyperscalers will apparently always have an edge, but once these AI models mature, there’s definitely chances for start-ups to come up and innovate and build on top of the existing models. To train these models requires so much capital that only hyperscalers are going to be able to compete today. Now, with DeepSeek coming out, I will say it’s more likely that some start-up is going to come and give people a deeper model that does not rely on some closed-source API like OpenAI’s API or any other hyperscaler’s API.”
Blockchain and Decentralized Finance
Recent announcements from the new U.S. administration point to the development of a crypto reserve that is likely to continue driving VC investment interest in blockchain technology and decentralized finance. A recent example of this is BVNK’s $50 million Series B funding by Haun Ventures, which brought the U.K. stablecoin infrastructure company’s valuation to nearly $750 million.
In an expert interview with a Partner at Concentric VC, the expert shares their perspective on BVNK leading stablecoin infrastructure (which they deem superior due to transfers with little to no volatility and speed), and their projection for Bitcoin evolution in the blockchain:
“BVNK is the leading stablecoin infrastructure solution globally now. I would say they’ve been at the forefront of this industry since that period, around 2017, 2018. We’ve been investing in Bitcoin infrastructure for two and a half years. There’s a very close link between stablecoin infrastructure and Bitcoin infrastructure. When you understand the nature of stablecoins and contrast that to Bitcoins, it puts both in context and can be quite useful… Right now, the demand in use cases is for stablecoin payments over these alternative blockchains. What we’re building towards as a venture firm is when that shifts to Bitcoin. We’re investing in a world that we see developing over the next five or six years and the structural reasons why we think that will evolve towards Bitcoin.”
A Managing Partner at 99 Capital believes that well-grounded solutions like Artemis, a crypto data platform, are an “attractive target investment” for VC investors:
“In my opinion, where is the biggest opportunity from a VC investment perspective? I think it’s probably getting exited to one of these guys who can sell pretty fat tickets for subscriptions. Bloomberg, CapIQ, these sort of guys. That’s where pretty much all the M&A is happening here. If you can accelerate their go-to-market in crypto and just really expand their breadth of data, I think that’ll make you quite attractive target as well.”
For a look back at last year’s trends, check out Venture Capital Trends and Outlook for 2024.
