Sapphire Ventures report: B2B VC deals plummet as investors maintain focus on AI

The venture capital landscape in early 2025 shows a stark contrast between artificial intelligence (AI) investments and traditional B2B startup funding. While AI companies are attracting record-breaking investment rounds, conventional B2B venture deals continue their downward trajectory that began in mid-2021.

Key trend analysis: The latest data from Sapphire Ventures reveals a continuing decline in B2B venture capital deal activity during January 2025, marking a significant shift in investment patterns.

• January 2025 showed an 8% decrease in B2B VC deals compared to December 2024
• Year-over-year deal volume has plummeted 64% from January 2024
• Overall deal activity has been declining steadily since reaching its peak in mid-2021

Market dynamics: Despite the downturn in traditional B2B venture funding, the broader technology sector demonstrates robust health and growth.

• Public tech companies like HubSpot are trading at or near all-time highs
• Y Combinator continues to maintain full startup batches
• B2B innovation, particularly in AI, is driving unprecedented growth rates

Investment focus shift: Venture capital firms are becoming increasingly selective, concentrating their investments on two specific segments of the market.

• Growth-stage companies demonstrating exceptional growth metrics
• Early-stage AI startups showing potential for rapid scaling similar to companies like Cursor
• Traditional B2B startups face greater funding challenges compared to 2024

Contrasting narratives: The current venture capital environment presents a paradox between overall technology sector health and B2B funding accessibility.

• AI-focused companies continue to secure massive growth rounds
• The total number of startups continues to expand
• Traditional B2B companies face a more challenging fundraising environment

Looking ahead – The funding divide: The bifurcation in venture capital deployment suggests a fundamental shift in how investors evaluate and fund technology companies, potentially creating long-term implications for innovation and market dynamics in the B2B sector. This selective approach to funding could lead to increased consolidation among traditional B2B companies while accelerating the growth of AI-focused enterprises.