U.S. startup funding surged 75.6% in the first half of 2025 to $162.8 billion, driven by massive AI investments including OpenAI’s $40 billion round and Meta’s $14.3 billion stake in Scale AI. This marks the strongest performance since 2021’s historic peak, with AI deals accounting for 64.1% of total deal value, even as venture capital firms face a 33.7% decline in fundraising amid longer timelines and limited partner concerns.
The big picture: The disconnect between startup funding abundance and VC fundraising struggles reflects a market where AI investments dominate while traditional venture capital faces structural headwinds.
- AI investments accounted for 64.1% of total deal value and 35.6% of deal count in the first half of 2025, underscoring sustained investor conviction in the sector.
- The current surge mirrors the 2021 boom during the Zero Interest Rate Policy era, but this time it’s driven by AI breakthroughs rather than pandemic-era monetary policy.
Key funding highlights: Several billion-dollar AI deals defined the second quarter, demonstrating the scale of investment flowing into the sector.
- OpenAI’s $40 billion funding round and Meta’s $14.3 billion purchase of a Scale AI stake led the quarter’s $69.9 billion in total investments.
- Other AI companies receiving over $1 billion included Safe Superintelligence, Thinking Machine Labs, Anduril, and Grammarly.
Why VCs are struggling: Despite the startup funding boom, venture capital firms raised just $26.6 billion across 238 funds in the first half, extending 2024’s downward trend.
- The median time to close new funds stretched to 15.3 months by Q2 2025—the longest in over a decade.
- Limited partners remain concerned about the asset class due to recent underperformance and liquidity constraints.
What they’re saying: Industry leaders attribute the AI investment surge to continued growth from market leaders and expansion into new domains.
- “I think it’s downstream of the fact that OpenAI and Anthropic continue to grow at unbelievable rates,” said Davis Treybig, partner at Innovation Endeavors. “If there’s even a chance you could see that sort of progress in other domains, whether it’s robotics, protein folding models, world models or video models, then there’s a lot of people who are going to want to invest a lot of money.”
Signs of recovery: Exit activity jumped 40% in the second quarter, bringing optimism for IPOs and M&A in the remainder of 2025.
- A loosening antitrust environment and thawing IPO market are boosting confidence among investors and companies.
- Sectors aligned with President Trump’s priorities—including AI, national security, defense technology, fintech, and crypto—dominated IPO interest.
- “The good news is we’re starting to see the tide turn,” said Lucas Swisher, co-head of growth investing at Coatue. “IPOs like Coatue portfolio companies Hinge Health and Coreweave have been well received by the market, and there are a dozen companies filed now.”
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