Why 2025 is shaping to be a better year for VC
December 21, 2024
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2024 gave us pockets of venture highlights.
Databricks raised a $10 billion round, and there were several other multibillion-dollar deals, all providing a window into the capital available for high-growth, well-known companies, particularly in AI.
Andreessen Horowitz raised more than $7 billion across several funds, a showcase of the leverage that certain firms have with LPs.
But overall, the market continued to slog through the mess. For companies outside of AI, capital continued to be a challenge to raise. Emerging managers had an incredibly troublesome time raising capital, and large exits remained few and far between.
The feeling around the market, though, is that the fog may begin to lift.
Rate cuts have started, changes at the FTC could bolster M&A activity, and there is a brighter sense that, should current trends continue, the IPO market will start to come back. Though it's a low bar to overcome.
Our outlook for venture in 2025 is positive, albeit tempered. Capital availability will likely remain lower for the later stages, a mechanic of the overinvestment a few years ago, and valuation growth should start to increase mildly.
The need for liquidity should finally push some companies to the table for acquisitions, and we can't forget there are 750 unicorns, not all of which will be able to raise more capital to provide liquidity for early investors and employees the way that Databricks and SpaceX could.
Distributions should also start to come back with the larger exits occurring, and that should also enhance the fundraising market, marginally.
The optimism inherent to venture allows for optimistic views no matter the true state of the market. However, it's inarguable that VC has gone through a dramatic change in the past three years, from anomalous years of highs to a swift contraction and now a relative normalization.
2025 will be a pivotal year, and there will likely be more shakeout in the market, but the sun seems to be rising.
To read our 7 predictions for next year, download our free 2025 US Venture Capital Outlook.
Databricks raised a $10 billion round, and there were several other multibillion-dollar deals, all providing a window into the capital available for high-growth, well-known companies, particularly in AI.
Andreessen Horowitz raised more than $7 billion across several funds, a showcase of the leverage that certain firms have with LPs.
But overall, the market continued to slog through the mess. For companies outside of AI, capital continued to be a challenge to raise. Emerging managers had an incredibly troublesome time raising capital, and large exits remained few and far between.
The feeling around the market, though, is that the fog may begin to lift.
Rate cuts have started, changes at the FTC could bolster M&A activity, and there is a brighter sense that, should current trends continue, the IPO market will start to come back. Though it's a low bar to overcome.
Our outlook for venture in 2025 is positive, albeit tempered. Capital availability will likely remain lower for the later stages, a mechanic of the overinvestment a few years ago, and valuation growth should start to increase mildly.
The need for liquidity should finally push some companies to the table for acquisitions, and we can't forget there are 750 unicorns, not all of which will be able to raise more capital to provide liquidity for early investors and employees the way that Databricks and SpaceX could.
Distributions should also start to come back with the larger exits occurring, and that should also enhance the fundraising market, marginally.
The optimism inherent to venture allows for optimistic views no matter the true state of the market. However, it's inarguable that VC has gone through a dramatic change in the past three years, from anomalous years of highs to a swift contraction and now a relative normalization.
2025 will be a pivotal year, and there will likely be more shakeout in the market, but the sun seems to be rising.
To read our 7 predictions for next year, download our free 2025 US Venture Capital Outlook.

Kyle Stanford, CAIA
Lead Analyst, Venture Capital
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