The global venture capital market closed the year with strong momentum, as Q4’25 investment reached $138 billion — the highest level in 14 quarters — pushing annual VC investment from $391.9 billion in 2024 to more than $500 billion in 2025. This increase occurred despite a sharp decline in deal activity, underscoring a market increasingly driven by fewer, larger transactions. Year-over-year growth in VC investment was fueled almost entirely by surging capital deployment into AI-focused companies.
Globally, AI was an incredibly hot sector for VC investment throughout 2025, attracting a record-level of funding by a large margin. Q4’25 was no exception. During the quarter, eight AI-focused companies in the US raised $1 billion+ funding rounds; in addition to the large raises by Anthropic and Project Prometheus, Anysphere raised $2.3 billion, Reflection AI raised $2 billion, Polymarket raised $2 billion, Lambda raised $1.5 billion, and Crusoe raised $1.4 billion.
AI also attracted numerous investments across other jurisdictions, if at smaller deal sizes. In Asia, Australia’s Firmus Technologies raised $541 million, China-based Didi Autonomous Driving raised $280 million, and Japan-based Mujin raised $235 million. In Europe, France-based Brevo raised $578 million, Germany-based Black Forest Labs raised $300 million), and UK-based Synthesia raised $200 million.
The diversity of AI investments globally highlights the rapid evolution and expansion of the AI space as increasing numbers of startups work to transform industries and day-to-day activities using AI. Investment trends have evolved nearly as rapidly, with VC investors shifting away from broad-based investments. Investors are increasingly focusing on backing proven AI innovators and businesses with not only transformative business models, but defensible ones that cannot easily be replaced by the next AI startup coming down the pipe. Particular areas of investment during Q4’25 included areas like data centres and other AI infrastructure, small language models, robotics, and niche vertical solutions.
Over the course of 2025, the exit environment for VC-backed companies started to unlock after a lengthy drought. It was a particularly good year for M&A globally. While M&A deal volume remained somewhat subdued, global M&A deal value grew quite substantively year-over year. Corporates were particularly active across regions as the enormous pressure to innovate to stay relevant drove them to prioritize buying innovation capabilities over focusing on internal innovation.
The global IPO exit environment improved over the course of the year, although not to the levels anticipated entering Q4’24. After showing signs of reopening earlier in the year, IPO activity stalled somewhat in Q4 as a result of the US government shutdown, contributing to continued softness in overall IPO volumes.
Despite this, IPO exit values increased in several key markets, including the United States, Hong Kong, and India, reflecting a selective but improving exit landscape. Looking ahead to 2026, IPO activity is expected to continue its gradual recovery — particularly in the US — as market conditions stabilize. In parallel, secondary transactions and special purpose vehicles remained heavily utilized across all jurisdictions, a trend expected to persist well into 2026.
Heading into 2026, AI is expected to remain the hottest area of VC investment globally, with VC investors intensifying their focus on companies working to use AI to transform how businesses and industries operate.
Over the next few years, as AI is increasingly used to augment workforce capabilities, reduce entry-level work, and drive an upswell in organizational productivity, one sector to watch will be education. As organizations globally look to upskill their people so they can get the most out of their use AI tools and solutions — and look to create new pathways for young people to enter the workforce given the absence of positions that have been available historically - there could be a significant increase in interest in edtechs that have considered what the next generation of learning will look like.
Explore the latest deals and venture capital trends through the fourth quarter of 2025
