AI and Mega-Funds Reshape Early-Stage Deals | PitchBook US Venture Capital Outlook

What's New

PitchBook's 2026 US Venture Capital Outlook forecasts a counterintuitive surge in early-stage deal activity despite sluggish fundraising, driven by multistage firms deploying aggressive seed strategies and AI capturing an unprecedented 65% of total deal value. First-time financing activity through Q3 2025 was just 200 deals behind 2021's record pace, defying expectations for a liquidity-constrained market.

Why It Matters

The fundamental structure of venture dealmaking is undergoing a structural shift. Multistage investors with unlimited follow-on capital are increasingly acting like seed-stage investors, deploying "spray and pray" tactics with less emphasis on the "pray" given their fund sizes. The data validates this strategy: top-decile seed and Series A rounds by valuation exhibit higher annualized returns with lower loss rates than lower-valued rounds.

Big Picture Drivers

• AI ubiquity: Artificial intelligence captured 65% of total VC deal value through Q3 2025 and accounts for over half of new unicorns; the market value of AI startups now exceeds $1 trillion

• Multistage dominance: Five of the 20 most active seed and early-stage investors are multistage firms (Andreessen Horowitz, General Catalyst, Khosla Ventures, Sequoia Capital, Lightspeed); together they've made over 400 seed and early-stage deals in 2025

• Accelerated AI development: Median age of AI startups receiving first investment is 65% lower than non-AI startups; median time between rounds is three months shorter and falling

• Geographic concentration: Nearly 70% of capital raised is now concentrated in Bay Area, New York, Los Angeles, and Boston—reversing the "rise of the rest"

• Venture-growth surge: Annualized venture-growth deal value has reached $150.2 billion, surpassing the 2021 record of $91.6 billion

By The Numbers

• 65%: Share of US VC deal value captured by AI startups YTD 2025

• $3.9T: Total post-money valuation of 830 active US unicorns, a tenfold increase over the past decade

• 37.1%: Share of non-life-sciences first financings that are AI companies, up from 21% in 2022

• $4M: Median seed deal size YTD, reflecting pricing power of large multistage funds

• $194.7B: Deal value with nontraditional investor participation YTD, second-highest in a decade

Key Trends to Watch

• AI bifurcation: Crowded vertical segments will bifurcate into a few massive winners and many losers as investment continues despite slow liquidity

• Paper unicorn reckoning: Many unicorns that reached status during 2021 may never deliver outsized returns, while AI-focused startups continue accessing substantial capital

• Emerging manager crisis: Only 33% of first-time managers in 2021 raised a second fund, and just 12% of 2022 new managers had follow-on vehicles

• Corporate VC role: Nontraditional investors—especially corporate VCs, PE funds, and sovereign wealth funds—continue to support select large transactions while hedge funds remain absent

The Wrap

2026 presents a tale of two markets: a booming, AI-driven early-stage ecosystem dominated by deep-pocketed multistage funds, contrasted with a mature market still working through an aging backlog. PitchBook is "more optimistic about early funding stages than we have been since 2021" due to AI's rapid development cycles and growing corporate demand.

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