Q2 2025 VC Insights from V17 Advisors
AI Remains King, But the Crown Feels Heavy
According to the Q2 2025 PitchBook-NVCA Venture Monitor First Look, venture deal value declined 22% quarter-over-quarter to $71.3B from $91.5B, even as deal count rose slightly to 4,093 from 3990. The decline is less a broad retreat than a reversion from Q1’s OpenAI fueled spike. Without another $40B megadeal to anchor headlines, Q2 deal activity looks more measured, though still remarkably top heavy. Five billion dollar plus deals in Q2 were all in AI, including Scale AI’s $14.3B raise, reinforcing the dominance of the sector but raising questions about sustainability. AI accounted for 64.1% of total H1 deal value and 35.6% of deal count, indicating ongoing investor conviction, but also a narrowing venture pipeline.
Fund Formation Rebounds, Fundraising Still Struggles
New VC fund formation jumped 74% to 151 funds in Q2, rebounding sharply from the Q1 2025 low of 87. However, the average fund size declined slightly to $109.9M (down 4%), and total capital raised reached only $16.6B, still far below historic norms. Annualized fundraising is pacing toward a decade low, with median fund close time now stretching to 15.3 months. While there’s new energy among emerging managers, first time funds continue to face sharp headwinds, capturing only $1.8B in H1.
Exit Markets Stir, But Down Rounds Dominate
Venture exits showed life in Q2, with 354 exits, slightly below Q1's number but still trending up from previous years. In terms of exit value, at $63.9B in Q2 saw a 14% increase over Q1 and the highest quarterly exit value since Q4 2021. Yet beneath the surface, IPO valuations remain significantly depressed. Nearly every major public listing in Q2, i.e., Chime, Hinge Health, MNTN and Circle, priced well below their peak private valuations. Down round IPOs have become the new normal. Still, there were bright spots: Voyager’s defense tech IPO and Circle’s post-listing surge indicate pockets of investor enthusiasm for sectors aligned with federal priorities like crypto and national security.
Liquidity Landscape: A Secondaries Surge
In the face of tepid IPO volume and continued exit delays, the secondary market has emerged as a crucial liquidity valve. An estimated $60B in secondary volume this quarter mirrors total exit value, with just 20 startups accounting for 83.2% of that activity. As investors wait for traditional distributions, secondaries are evolving from emergency options into strategic tools for recycling capital and resetting valuations.
Tariff Turbulence and Market Sentiment
April’s Liberation Day tariffs triggered a brief market jolt, but policy reversals and consumer adjustment steadied sentiment by June. However, lingering uncertainty around macroeconomic policy and global trade continues to constrain capital deployment and elongate decision cycles. Most major exits in Q2 occurred in sectors insulated from policy risk, such as AI, defense, and fintech, while clean tech and consumer sectors lagged.
Conclusion: Stabilization, Not Rebound (Yet)
Q2 2025 showed signs of resilience: fund formation is up, exit activity is improving, and the venture ecosystem is adjusting to new liquidity pathways. But fundraising remains difficult, valuations are bifurcating, and AI continues to dominate both narratives and capital flows.
Key questions for Q3:
- Will AI's gravitational pull support the rest of the ecosystem or crowd it out?
- Can the IPO pipeline accelerate beyond defense and crypto?
- Will fundraising momentum return or remain stuck in low gear?
For fund managers and allocators, the current environment calls for sharp positioning, operational resilience, and investor-ready infrastructure.
At V17 Advisors, we work with venture firms navigating these shifting tides. Whether you're refining your investor reporting, standing up new vehicles, or preparing for diligence in a volatile market, we provide CFO and compliance solutions tailored to this moment.
Reach out if you’re ready to build for Q3 with precision and confidence.