Despite geopolitical headwinds and market volatility, venture capital continued to flow in Q1 2025, but the market showed signs of concentration, valuation pressure, and increased geopolitical risk.
Here’s a preview of the February 2025 market memo:
- VC funding held firm at ~$100B: Capital remains available, but it’s increasingly concentrated in a handful of breakout companies, mostly AI-native leaders.
- Tariff-driven volatility shook public markets: The Nasdaq dropped 14% and software stocks fell 20–30% as macro policy whiplash set in.
- SaaS valuations compressed sharply: Revenue multiples returned to early-2022 levels, reversing late-2024 momentum.
- Mega and ultra-rounds dominated capital deployment: Just 20 financings accounted for 44% of total VC dollars, reflecting a barbell market dynamic.
- Early signs of a rebound in exits emerged: Google’s $32B acquisition of Wiz and CoreWeave’s IPO are bright spots, even as other listings stall.
- Macropolitical uncertainty weighed on enterprise demand: Executives flagged slower deal cycles and budget conservatism as top concerns.
- Global realignment is influencing tech strategy: Governments are treating AI, chips, and cloud as strategic assets—and adjusting policy accordingly.
Founders and investors are navigating a more concentrated, more volatile market shaped by geopolitics as much as economics. AI remains the dominant growth engine—but macro forces are reshaping how and where capital gets deployed.