Investing

Early-stage activity drives optimism

Early-stage deals reached new highs, with AI capturing a significant share.

The pace of dealmaking in 2024 remained measured compared to the oversubscribed frenzy of the pandemic years, yet encouraging signs of recovery began to emerge.

$209 billion

invested in 2024

Deal count reached an estimated 15,260 transactions, marking the third-highest annual total since 2014 and a 29% increase over 2023 in capital invested. Venture-backed companies collectively raised $209 billion in 2024, surpassing pre-pandemic levels but remaining well below the highs of the zero-interest-rate-policy (ZIRP) era.

17%

increase in deal count

33%

increase in deal value

In 2024, early-stage transactions saw notable growth, with a 17% increase in deal count and a 33% rise in deal value compared to 2023, reversing a two-year decline. Late-stage activity, though still subdued, experienced a modest rebound as companies returned to the market to secure delayed funding. Deal value rose by 21%, reflecting larger check sizes, while deal count declined by 9%, indicating continued investor selectivity. The average time between funding rounds extended to over two years for Series C and D+ companies, underscoring investor caution amid economic and geopolitical uncertainties.

46%

of total capital deployed to AI/ML

AI and machine learning solidified their position as dominant forces in 2024, capturing over 46% of all venture capital deployed during the year. AI investments were a major driver of deal activity across all stages, accounting for 77% of capital invested at the seed stage, and nearly half of the capital invested in Series D round and beyond. Innovation at the seed stage and rounds sizes at the later stages reflect founder and investor enthusiasm for AI.

If 2024 was the primordial soup year for AI, the building blocks are now firmly in place. AI’s potential is now congealing into something real and tangible—embodied by physical data centers that are rising up all across America...If 2024 was about new ideas abounding, 2025 will be about sifting through those ideas to see which really work.

David Cahn, Partner at Sequoia Capital

As generative AI matures, transformative applications are expected to emerge, redefining industries and expanding the scope of AI’s impact. Investors focusing on advanced reasoning and service-based solutions are likely to capture the next wave of opportunities in 2025 and beyond.

Source: PitchBook

Trend

The great institutionalization of VC secondaries

Secondaries are quickly becoming a standard tool in venture capital for both managers and limited partners. Deal volume in the secondary VC market was estimated to be more than $100 billion in 2024. With that rise came a wave of headlines about eye-popping discounts, mega fundraises, and claims of the death of the IPO. With 2024 in the rearview, what should be made of where we are and what’s to come in 2025?

What are VC secondaries?

"VC Secondaries" broadly refers to the sale of venture capital assets, whether by a venture capital fund, an employee of a venture-backed company, or a limited partner of a venture fund. These deals fall into two categories:

•

Direct Equity Sales: Shares in a venture-backed company are sold, either by an individual, company, or VC fund

•

Limited Partnership (LP) Interest Sales: Limited partners sell some or all of their ownership in a VC fund, often through continuation funds or other vehicles

Historically, secondary deals have been a staple in the buyout space, with transactions between LPs and sponsor-to-sponsor sales dominating the space. Now, VC secondaries are seeing a similar surge. Fueled by a combination of companies staying private longer and limited distributions going back to LPs , the secondary market has exploded.

With the VC market growing in both complexity and maturity, 2025 is poised to be another banner year.

A key trend in 2024?

Companies continued to stay private longer. The median age of companies raising Series D or later rounds hit a near-decade high of 9.7 years. Meanwhile, VC-backed exits were at historic lows, putting additional pressure on LPs. This combination of factors pushed many investors looking to unlock liquidity to the secondary market.

At the same time, investors and early employees of those companies have found a secondaries market willing to pay for their positions in order to gain ownership of hot assets. A small group of VC-backed “superstar” companies has emerged, with trading primarily concentrated in shares of SpaceX, Anthropic, Stripe, and Databricks according to data reported by secondary market platforms Notice.co and Caplight. As a result, discounts in secondary deals, which were as steep as 37% early in 2024, narrowed to just 6% by October. The secondary market is evolving, with most trading now concentrated in top-tier companies.

9.7 years

average age of companies raising late-stage rounds

Tender offers are becoming an increasingly important liquidity option for venture-backed companies. Six of the CB Insights top ten most valuable VC-backed startups in 2024 have executed multi-billion-dollar tender offers, raising significantly more than the total value of tech IPOs in the last two years combined. Notably, all but one of these offers were led by VC fund managers, underscoring the growing role of VCs in managing liquidity events for their portfolio companies.

According to VC platform Carta, 2024 was its largest year for tender offers. Even early-stage companies are increasingly turning to tenders, which can help clean up cap tables and prepare for a future IPO.

The secondary market is maturing and becoming a mainstay in the venture ecosystem.

As companies delay their IPOs, secondary transactions provide early investors with a way to realize returns without waiting for traditional exits. For private companies, secondaries offer flexibility to extend timelines and actively manage their cap tables.

In 2025, the secondary market is set to play an even bigger role. What's driving this trend?

More Liquidity Opportunities: Sellers in the secondary market can time liquidity more strategically, particularly by avoiding post-IPO lockup periods.

Discounted Valuations: As LPs look to access promising startups at potentially discounted prices, secondary market transactions become even more appealing.

Even if the IPO market rebounds in 2025 and distributions start flowing to LPs, it likely won’t be enough to counterbalance the past few years of low distributions. As PitchBook reports, VC distributions remain at around 5% of VC NAV—similar to levels seen during the 2008/2009 financial crisis.

Looking ahead, the secondary market is on track for another record-breaking year in 2025. With a growing number of companies staying private longer and new secondary market platforms emerging, investors have more tools than ever to access top-tier companies and unlock liquidity.

Despite the potential resurgence of IPOs, secondary market transactions will remain critical in 2025, allowing early investors to realize returns, helping companies extend their timelines before going public, and providing cash flow without needing to rely solely on traditional exits.