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AI Funding Soars as VC Market Faces Liquidity Crunch
7 Jan
Summary
- Venture capital fundraising fell 35% in 2025, reaching a six-year low.
- Companies are remaining private due to public market scrutiny.
- AI startup funding reached a record $222 billion in 2025.
Venture capital fundraising saw a substantial decline in 2025, dropping 35% to $66 billion, the lowest in at least six years. This reflects a broader liquidity crunch where startups are choosing to remain private rather than face public market scrutiny. The prolonged absence of successful initial public offerings has further complicated capital raising efforts.
Investors are consolidating their investments into more established and trusted venture capital firms, making it harder for new managers to secure funding. This trend is exemplified by large raises from firms like Lightspeed Venture Partners and Founders Fund. Consequently, cash-intensive AI businesses are increasingly seeking capital from sources beyond traditional VCs.
Despite the general slowdown, funding for U.S. AI startups reached an unprecedented $222 billion in 2025. This surge includes significant rounds for OpenAI, Databricks, and Cursor. Future IPOs from major companies like SpaceX and OpenAI could potentially inject more capital back into the market.
