Mid-Year Check-In: What We’re Seeing in the 2025 Venture Capital Market
By Matt Hickman
At Plains Ventures, we believe thoughtful investing starts with understanding the landscape. As we pass the halfway mark of 2025, our team has pulled together a few key observations shaping the venture capital market.
Liquidity remains elusive.
Despite frequent discussions about solutions like secondaries, they cover only a small percent of VC portfolio value. M&A activity is shifting earlier: over half of venture-backed acquisitions this year happened at the seed stage or earlier, signaling acquirers’ desire for pricing flexibility and less valuation baggage.
Fundraising is polarized.
Large, established firms captured 56% of closed funds so far in 2025. Yet, history shows that emerging managers have outperformed by an average IRR of 5.78% since 2000, and smaller funds (<$250M) have delivered stronger DPI.
The AI effect.
AI continues to dominate, highlighted by OpenAI’s $40 billion late-stage round, which made up nearly 60% of late-stage deal value in Q1. Outside of AI, the capital demand vs. supply imbalance has led to the highest percentage of VC deals in recent memory with participating liquidation preferences (11.3%) and a median dividend rate of 7.23%, numbers we haven’t seen since before 2021.
Investors grow cautious.
Funds are slowing new deployments and reserving dry powder to support existing portfolios. Nearly half of dry powder is now between two and five years old, compared to the rapid deployment and fundraise cycle in 2021. Meanwhile, over a quarter of completed deals in 2025 have been flat or down rounds, the highest level in a decade.
Still, opportunity remains.
Valuations outside AI have reset, and terms have become more investor friendly. For disciplined investors willing to look beyond the hype, now may be an advantageous time to back high-quality companies.
At Plains Ventures, we remain focused on fundamental value creation, not just market trends, to find and support innovative teams poised to thrive, even in a complex environment.
Let’s keep the conversation going.
Matt Hickman, Investment Principal – [email protected]