Editor’s note: This article is part of our 2026 forecast coverage. See our IPO market outlook here, and our startup M&A forecast here.
Last year was a stellar one for venture funding, in large part thanks to AI. Preliminary Crunchbase data shows global venture investment in 2025 was on pace to be the third-highest on record, after the peak years of 2021 and 2022.
A total of $205 billion was raised through mid-2025, up 32% from H1 2024, and marking the strongest half-year for venture capital since the first half of 2022. In the third quarter, global funding jumped 38% year over year, with funding up at all stages, albeit concentrated at the top into the largest AI companies. (Final year-end 2025 numbers were not yet available at the time of this writing.)
Both of the two largest venture fundings on record were also raised last year, and both were AI-related. They were Scale AI, with $14.3 billion in Q2, and OpenAI with $40 billion in Q1.
With that momentum behind the industry, what’s ahead for 2026? Will it be more of the same, or will investors finally pull back on AI?
To get a sense of the startup funding outlook for the year ahead, Crunchbase News reached out to four investors via email: George Mathew, managing director at Insight Partners; Tim Tully, partner at Menlo Ventures; Matt Murphy, managing director and partner at Menlo Ventures; and Anders Ranum, partner at Sapphire Ventures. The following interviews have been edited for brevity and clarity.
Crunchbase News: In 2026, do you expect total dollars deployed to be up, flat or down vs. 2025, and by roughly what percentage?
Mathew: We expect global venture capital deployment to increase from the low $400 billion to the high $400 billion mark, which implies a 10% increase in dollars deployed.
Tully: The data indicates about $340 billion was invested in 2024, and we are on track for north of $400 billion in 2025, which was a 17.6% increase, so I’d ballpark this goes up even further, perhaps closer to 25%. You’re seeing large funds raise progressively larger funds, giving them more capital and dry powder to deploy. Additionally, the round sizes themselves are getting larger at all stages. Putting those two ideas together would lead to this prediction.
Murphy: Up, mainly due to the fast growth and maturation of AI native companies that will raise large expansion rounds. Early-stage will be robust, likely the same as this year, but we could see some slowdown as the bloom comes off the rose in competitive overfunded categories.
Ranum: Up vs. 2025, by roughly 10% to 15%, driven by reopening growth rounds and fewer, but larger checks from scaled funds.
In 2026, do you expect more rounds to be priced up, priced flat or priced down? What does “normal” look like?
Mathew: This will likely be a tale of two cities. AI funding will be about half the total funding and will continue to accelerate with likely large raises, especially in growth and later stage.
Murphy: For the AI native companies, rounds will continue up, but there will be a bifurcation as the winners emerge and the number 3 to 8 players in categories really struggle to raise and likely seek M&A. Winning SaaS companies from the ZIRP era will finally start to exceed previous valuations and raise flat to slightly up rounds. Those that didn’t rebound substantially will seek liquidity, with PE increasingly becoming the option.
Ranum: “Normal,” meaning hyper-growth AI companies clearing at premium valuations, while the median remains flat with tighter terms and less available capital.
Where do you expect net new dollars to concentrate in 2026: seed, Series A or growth? Why?
Mathew: We believe that seed and Series A will aggregate the highest number of deals, but the net new dollars will continue to concentrate on growth, especially in the megarounds of AI infra and foundational models.
Tully: I expect net new dollars to concentrate more in seed and growth deals, primarily because the seed rounds are getting quite large thanks to fundraises by the likes of neolabs, neoclouds, and others. Furthermore, the capital needs of existing high-growth companies will continue to grow due to dependencies on frontier lab and hardware spend.
Murphy: Bigger rounds in growth. The early AI winners will continue to separate, and the enormous capital in the private growth market continues to pour in. Seed likely sees an uptick, but dollar-wise, it’s trumped by growth.
Ranum: Series A, as seed remains crowded and growth selectively reopens for companies with real revenue and AI leverage. It’s a bit of a barbell where concentrated bets continue to take place on the growth end.
Which three sectors will gain share of venture dollars in 2026, and what’s the concrete catalyst for each? Which will lose share?
Mathew: Simply put, AI, AI and AI are the three sectors that are positioned to gain. In all seriousness, foundation models, agentic infrastructure and vertical AI are all expected to expand in 2026. That said, it will likely be very difficult for a SaaS company without native AI/agentic capabilities to find VC dollars at any stage.
Tully: I expect an increase in:
- AI infrastructure: As the old saying goes, when there’s a gold rush, invest in picks and shovels …
- Defense tech: The current administration’s focus on defense procurement will create increased near-term contract wins, particularly for startups.
- Robotics: The convergence of decreasing hardware costs for sensors, batteries, etc. … combined with increased AI capabilities will make 2026 an inflection point where physical AI becomes not only more viable, but rather likely.
I expect a decrease in:
- Climate tech: They will still get funding, but I predict this sector will lose share because climate tech requires long-term patient capital along with long development cycles.
- Crypto: decreasing crypto prices in the back half of 2025 will continue to sour investors and force them into a wait-and-see mentality in 2026 and vertical SaaS.
- Vertical SaaS without AI differentiation or a technical moat: This will be hard to justify for investors demanding strong fundamentals and dramatically higher multiples relative to the past for their companies.
Ranum: AI infrastructure (cost/performance breakthroughs), defense (geopolitical), healthcare AI (provider margin pressure) will gain share, while consumer and horizontal SaaS will lose.
In 2026, does capital shift from “AI wrappers” to infrastructure, data and verticalized workflows — or do apps still attract venture dollars?
Mathew: We believe that shift has already happened. Last year demonstrated that it’s difficult to survive as an AI wrapper company. Even the vertical AI providers have to be deeply embedded into industry workflows to differentiate themselves from a foundation model doing more of the repetitive work in the market.
Murphy: The market is more balanced in 2026 as the number of companies deploying AI apps scales up significantly, and operational challenges of scale require more tooling and more great infra products to help replatform. Apps remain strong, but more 50-50 in 2026.
Ranum: There are enough dollars chasing exposure to continue to support apps on generic AI wrappers and to infrastructure, data and deeply verticalized workflows. We will also see a few app-layer winners breaking out in accounting, ITSM and ERP.
What’s your 2026 base case for liquidity: More IPOs, more M&A, secondaries or still mostly private?
Mathew: We would expect more IPOs and more M&A as drivers for liquidity in 2026.
Tully: According to PwC, for companies that went public in 2025, the median time to IPO for those valued at $500 million or more has reached over 11 years, the longest in a decade. The bar for IPOs has risen in recent years, with the bar now set at close to $500 million-plus in revenue, at least 30% growth if not more, as well as positive rule of 40. There are only a handful of companies positioned to go public based on these factors. Based on that, I do believe we will see continued growth in M&A and secondaries in 2026 as shareholders seek outlets for liquidity.
Murphy: IPOs slightly up, continued upward trend in M&A as legacy companies seek AI assets and as private-market players consolidate to gain scale. Secondary continues to rise as VCs get more intentional about liquidity, and even become more active in buying and selling to each other.
Ranum: I’m excited to see more M&A and secondaries, as well as an uptick in IPOs at the high-end/scaled companies.
How do you expect 2026 venture fundraising to impact deployment? Are too many firms “underfunded” to keep pace?
Mathew: Again, a tale of two cities. Scale and domain expertise will matter. It will be increasingly harder to be a generalist tech investor, especially in venture markets.
Murphy: Given the size of AI rounds, multistage firms have an advantage. Smaller funds are forced to go earlier or write small participation checks. It could be a great time to be an early-stage firm if you can pick well and get in before the big uptick rounds, which are increasingly happening at the A stage.
Ranum: I don’t expect there to be less capital available to funds. I think total fundraising in 2026 will be comparable to, or stronger than, 2025. The totals for 2024 were notably low relative to prior years, and LPs are actively seeking exposure to the AI wave.
Give me your 2026 predictions in one sentence.
Mathew: We are accelerating to a world where models and agents can complete a full day’s worth of work with minimal or no human intervention, and we may already be there in some domains.
Murphy: AI hits a further inflection in the enterprise as security issues and technology choices are largely addressed, and enterprises substantially increase their application development velocity with tools like Claude Code.
Ranum: 2026 is a fundamentals-first year where capital rewards revenue growth, efficiency and real AI advantage, and punishes anything that is AI veneer on old ideas.
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Illustration: Dom Guzman
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