As we enter 2025, the venture capital (VC) fundraising landscape appears radically transformed from pre-pandemic times. Unfortunately, a big part of these investments is currently geared toward artificial intelligence (AI) startups. Indeed, a report from PitchBook released just last week showed that only 823 funds have been raised worldwide in all of 2025 so far. This new figure represents a dramatic decline from the 4,430 funds raised in 2022. This drop is indicative of a broader trend across the industry, as the race to secure funding has become increasingly cut-throat.
In the first quarter of 2025, VCs poured $192.7 billion into the industry. That brings the cumulative 2023 total to $366.8 billion, on track to set a new full-year record of money raised for transportation. This is perhaps the biggest takeaway, meaning that total dollars are still large but the trend is very much toward the sectors and notably AI.
There’s no question that AI had a big quarter, particularly in the last three months. It represented a stunning 62.7% of the cash deployed by U.S.-based venture capitalists. Global companies were even more inclined toward AI, with 53.2% of their investments going to that sector. The extreme demand for AI has dramatically flipped the market on its head. This change, according to Kyle Sanford, PitchBook’s director of research, has created a “bifurcated” market.
Sanford described today’s environment as a tale of two different types of companies. He stated, “you’re a big firm, or you’re not,” highlighting how only larger firms or those heavily invested in AI are managing to secure significant funding. The proof of this wild, wild west bifurcation is evident. The amount of new startups and venture funds able to raise money has dropped off a cliff down to its lowest levels in several years.
As outlined by Bloomberg, this trend is a sign that venture capitalists are becoming more choosy about where to invest. The stark division between AI-focused firms and those outside this realm raises questions about the future viability of non-AI startups in the current investment climate.