Institutional Research Group 2026 US Venture Kyle Stanford, CAIA Capital Outlook Director of Research, US Venture [email protected] Our analysts’ outlook on the venture market in 2026 Emily Zheng Senior Research Analyst, PitchBook is a Morningstar company providing the most comprehensive, most Venture Capital accurate, and hard-to-find data for professionals doing business in the private markets. [email protected] Kaidi Gao Senior Research Analyst, Venture Capital 2026 outlooks [email protected] Susan Hu 4 The early stages of the market will see a surge in deal activity. Quantitative Research Analyst [email protected] 9 Later-stage deal activity will remain strong. [email protected] Published on December 1, 2025 13 Liquidity will return, though recovery will remain uneven. 16 Fundraising has bottomed out, and a gradual rebound awaits as distributions and LP sentiment improve.

Introduction Optimism in the US venture market heading into 2026 may not differ much from that at the start of 2025. Public markets had been trading at or near all-time highs, liquidity is still a major concern for venture capital, and further rate cuts are expected as the new year begins. Meanwhile, geopolitical tensions continue, though their impact on markets has somewhat lessened, and inflation is back to where it was a year ago. US GDP growth has returned to an annualized rate of 3.8% (as of Q2), aligning with the 3.6% rate from a year prior. What is different is that the Trump administration has had nearly a year to implement its policies, reducing the chances of legislative surprises in 2026. Now, the likelihood of rapid regulatory change in the market is low, contrasting sharply with last year when the changing administrations raised hopes of an M&A rebound and a more relaxed regulatory environment. Overall, we maintain a cautiously optimistic outlook for 2026, expecting tempered growth in IPOs, relatively improved market liquidity through secondaries, and continued growth in the number of completed deals, especially at the early stages.

M&A rebound and a more relaxed regulatory environment. Overall, we maintain a cautiously optimistic outlook for 2026, expecting tempered growth in IPOs, relatively improved market liquidity through secondaries, and continued growth in the number of completed deals, especially at the early stages. Liquidity will remain the primary challenge for the VC market in 2026. Despite a rebound in exit value in 2025, the year’s total is projected to fall below $300 billion, trailing not only 2021 but also 2020 and 2019. Fourth place is not bad, except that the net asset value (NAV) of VC has doubled since 2020, with the prior three years also having relatively low exit values. However, both big-ticket M&A and the number of unicorns going public noticeably increased in 2025. Exits of $500 million or more accounted for 91% of total exit value through Q3. We expect exit counts to continue to increase. Barring a major market event, public market multiples will likely keep expanding. Although the Federal Trade Commission has not explicitly commented on lowering M&A barriers, none of the year’s large deals has faced as much scrutiny as it might have under the previous administration. This is another positive sign for the market. With nearly half of unicorns being held for at least nine years, liquidity for these companies cannot rely solely on the public market.

riers, none of the year’s large deals has faced as much scrutiny as it might have under the previous administration. This is another positive sign for the market. With nearly half of unicorns being held for at least nine years, liquidity for these companies cannot rely solely on the public market. Despite these positive indicators, broad LP sentiment remains poor. Since 2022, net cash flows to LPs have been negative by $169 billion. The time to close new funds has increased sharply as LPs hesitate to commit more capital without any distributions. This has led to a concentration of capital among established firms. We knew that traditional venture mechanics would break with the extended liquidity timelines, and we are starting to see that happen.

On the dealmaking side, AI continues to foster optimism. It was a key driver of the surge in billion-dollar funds, and the nature of the AI market has significant implications for venture. AI startups have captured 65% of the total VC deal value in the US YTD, and more than half of new unicorns are AI companies. The market value of AI startups exceeds $1 trillion. AI is often seen as a single sector, such as climate tech, or a specific business model, such as software as a service; however, it is increasingly becoming an essential part of a broader range of industries, including biotech, enterprise productivity, and the previously mentioned climate tech. There is an endless stream of new AI tools being developed and adopted by corporations worldwide. It has been challenging for large companies to develop their own AI tools, so many have turned to tools created by startups. Through the first three quarters of 2025, first-time financings were nearing the all-time high set in 2021. While this has led to a rally in the early stages of venture, it has also led to crowded vertical segments that will bifurcate into a few winners and many losers. The pace of investment in AI continues to increase despite the venture market’s slow liquidity and low fundraising levels. Should those flip in 2026, deal counts could reach levels seen in 2020 and 2021.

also led to crowded vertical segments that will bifurcate into a few winners and many losers. The pace of investment in AI continues to increase despite the venture market’s slow liquidity and low fundraising levels. Should those flip in 2026, deal counts could reach levels seen in 2020 and 2021. We are more optimistic about early funding stages than we have been since 2021 because of AI, its rapid development cycles, and its growing demand from global corporations. Still, continued improvement of liquidity markets is necessary. IPOs may not be the most common exit path, but they will be crucial in expanding liquidity.