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AsianFin -- The global venture capital (VC) transaction volumes plunged in the first quarter of 2025, according to global research institutions Crunchbase and PitchBook-NVCA.
Despite a decline in overall deal volume, artificial intelligence (AI) investments have experienced the most robust quarter in the first quarter of 2025 since mid-2022.
Global VC transactions in Q1 2025 reached 7,551 deals, a 32% year-over-year decline, as per PitchBook. However, the total transaction value surged to $126.3 billion, representing a 53.46% increase compared to the same period in 2024.
AI and machine learning led the charge, with 2,101 transactions worth $73.1 billion, making up 57.87% of the total global VC funds invested during the first quarter.
However, investment activity in Asia, including China, remained sluggish. In Q1 2025, Asia saw 2,063 deals worth $12.2 billion, accounting for less than 10% of the global total. The only bright spot is that despite fewer transactions, average deal sizes were larger.
These trends indicate a noticeable shift in the global VC landscape, with a marked decrease in investment activities in Asia.
In contrast, U.S.-based companies, particularly those in the AI sector, continued to attract the lion’s share of global venture capital. Notably, OpenAI’s $40 billion fundraising round led by SoftBank, which closed on March 31, 2025, captured over 50% of the U.S. VC funds and one-third of the global total.
PitchBook’s U.S. VC report noted that 77% of VC funds in the U.S. were concentrated in AI, significantly boosted by OpenAI's high-profile investments. However, the report also highlighted a growing divide between well-funded tech giants and other markets struggling to secure capital, particularly outside the U.S.
Crunchbase’s Q1 report echoed these trends, reporting that global startup funding reached $113 billion, up 17% from the previous quarter and 54% year-over-year. AI investments alone amounted to $59.6 billion, or 53% of global VC activity. The healthcare and biotechnology sectors followed, with $18 billion raised, while financial services saw $10.8 billion in funding.
Regionally, U.S. companies attracted $80 billion in VC funds in Q1 2025, accounting for about 71% of the global total. The San Francisco Bay Area alone secured $55 billion, nearly half of the global VC funds. Meanwhile, Asian markets, including China, continued to lag behind with lower transaction volumes and a share of under 10%.
The Asian VC market’s sluggishness was further reflected in the Q1 2025 figures, where Asia’s total VC funding was just $12.2 billion, down significantly from 2024’s $77.5 billion. Despite this, the average deal size in Asia was larger, indicating that while the number of transactions was low, the deals themselves were more substantial.
Crunchbase’s report also noted significant growth in later-stage deals, with total Q1 2025 transactions reaching $81 billion, up 30% from the previous quarter and a 147% increase compared to the same period in 2024.
On the exit front, Q1 2025 saw the highest number of M&A transactions for startups since 2021, with a total exit value of $71 billion. Notable deals included Google’s $32 billion acquisition of cybersecurity firm Wiz Inc. and SoftBank’s $6.5 billion purchase of Ampere, a chip design company.
Despite the overall strong numbers, the venture capital landscape faces potential challenges. PitchBook reported that U.S. VC fundraising in Q1 2025 reached only $10 billion, the lowest quarterly fundraising since 2016. This slowdown in new commitments, coupled with a lack of liquidity after exits, poses significant challenges for emerging managers and small funds, especially outside the U.S.
AI and machine learning continue to dominate the global VC market, but the dominance of tech giants in the AI sector is becoming more pronounced, making it increasingly difficult for new startups to secure seed funding. Early-stage investments in Q1 2025 fell slightly to $24 billion, with seed-stage funding dropping 14% year-over-year to $7.2 billion.
The tightening investment environment has led to caution among venture capitalists, with some, like venture capital veteran Zhu Xiaohu, expressing skepticism about the commercialization potential of AI foundational models, humanoid robots, and embodied AI. He emphasized the importance of focusing on AI application and integration rather than just core technology.
The trend toward consolidation in the AI and semiconductor sectors continues, with notable mergers and acquisitions (M&A) such as Siemens' $5.1 billion acquisition of AI software company Dotmatics and other high-profile deals in the chip and biotech industries.
As global VC dynamics evolve, with AI investment leading the charge and Asian markets facing challenges, the landscape is set for a period of significant transformation, particularly as competition intensifies within the AI sector.
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