The Venture Chill is over — but only for the best

Cost cutting, down rounds, layoffs and a renewed focus on profitability became the soundtrack to 2023 and 2024 as venture markets adjusted to the end of cheap capital.

But the latest CB Insights data for Q3 2025 suggests the thaw has arrived.

Just not evenly—and certainly not for everyone.

The return of big money

Global venture funding reached $76.8bn in Q3, up 14% quarter-on-quarter and its highest level since mid-2022.

At first glance, that looks like a conventional recovery. Look underneath the headline, however, and the picture is more interesting.

Mega-rounds of $100m or more reached 152 and accounted for more than half of total funding. Median deal size increased again, while overall deal count fell for the fourth consecutive quarter. The US continued to dominate, attracting 51% of global funding, led by AI, healthtech and enterprise infrastructure.

In other words, more money does not mean more companies are getting funded.

Investors are writing bigger cheques into fewer businesses.

The market has moved away from rewarding growth almost regardless of its quality. Capital is increasingly concentrating around businesses that investors believe can establish genuine category leadership.

The cost of capital changed the rules

To understand why, it helps to remember what actually changed.

For much of the previous decade, interest rates were exceptionally low. Cheap capital increased investors’ appetite for risk, supported higher valuations and allowed startups to raise significant amounts against future potential.

That changed rapidly from 2022 as central banks raised interest rates to combat inflation.

US 10-year Treasury yields moved from around 1.5% during the low-rate period to above 4% at various points thereafter. Suddenly, investors could generate meaningful returns from assets carrying substantially less risk.

Venture capital therefore had to compete for capital again.

That changed the equation for founders.

Growth still matters enormously. But investors increasingly want to understand the quality and cost of that growth: cash efficiency, margins, retention, intellectual property, pricing power and the potential for genuine competitive advantage.

Growth hasn’t gone out of fashion. It has simply been repriced.

The result is a more disciplined—and more divided—market. Category leaders can still attract significant capital, while companies without clear differentiation face greater valuation pressure and much tougher fundraising processes.

There is an increasingly visible gap between being venture-backed and being genuinely venture-worthy.

AI is still eating the market

No surprise here.

AI companies raised $22.4bn during the quarter, accounting for almost 30% of global venture funding.

But what investors are funding is beginning to evolve.

Attention is broadening beyond foundation models towards AI infrastructure, tooling and applied enterprise AI: businesses that take the underlying technology and embed it into real commercial workflows.

Generative AI deal volumes may have moderated, but capital is increasingly concentrating around businesses investors believe can turn the technology into sustainable revenue and strategic value.

The question is moving from “Can you build with AI?” towards “What do you own, where are you embedded and how do you monetise it?”

That is a much higher bar.

A fragmented global recovery

Outside the US, the picture remains uneven.

European funding was broadly flat at $11.3bn, although stronger late-stage activity suggests investors continue to support established winners.

Asia recorded 21% growth, with activity supported by markets including India and Singapore, while China remained relatively subdued.

Latin America and Africa continued to attract a much smaller share of global venture capital as many international investors concentrated their attention on core markets.

This is not yet a synchronised global recovery.

It is a selective one.

The exit window opens—slightly

Liquidity is also beginning to improve.

There were 245 venture-backed exits during the quarter, up 9% quarter-on-quarter. That is hardly a flood, but after an extended period of limited liquidity, any sustained improvement matters.

The more important development may be the continued growth of secondary and structured liquidity markets.

Funds need to return capital to LPs. Employees and early shareholders want liquidity. Companies do not necessarily want to wait for an IPO or full strategic sale.

That creates a growing role for secondary transactions and other structures that allow liquidity without requiring a conventional exit.

A healthier venture ecosystem ultimately needs money to travel in both directions.

The flight to quality

The broader message from Q3 is not that venture capital is suddenly easy again.

It is that investors are demonstrating a willingness to pay significant valuations for businesses they believe genuinely deserve them.

Companies with differentiated technology, proprietary data, embedded distribution, strong economics and credible paths towards category leadership can still attract extraordinary levels of capital.

For everyone else, conditions remain considerably harder.

That makes this less a broad-based recovery and more a re-concentration of capital around quality.

And that distinction matters for founders.

A rising headline funding number does not necessarily make your next round easier. What matters is whether your business possesses the characteristics investors are currently competing to fund.