According to Inc, recent PitchBook data indicates venture capital fundraising is heading for its lowest annual total since 2017. Fund managers raised $45.7 billion in the first nine months of 2025, a pace that would result in the worst year in eight years. Even more stark is the collapse in the number of new funds: only 376 launched in that period, which is less than half of the 832 from 2024 and a dramatic fall from the 1,776 funds launched in 2022. Compounding the issue, data from portfolio company Carta shows most venture funds started between 2017 and 2024 have yet to record a single IPO or sale. The Information reported this timing meant those funds “largely missed the 2021 liquidity boom,” leaving their startups too young to capitalize on that exit window. This creates a perfect storm of scarce new capital and a backlog of funds needing returns.
The Dry Powder Myth
You’ll hear a lot of talk about “dry powder”—the billions VCs have already raised but haven’t spent. But here’s the thing: that capital is mostly spoken for. It’s reserved for propping up existing portfolio companies, many of which are struggling to grow into their lofty 2021 valuations. New funds are the lifeblood for *new* bets, for funding the next generation of startups. And that pipeline is getting choked off. When the number of new funds drops by more than half in a year, it means fewer scouts are out there looking for the next big idea. The innovation ecosystem doesn’t just run on existing money; it needs fresh capital and fresh perspectives. This drought suggests a lot of investors are sitting on their hands, waiting for the storm to pass. But what if it doesn’t?
A Generation in Limbo
The Carta data is the real kicker. Think about it: most funds from an entire seven-year period haven’t had a meaningful exit. That’s a huge problem. Venture capital is a hits-driven business where a few massive wins pay for all the losses. If you’re a fund from, say, 2019, you’re now six years in with no big scoreboard moment. Your investors, the limited partners, are getting impatient. And now you’re trying to go back to those same LPs to raise your next fund? Good luck. They’re looking at your track record, seeing a blank space under “IPOs,” and then reading headlines about the fundraising market collapsing. They’re going to be tight with their checkbooks. This creates a vicious cycle: no exits makes raising new funds harder, which means less capital for new companies, which further constricts the future supply of exits. It’s a trap.
What Comes Next?
So what does this mean for startups and the tech landscape? Basically, it’s going to get even more brutal for founders. The bar for a seed or Series A round is already sky-high; it’s going to go higher. VCs with money will be unbelievably picky, favoring proven teams with immediate revenue paths over moonshots. We’ll see more “venture studios” and “founder-in-residence” programs as firms try to de-risk creation itself. And we’ll see a lot of quiet shutdowns—companies that raised during the boom but now can’t secure a follow-on round in this desert. For the broader economy, it means a period of consolidation, not explosion. The era of “growth at all costs” funded by easy VC money is unequivocally over. The next wave of big companies will have to be built with far more discipline, which isn’t a bad thing, but it will certainly be a slower, harder thing. The question is, how many will survive the transition?
