Investment Shifts: Late-Stage Growth vs. Early-Stage Declines

In the first quarter of 2025, global venture capital funding reached $113 billion. This marked a notable increase of 17% from the previous quarter and a substantial 54% rise year-over-year. Notably, late-stage investments drove this growth, soaring over 30% quarter-on-quarter and an impressive 147% from the previous year, amounting to $81 billion.

Conversely, early-stage investments suffered a setback, plummeting to $24 billion—the lowest level in over a year. Seed funding also fell by 14% year-over-year, totaling $7.2 billion, though this figure typically sees adjustments as more rounds are added to the database in subsequent periods.

Artificial Intelligence Investment Reaches New Heights

The artificial intelligence sector dominated venture funding in Q1, drawing nearly $60 billion, with OpenAI alone capturing two-thirds of that total. This quarter represented the highest level of AI funding ever recorded, accounting for a staggering 53% of all global venture investment.

Regional Insights: North America vs. Global Landscape

North America experienced a dramatic uptick in venture capital, with funding soaring to $82 billion—its highest level in three years. OpenAI’s monumental funding round contributed significantly, comprising nearly half of this total. The share of global venture dollars from North America also rose sharply to 73% from 59% in 2024.

Despite this surge in capital, the number of deals has continued to decrease, reflecting a concentration of investment in larger, late-stage rounds rather than a broad spectrum of startups.

Mergers and Acquisitions on the Rise

Mergers and acquisitions (M&A) activity saw a resurgence in Q1, with total reported exit values reaching $71 billion—the highest since 2021. A total of 550 M&A deals involving venture-backed firms were executed, marking a 26% increase from last year, though slightly down from the previous quarter’s 563 deals.

Among the significant M&A transactions was Google’s intended acquisition of cybersecurity firm Wiz, valued at $32 billion, which, if completed, would set a record for the largest ever acquisition of a private company. The AI sector particularly thrived in M&A actions, with 81 deals reported, reflecting nearly a 33% increase from both the first and last quarters of 2024.

Regional Performance: Challenges in Asia and Europe

Asia saw its weakest quarter since 2014, with only $13 billion allocated to VC-backed startups—a sharp 40% decrease from the previous year and a 25% decline from the preceding quarter. The downturn was significantly influenced by China, where venture investment nearly halved to $6.5 billion.

Meanwhile, Europe’s venture capital funding remained stagnant at $12.6 billion, mirroring figures from the last quarter and year. This plateau marked a decline in the continent’s share of global funding, decreasing to 11% from 16% last year.

Latin America: Early-Stage Resilience Amidst Dips

Venture capital investments in Latin America experienced a modest increase, with over $800 million directed towards various stages of startup financing. Although this was up 17% from the prior year, it represented a 35% drop compared to the last quarter. Notably, early-stage funding saw a boost, with $435 million primarily going to fintech startups.

Looking Ahead: Challenges and Uncertainty

As we move forward in 2025, uncertainty looms over the startup landscape. The turbulence in public markets has hindered some anticipated IPOs, while economic concerns could restrict venture investments, particularly in the early stages. Increased tariffs and ongoing trade conflicts may also impact the technology sector and AI companies reliant on chips and data centers.

While interest in AI remains robust, companies within the sector will need to demonstrate significant growth to secure continued funding at the high levels witnessed in Q1, particularly as investor confidence fluctuates.