2025 US VC Outlook

Each new year brings a flood of market predictions. Here is a summary of PitchBook’s outlooks for the US VC in 2025:

1. Valuation growth for the market will rebound

Startups’ valuations are expected to rise due to factors like a resurgence in exits and strong investor conviction in market-leading startups. Recent cost reductions and expanding multiples will support valuation increases, though likely at historical levels rather than 2021’s highs. However, down and flat funding rounds will remain common even if exits pick up.

2. An acute need for liquidity generation will spur an increase in acquisitions

Regulatory shifts may favor large M&As in the near to medium term, setting the stage for increased exit activity. VC-backed acquisitions are anticipated to rise in 2025, driven by liquidity urgency and aligned pricing expectations. The appetite for acquisitions could also come from PEs facilitating add-on deals for their platform companies, supported by more attractive valuation levels.

3. Unicorn IPOs will propel growth in venture exit value

Unicorn IPOs have historically led the creation of venture exit value, but the prolonged drought of the last 3 years has stalled returns, with 40%+ of unicorns being held now for over nine years. Pitchbook projects at least 20 unicorn IPOs in 2025, aligning with pre-pandemic levels, and potentially generating $120B in realized value

4. The secondary market will expand due to increasing demand

The secondary market is expected to play an even larger role in venture in 2025. Secondaries are mutually beneficial for investors and private companies, providing longtime shareholders with opportunities to realize returns while startups extend their timelines before going public. By reorganizing their cap tables, startups can exchange early investors for a new vintage of long-term shareholders, encouraging better-aligned interests

5. Distribution yields will increase for the first time since 2021

Distribution yields have been declining since their peak in Q3 2021, with recent quarters nearing the global financial crisis lows of 4.2%. These yields, which measure the % of aggregate US VC fund net asset value distributed annually, averaged 16.4% from 2010 to 2019. A reversal of the current downtrend is anticipated in 2025, with yields trending back toward historical averages

6. VC fundraising activity will surpass 2024 levels

The time between fundraising cycles has lengthened, particularly for smaller and midsized funds. Larger, more established GPs have continued to secure capital, albeit sometimes with reduced fund sizes. As exit activity gradually recovers in 2025, US VC capital raised is expected to grow by 20%, reaching $90B+

Conclusion

We, at Fabrica Ventures, subscribe to each one of these outlooks.

We are also optimistic for the US VC in 2025.

Happy New Year!