By Agencies

U.S. startup funding skyrocketed by 75.6% in the first half of 2025, fueled by the ongoing AI boom, positioning the sector for its second-best year to date. However, venture capital firms are struggling to raise new funds, according to a Tuesday report from PitchBook.

In the first six months of 2025, startup funding reached $162.8 billion, marking the strongest performance since the same period in 2021, which was a historic peak for venture capital. This earlier surge coincided with the Zero Interest Rate Policy (ZIRP) during the COVID-19 pandemic, when central banks slashed rates to boost economic activity, channeling capital into higher-risk assets like venture capital.

This year’s growth is largely driven by significant AI investments and bold moves from major tech companies, sparked by the introduction of ChatGPT in late 2022. In just the past three months, U.S. startups attracted $69.9 billion in investments. Notable deals included OpenAI’s $40 billion funding round and Meta’s $14.3 billion acquisition of a stake in Scale AI. Other AI investments exceeding $1 billion in the second quarter included contributions to Safe Superintelligence, Thinking Machine Labs, Anduril, and Grammarly.

These transactions highlight a strong investor belief in the AI sector, which made up 64.1% of total deal value and 35.6% of deal count in the first half of the year. “The growth of OpenAI and Anthropic is remarkable,” said Davis Treybig, a partner at VC firm Innovation Endeavors. “If there’s even a chance of similar advancements in other areas like robotics or video modeling, many will be eager to invest.”

VC Fundraising Challenges

Conversely, U.S. venture capital fundraising is facing obstacles, with only $26.6 billion raised across 238 funds in the first half of the year. This represents a 33.7% drop in capital raised compared to last year, continuing the downward trend from 2024. Fund managers are also taking longer to close new funds, with the median duration extending to 15.3 months— the longest timeframe in over a decade.

This disconnect from the startup market stems from limited partners’ concerns regarding recent underperformance and liquidity issues. However, a rebound in exit activity, including IPOs and mergers and acquisitions, is fostering optimism for the rest of the year, with exit activity in the second quarter up 40% from last year. A more favorable antitrust environment and a recovering IPO market are boosting confidence.

Sectors aligned with former President Donald Trump’s focus, such as AI, national security, defense technology, fintech, and crypto, dominated IPO interest in the second quarter. “The good news is we’re starting to see the tide turn,” said Lucas Swisher, co-head of growth investing at tech investment firm Coatue. “IPOs from our portfolio companies like Hinge Health and Coreweave have been well received, and several companies are currently in the filing process.”