#23: My 6 predictions for a Transformative VC Year 2025
Why 2025 will be a transformative year in Venture Capital
As we approach 2025, the venture capital landscape is poised for transformative year. After a year of stabilization and recovery in 2024, I am confident that 2025 will be a year of transformative opportunities. Drawing from current trends, data, and my personal market perspective, here are my 6 key predictions for the VC industry in 2025:
1. Investment Volume Surging Past USD 250 Billion
After a measured plateauing and first rebound of investment volume in 2024, I predict that in 2025 we will witness global venture capital investments surpass the USD 250 billion mark again. I see various supporting factors fueling this growth:
VC-Supportive Governments: The new U.S. administration, featuring prominent VC advocates in advisory roles, is expected to bolster innovation through favorable policies. Similarly, Europe’s supportive stance — especially with Germany’s potential newly formed government — will encourage VC growth.
Dry Powder Deployment: VC funds have substantial reserves (“dry powder”) awaiting deployment. Improved exit markets will trigger accelerated investments, preparing for the next fundraising cycle.
Institutional Participation: As fixed-income assets yield turn into lower returns cycle, institutional investors (e.g., pension funds, endowments and insurances) will expand their VC allocations, drawn by the sector’s resilience and growth potential.
Innovation themes : Key innovation areas & investment themes are expected to receive significant funding given its strong projectory. Such investment themes will contribute to the investment volume market growth. These areas are: Artificial intelligence (on later stage side foundational layer and cross-stage for application and AI environment layer), Enterprise technologyClimate tech (despite reduce political radar, I expect this to continue being a driver given fund sizes and transformation opportunities)FinTech & Health CareDeep Tech and Defense/Security tech.
2. Exit Markets to Recover in 2H 2025
After a challenging period, I expect exit markets to recover significantly by mid-2025, with volumes expected to double compared to 2024. This recovery is anticipated to drive a substantial increase in distributions from VC funds to their limited partners (LPs), with distributions projected to rise from the current 5.2% to levels exceeding 7.5%-10%.
The recovery will be fueled by strengthening public markets and heightened M&A activity. Public markets are experiencing renewed growth, supported by stabilizing inflation at target levels of around 2% and cycle of interest rate reduction. These favorable conditions are expected to revitalize IPO activity, particularly in sectors like technology and biotech. However, recent statements from the Federal Reserve regarding inflation and interest rate expectations underscore the lingering uncertainty in the broader economic environment.
At the same time, increased M&A activity will play a pivotal role in exit markets. Corporates, with strong balance sheets and higher market capitalizations providing effective buying power, are well-positioned to pursue strategic acquisitions. Combined with lower startup valuations and the growing pressure from early investors seeking exits, the landscape is primed for robust M&A transactions in 2025.
This exit market recovery will be critical in unlocking value, providing much-needed liquidity to investors and founders, and driving the venture capital ecosystem into its next cycle of growth and innovation.
3. European VC Market Growth Outpacing 2024 by Over 10%
I anticipate Europe’s venture capital ecosystem with an accelerated growth by over 10% in 2025, outpacing its activities in 2024. According to PitchBook and CB Insights, European VC funding reached USD 37.4 billion in the first three quarters of 2024 and is projected to close the year at approximately USD 48–50 billion. For 2025, I forecast the European VC market to accelerate further, reaching between a total investment volume of USD 55–60 billion.
My prediction is supported by several key trends shaping the ecosystem:
European Transformation and Funding Gap: The European Transformation of its industries demands substantial innovation and investment. A study by KfW highlights a funding gap of EUR 30 billion annually in Germany alone, underlining the scale of capital required to drive this shift.
Government and Policy Support: Proactive policies and initiatives from the EU and national governments are catalyzing investment in sustainability and technological innovation. Programs such as the European Tech Champions Initiative, WIN (Germany), and Tibi (France) exemplify how public funding is unlocking additional capital from insurances and private side to address critical challenges.
Talent Migration to Startups: Layoffs in corporate and tech sectors are redirecting highly skilled talent toward European startups. Innovation hubs like Berlin, Paris, Amsterdam, Munich and Stockholm are particularly well-positioned to benefit from this inflow of expertise, fueling entrepreneurial growth.
Increased foreign Investment interest: Europe’s vibrant startup ecosystem, maturing investment landscape, attractive return profile (in 2024 outperforming US VC funds) and opportunities for larger check sizes are attracting heightened interest from international investors. Additionally, geopolitical tensions, such as those between the US and China, amplify Europe’s appeal as an VC investment destination.
These factors collectively reinforce Europe’s emergence as a prominent global VC hub, second to the US, which still dominates with over 60% of global VC funding. Europe offers compelling opportunities for global investors, solidifying its position as a critical player in the global venture capital landscape.
4. Web3 and Blockchain comeback
Web3 and blockchain technologies, following a challenging three-year period, are poised for a significant resurgence in 2025, driven by two key factors.
First, increased adoption is transforming the web 3 / blockchain landscape. Institutions and corporations are leveraging blockchain for practical applications such as tokenized assets, custody solutions, and stablecoins. Additionally, public engagement with Web3 technologies continues to rise, as evidenced by findings in CONSENSYS 2024 Web3 Survey.
Second, regulatory clarity is playing a pivotal role in fostering growth. In Europe, the implementation of the Markets in Crypto-Assets (MiCA) framework and initiatives like the European Blockchain Services Infrastructure (EBSI) are setting operational standards, boosting investor confidence. In the United States, the policy direction of the new administration, led by Crypto and AI Czar David O. Sacks appointed by Donald Trump, is expected to provide strong momentum for web 3 & blockchain adoption and making US leader in the space.
While speculative cryptocurrencies may experience volatility, the rebound in 2025 will be centered on practical, scalable applications. This shift will drive deeper integration of blockchain technologies into traditional industries, solidifying their role in the broader economic landscape.5. Rise of Larger European Funds
5. Rise of Larger European Funds
While the total number of venture capital funds is expected to continue to decline globally, including in Europe, I anticipate the emergence of additional large-scale European VC funds in 2025, particularly in major economies such as Germany, France, and the UK. This trend is driven by several factors:
Government initiatives, such as the European Tech Champions Initiative from European Investment Fund (EIF) with ~ EUR 4 billion in assets, along with local programs like KfW Capital pital in Germany and Bpifrance rance in France, are actively supporting the development of larger VC funds.
The need to fund late-stage startups through mega-rounds exceeding EUR 100 million is also a key driver. These rounds require substantial fund sizes—typically EUR 1 billion or more—to achieve an appropriate risk-benefit ratio and maintain competitiveness in the market.
The European transformation further underscores the need for larger funds. Investment themes particularly relevant to Europe, such as Deep Tech, Climate Tech, Security Tech, and Infrastructure Tech, demand significant capital deployment. These investments necessitate funds capable of writing large checks to address the continent’s structural funding gaps.
The growing interest from foreign and institutional investors in European VC is playing a critical role. Global institutional investors, including insurance companies and pension funds, require funds of a certain size to deploy their capital effectively while maintaining balanced portfolio allocations. Larger European funds are essential to attract and accommodate these institutional investors.
This combination of factors positions Europe for creation of larger-scale venture capital funds.
6. Corporate VCs remain All-Weather Investors
Corporate venture capital continues to play a critical and enduring role in the global VC ecosystem, acting as “all-weather investors” across market cycles. The defining characteristic of the expected key investment themes for 2025 is their demand not only for substantial capital but also for strategic partnerships. Partnerships which bring expertise, access to distribution channels, research and production capabilities, and client adoption, providing valuable client signaling, boosting the credibility of solutions in the market. Artificial intelligence serves as a prime example of this dynamic. The sector has seen robust support from corporate investors, who often combine funding with deep collaborative partnerships, accelerating the development and adoption of AI technologies. This model underscores the unique value proposition of CVCs, which goes far beyond financial investment.
Over the past few years, as the broader VC market softened, CVCs maintained a steady share of global venture capital investment, ranging between 15% to 17%. This stability highlights their long-term strategic focus and maturity, often aligned with corporate objectives.
Looking ahead to 2025, I expect corporate venture capital to retain its resilience, maintaining its share at approximately 17% of total venture investment volume. This continued participation will also be supported by corporates strong balance sheets (e.g. significant cash positions of Tech companies) and its higher market capitalizations providing effective buying power in M&A scenario.
Conclusion
As we approach 2025, I am confident the venture capital ecosystem is entering a period of renewed strength and strategic evolution. My predictions reflect a year of growth and transformation: global investment volumes crossing USD 250 billion, exit markets recovering, and the European VC ecosystem solidifying its position as a key global player. Catalyzing innovation in sectors like AI, deep tech, security/defense tech and climate tech as well as seeing a comeback of Web3 and blockchain technologies, driven by practical applications and regulatory clarity. I look forward to seeing how these trends materialize and contribute to a vibrant and dynamic VC ecosystem.
Disclaimer: The views and opinions expressed in this post and under my Corporate Venture Capital newsletter are solely mine as the author and do not necessarily reflect the official policy, position, or opinion of my employer. Any content provided are my personal views and not investment advice.
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