- Global PE/VC deal value rebounded about 43% in 2025 to roughly $468.5B, led by late-stage and middle-market activity while early-stage stayed muted.
- Private equity enters 2026 with an exit overhang as hold periods near seven years, unsold assets pile up, dry powder ages, and LPs press harder on liquidity, fees, and terms.
- Venture capital is concentrating in AI and proven later-stage winners, leaving non-AI and early-stage startups facing tougher pricing and funding selectivity.
- To unlock liquidity and returns, managers are leaning on secondaries and continuation vehicles, more carve-outs, and increasingly flexible fund structures as PE/VC strategies converge.
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The private markets are entering 2026 from a position of both momentum and tension. Deal value in PE and VC rebounded sharply in 2025, yet significant structural pressures are shaping how capital will flow and which managers are best positioned to succeed.
Deal Flow & Exits
Global PE and VC deal value rose ~42.6% in 2025 to $468.5B, largely due to growth in late-stage rounds and middle-market buyouts. Early-stage funding increased only ~15% year over year, signaling cautiousness among investors in less mature ventures. Exit activity, particularly IPOs, improvements in M&A, and rises in continuity vehicles, have incrementally eased the liquidity squeeze.
Structural Challenges in Private Equity
PE firms are carrying roughly 12,900 unsold portfolio companies in U.S. portfolios as of September 2025, with average hold times near seven years—well above pre-COVID norms of ~5-5.5 years. This exacerbates LP impatience and puts pressure on firms to deliver exits or valuations without relying purely on financial engineering. Meanwhile, dry powder has declined from ~$1.3T at end-2024 to ~$880B by late 2025 in the U.S., and globally from ~$2.7-2.5T; though still large, much of it is aging and underperforming.
VC Market Selectivity & AI Ascendency
VC investors are narrowing focus: AI-driven companies, high quality later-stage firms with proven unit economics or clear exit paths are commanding the lion’s share of capital. Valuations in Series B and above dropped in median pre-money terms through early 2025, especially in Series C, but late-stage rounds saw the highest capital deployed since 2021. Exit value has recovered significantly, powered by large deals and AI-centered exits.
Strategic Responses & Innovation
Managers are adopting new structures to address liquidity and value creation: increased use of continuation vehicles and secondaries; carve-outs are becoming more frequent in industrial, energy and utility sectors; fund terms are evolving; and the blurring between PE and VC strategy—VC entering growth buyouts, PE entering earlier stages—is evident. LP demands for transparency, ESG integration, alignment of incentives, and operational rigour are shaping strategy.
Risks and Open Questions
What will happen to exit multiples if interest rates remain high longer than expected? Will the IPO market sustain its momentum or falter under tightening valuation expectations? Can managers of lower-tier or distressed assets avoid steep markdowns—and how will LPs respond if returns don’t meet expectations? Regulation, fund-life extensions, and tax policy may also shift in unexpected ways.
Supporting Notes
- Global PE/VC deal value rose ~42.57% to $468.51B in 2025 vs 2024; late-stage funding grew ~45.7%, early-stage ~15.2%.
- There were ~12,900 unsold companies in U.S. PE portfolios as of late Sept 2025; average holding periods are close to seven years.
- Dry powder in U.S. PE declined to ~$880B by September 2025, down from about $1.3T in Dec 2024; global dry powder also slid from ~$2.7-2.5T.
- Exit value in U.S. PE-backed deals rose to ~$472B in 2025 versus ~$377B in 2024; IPO activity improving especially for quality assets.
- In the VC market, later-stage and AI-focused companies are receiving significantly higher valuations and deal volume; non-AI startups becoming increasingly selective.
- Median pre-money valuations for Series C rounds dropped from ~$360M in Q4 2024 to ~$164M in Q1 2025; Series D+ rounds dropped from ~$652M to ~$544M.
- Carve-outs increased, particularly in industrials, energy and utilities: e.g. in US & Canada 83 carve-outs worth $20.6B in first half of 2025, Europe saw 47 worth $2.6B.
- LPs pushing for fund life extensions, greater alignment, fee and fund-structure scrutiny; continuation and secondary vehicles are rising in prevalence.