Private equity and venture capital fundraising in 2025 tells a tale of two markets. While headlines trumpet record-breaking rounds and billion-dollar valuations, the underlying reality is one of the most challenging fundraising environments in years.
But capital has not vanished. Our private market data analysis reveals that capital is consolidating into specific transformational themes and, at times, more than one to create outsized opportunity:
AI infrastructure
Defense technology
Enterprise software
Cybersecurity
Figure 1: 2025 PE/VC funding by sector
The fundraising landscape has shifted dramatically. In H1 2025, private equity and venture capital fundraising slowed to some of its weakest levels in years. Venture capital activity in the U.S. is at its lowest in over a decade, with many traditional sectors struggling to attract meaningful investment. In private equity, the U.S. is on track for its weakest year since 2018, and global and European markets are also experiencing subdued conditions not seen since before the pandemic.
The root causes are persistent: elevated interest rates, geopolitical uncertainty, and a distribution crisis that has left limited partners cash-constrained and unable to recycle capital into new commitments.
This drought reflects deeper structural challenges. The median time between fundraises has exceeded three years for the first time, forcing managers into increasingly creative deals to postpone their return to hostile capital markets.
Our data shows a sharp polarization in 2025 when viewed through a custom Funding Score, created using FactSet’s Screening multi-factor filtering tool. By combining capital raised, deal volume, average round size, and year-over-year momentum, the score highlights where investor conviction remains strongest.
Figure 2 reveals that AI/ML, cybersecurity, defense, enterprise SaaS, and digital infrastructure all score above 80, while consumer apps, e-commerce, food delivery, Web3/crypto, and EdTech fall below 40—showing capital concentrating in transformational themes and steering clear of slower-growth categories. The split seems driven both by excitement around foundational technologies and by caution in markets where growth has stalled, margins are thin, or hype has faded.
Figure 2: 2025 thriving vs. struggling funding
Artificial intelligence has emerged as the dominant force reshaping private market allocation, and our deal flow analytics show this transformation in real-time. AI startups captured the majority of global VC dollars in H1 2025, but this isn't speculative betting. It represents a fundamental shift toward AI as core business infrastructure.
Our private markets intelligence reveals that enterprise AI companies are experiencing exceptional growth as businesses scramble to integrate AI capabilities across their operations. The infrastructure supporting AI development is equally compelling to investors, with digital infrastructure funding driven primarily by the high capital requirements of AI deployment.
Our data uniquely captures how AI investment has evolved beyond foundation models. Companies demonstrating AI integration as baseline functionality rather than a differentiating feature are commanding premium valuations, a trend visible through our comprehensive coverage of private companies worldwide.
Example:
Geopolitical tensions have transformed defense technology from a niche sector into a mainstream investment theme, and our sector analytics reveal the full scope of this transformation. Space and defense startups experienced one of their strongest funding periods on record in the first half of 2025.
Through our private markets lens, we identified how dual-use technologies that serve both commercial and defense applications are attracting crossover investors seeking to capitalize on accelerated government procurement cycles while maintaining commercial scalability. Increasingly, companies commanding the highest valuations merge dual-use potential with other transformational themes such as AI-enabled targeting systems or AI-powered geospatial intelligence, both of which are clear examples of theme convergence driving investor interest.
Example:
Cybersecurity funding demonstrated remarkable resilience in 2025 despite broader market headwinds. Our sector analysis reveals this is due to cybersecurity's position as a non-discretionary expense category, with escalating geopolitical threats and regulatory requirements driving consistent demand.
Our private markets data shows late-stage cybersecurity companies capturing the majority of sector funding, indicating investor preference for scaled platforms with proven market traction. The most attractive deals are increasingly those where cybersecurity intersects with other high-priority themes—particularly AI-powered threat detection, autonomous incident response, and integration with critical infrastructure—making them more defensible and scalable in the eyes of investors.
Example:
While overall climate tech funding faced headwinds globally, FactSet's geographic analysis reveals remarkable resilience in the U.S. market, which captured the majority of global funding and projected growth for the year. This geographic concentration reflects policy stability and strong commercial partnerships between technology providers and buyers—patterns clearly visible in our comprehensive deal database.
At the same time, Europe continues to produce standout innovators. Capalo AI, based in Finland and backed by European investors, develops AI-driven solutions for clean energy infrastructure. By combining climate technology with AI-enabled grid optimization and predictive maintenance, it illustrates how companies can align with multiple high-conviction themes—sustainability, AI, and infrastructure—while attracting meaningful capital outside the U.S.
Example:
The current fundraising environment represents more than a cyclical downturn; it marks a permanent shift toward more disciplined capital allocation. The themes attracting investment in 2025—AI infrastructure, defense technology, profitable enterprise software, and necessity-driven cybersecurity—share common characteristics that our analytics help investors identify and track. Yet even these areas face risks, from monetization hurdles in AI to shifting government priorities in defense.
To navigate this complexity, private market participants must move beyond broad-brush sector strategies in favor of thematic approaches that can identify companies at the convergence of multiple positive trends. As capital becomes increasingly scarce and selective, the ability to identify and analyze thematic investment drivers—and the companies that embody more than one—will become a core competitive advantage. The funding desert of 2025 may appear unfit, but there are oases of opportunity that promise exceptional returns for well-prepared investors.
FactSet provides comprehensive private market intelligence covering more than 15 million companies globally, with advanced analytics and AI-powered insights that help investors identify emerging opportunities and make confident investment decisions. Ready to uncover the trends shaping your market? Discover what FactSet Private Markets can reveal about your investment landscape.
Mr. Jamil Sheppard is Director of Enterprise Growth & Partnerships at FactSet, based in New York. In this role, he specializes in enhancing client workflows by leveraging cutting-edge technologies, including predictive analytics, artificial intelligence, and connected data models. His work empowers organizations to optimize decision-making processes and unlock actionable insights, particularly in private markets and mergers and acquisitions. Prior to FactSet, he held senior leadership roles in sales and strategy at firms including ComplySci and Cyndx, and he and previously spent over 16 years at FactSet in sales and product strategy roles. Mr. Sheppard earned a Bachelor of Science in Psychology from Arizona State University.
Ms. Jennifer Hanscomb is an Associate Product Manager on FactSet’s Entities, Transactions, and Deals team, where she focuses on data sourcing and integration strategies that power the firm’s Private Markets offering. In addition to her work on data acquisition, she collaborates across teams to support go-to-market initiatives that enhance product adoption and client value. Before joining FactSet, Jennifer held key roles at AQR Capital Management, a leading alternative investment firm. There, she contributed to both the Marketing and Human Resources functions. In her most recent position at AQR, she led the analyst training program for early-career talent, helping to shape the onboarding and professional development of new graduates entering the investment industry. Jennifer holds a Bachelor’s degree in Political Science and a Master’s degree in Human Resource Management, both from the University of Connecticut.
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