Venture Capital Market 2026: Flexibility is Key in Uncertain Times

Venture capital market 2026 predictions for the VC market were all over the map after a tumultuous 2025, with geopolitical instability and economic volatility contributing to extended hold times and drawn-out venture capital fundraising trends fundraising periods.

The US venture capital market did more than just show resilience during the pandemic: it reached new heights. According to PitchBook, 2021 US VC investment “topped $300 billion for the first time, settling at $329.8 billion and nearly doubling 2020’s total of $166.6 billion—the previous record.”

Unfortunately, that growth was short-lived, and by 2022, EY was ready to declare that “the venture capital bull market has run its course.” The next few years saw less investment and fewer exits, putting pressure on fund managers’ bottom lines as longer VC hold times delayed repayment and fundraising periods stretched longer than expected.

While 2025 provided some encouraging data, those bright spots were concentrated among larger funds and key sectors like AI. Smaller VC funds and those invested in industries affected by tariffs have been especially vulnerable to macroeconomic trends. Understanding these trends and their long-term ripple effects can help us understand what it will take for VC fund managers to weather an uncertain environment in an already chaotic 2026.

Lessons from the 2025 venture capital market

The first quarter of 2025 was the strongest for VC investment since Q1 2022. That sounds promising, but OpenAI’s massive $40 billion funding round skewed the numbers, which would have been less impressive otherwise.

The rest of the year told a similar story. Data from PitchBook shows AI and Machine Learning deals represented 65.4% of all deal value in 2025. Average deal value and deal volume were way up overall, but these numbers rely heavily on a small number of massive AI deals.

Exits were similarly lopsided, according to a report from the National Venture Capital Association: “ten IPOs account for 76 percent of IPO value. Ten M&A deals account for nearly half of M&A value. 487 mega-deals account for 67 percent of all deal value. The system produces magnificent outcomes for a few and functional outcomes for some. The question for the next several years is what happens to the many for whom it produces nothing at all.”

NVCA describes a bifurcated fundraising market of haves and have-nots: “The top ten funds alone raised a combined $22 billion, 32.9 percent of all VC capital, up 2.5 times from the 13 percent they claimed in 2021. That left roughly $44.9 billion to be divided among the remaining 575 funds.”

For managers of smaller funds, closing a second vehicle has become a significant VC fund manager challenge, especially in a sector where past performance is harder to prove amid long hold times. Per NVCA, ” fewer firms are entering the market, while others are exiting due to fundraising challenges. For emerging managers, the bar has risen significantly.”

Venture capital market 2026: outlook and predictions

As one might expect after a year that saw such geopolitical volatility, there were plenty of conflicting predictions for where the VC market may be headed in 2026.

 KPMG provided one of the more positive outlooks, stating that, “for VC investors, the combination of sustained capital deployment and healthier exit conditions suggests a more constructive and balanced venture capital environment.” J.P. Morgan was more cautious, citing risk factors such as the possibility the “AI boom disappoints” or that “IPO activity fails to improve.”

PitchBook’s 2026 VC outlook gave “a cautiously optimistic outlook for 2026, expecting tempered growth in IPOs, relatively improved market liquidity through secondaries, and continued growth in the number of completed deals, especially at the early stages.” However, “Liquidity will remain the primary challenge for the VC market in 2026.”

“Companies are re-imagining their portfolios as innovation reshapes industries and capital awaits deployment. Those who think strategically and act boldly will set the course for what comes next,” says Stephan Feldgoise, Global Head of M&A, Goldman Sachs.

Macroeconomic concerns creating uncertainty for VC managers

The big story of 2025 was tariffs. As Heather Gates and Angelica Tsakiridis of Deloitte put it, “Just as venture capital (VC) was beginning to stretch its legs after a long market cooldown, tariffs blew in like a sandstorm.” They suggest that if the tariff landscape “remains unpredictable, we may see collateral effects such as reduced investor confidence.” Fundraising will be harder, as will evaluation for fund managers. “More uncertainty means fewer investments.”

In the first half of 2026, the discussion of tariffs has been replaced by the conflict in Iran and other geopolitical concerns. Inflation remains the major political issue of 2026, with consumer sentiment hitting records lows in some surveys.

“The onset of the war in Iran has added another obstacle to opening the IPO window,” says PitchBook. “After tariffs and a government shutdown weighed on 2025’s new listings, Q1 2026 contended with fresh policy and geopolitical risks.”

Overall data from Q1 remained strong – at first glance. According to NVCA, “The quarter’s $267.2 billion in deal value exceeded every full-year total except for those of 2021 and 2025, and exit value hit $347.3 billion, the highest quarter on record.” However, a closer look reveals lopsided data: “without the five largest deals and exits, those figures fall by 73.2% and 86.6%, respectively.”

CB Insights notes Q1 was “the highest quarterly total on record. But that headline figure was driven largely by a single transaction: OpenAI’s $122B raise accounted for 43% of all funding during the quarter.”

AI continues to dominate, but isn’t the only sector seeing positive results. CB Insights notes, “Hard tech markets in areas like defense, space, and quantum” are seeing momentum. And KPMG says, “Persistent geopolitical tensions have accelerated interest in autonomous defense, space infrastructure, and dual-use technologies, with governments in multiple jurisdictions increasing support for domestic defense and space ecosystems.”

Unfortunately, the latest geopolitical and macroeconomic developments mean this data is hardly reliable for predicting the rest of the year. If the impact of tariffs in 2025 was to cause uncertainty in the venture capital market, then given what’s happening now, even more uncertainty can be expected for the rest of 2026.

The solution, then, is to plan for the possibility that markets improve along with the possibility that they stall. To do that, VC fund managers need to focus on pain points that could be coming, not just those felt now.

How longer VC hold times and fundraising periods put pressure on fund managers

We’ve mentioned before how the IPO landscape has slowed in recent years, with companies waiting for the right moment to go public. This means VC longer hold times for VC funds. Not only can that hurt a fund’s bottom line as operating expenses eat into margins, but it also means funds are forced to exit upon IPO rather than retain a percentage of shares.

Liquidity is a key issue across the board. Without exits, managers can’t redeploy, which leads to missed opportunities. “There simply often isn’t the same rate of capital being returned for allocators to redeploy,” says KPMG.

 “When exits stall, the entire cycle slows,” says NVCA CEO Bobby Franklin in Forbes. “When they aren’t able to have exits by way of a merger and acquisition or an IPO, then it’s very difficult for them to go back and raise another fund and support more entrepreneurs.” This is where hold times collide with venture capital fundraising periods, which have also been extended. The median time to close a new fund was around 10 months in 2022 and circa 16 months.

Macroeconomic and sociopolitical concerns are delaying both exits and fundraising, with residual effects for investors, managers, and companies seeking capital. VC managers can’t do anything about these outside factors, but they can do something about how they control costs.

Creating breathing room for VC funds though greater efficiency and faster scaling

As a fund administrator, JTC works with VC funds to transition smoothly through the different stages of their lifecycles, from formation to wind-down and everything in between. Our clients can sidestep the costly and burdensome hiring process and reduce the size of their full-time staff by outsourcing key functions such as investor servicing, fund accounting and reporting, regulatory support, cash and treasury services, and more.

Our 96% staff retention rate means clients don’t have to deal with the high turnover of the financial services industry, and with the right technology, operations can be more efficient. Increased efficiency helps see funds through long hold periods, reducing costs as they wait for portfolio company exits.

JTC helps VC fund managers mitigate operational, staffing, and compliance risks while boosting efficiency to allow managers to focus on what they do best. By offering sector-specific expertise, advanced technology solutions, and a proactive, client-focused approach that ensures both accuracy and timely communication, JTC’s operational fund administration solutions bring value and peace of mind to fund managers and their investors.

The next year may prove to be a big one for venture capital, or it may be another year of waiting and seeing. Big players and AI may continue to dominate, or niche markets could prove to be the smart play for intelligent investors. No matter what happens, JTC’s clients know they can adjust with efficient, technology-driven administration built specifically for their businesses.

Learn more about JTC’s venture capital solutions

JTC does not provide legal, tax or investment or other professional advice and, whilst it may review and report upon such advice received, JTC does not give, accept or endorse and should not be understood to be giving, accepting or endorsing such advice.