The venture capital landscape is poised for significant changes in 2025, according to top VCs who shared their predictions with us. The industry is expected to continue its shift towards more disciplined investment approaches, with a focus on booked revenues, client pipelines, and costs as key considerations. Meanwhile, AI is set to remain a dominant force, driving consolidation and M&A activity in the sector.

The number of venture capital firms in the US has taken a sharp dip, with risk-averse institutional investors favoring bigger names in Silicon Valley. However, the new year may bring a renewed focus on change, with VCs adapting to the evolving landscape. Nekeshia Woods, managing partner at Parkway Venture Capital, predicts that wealthy individuals will look to private markets for outsized returns, driving an influx of capital into the industry.

Austin Clements, managing partner at Slauson & Co., expects the IPO market to reopen, bringing much-needed liquidity to LPs and leading to increased commitments to new funds. However, he also notes that LPs may be more reluctant to commit to new fund managers after seeing undisciplined behavior in the last cycle, making it challenging for innovative strategies to get funded.

AI is expected to continue its rise, with consolidation in the industry driven by acquisitions in areas where AI can become a commodity, such as large language models. According to Gabby Cazeau, partner at Harlem Capital, AI startups selling to enterprises will face a make-or-break year, with many struggling to transition from experimental phase to core software spend.

Triin Linamagi, founding partner at Sie Ventures, predicts that solo GPs and angel funds will drive increased investment into earlier-stage companies, leading to a more diverse range of investment approaches. However, she also notes that meaningful M&A or IPO activity is unlikely until late 2025, with LPs remaining hesitant to deploy capital.

Michael Basch, founder and general partner at Atento Capital, expects increased liquidity for LPs, with more funds and companies taking secondaries. He also predicts consolidation and roll-ups in oversaturated spaces, such as GLP-1s. However, he notes that continued falling unicorns will lead to a significant reset in valuations due to market resizing and growth expectations resetting.

Looking ahead, VCs expect dealmaking to remain favorable to investors with dry powder, with a focus on booked revenues, client pipelines, and costs as key considerations. The pace of investing is expected to maintain a balanced approach, with investors prioritizing paths to profitability and sustainable business models.

Some unexpected trends that could emerge in 2025 include mergers or closures of big-name unicorns, a surge in venture dollars looking at hard technology, and a significant increase in companies raising only a seed round and having a sub-$100 million exit in sub-three years of existence.

As the venture capital landscape continues to evolve, one thing is clear: AI will remain a dominant force, driving consolidation and M&A activity in the sector. With VCs adapting to the changing landscape, 2025 is set to be a pivotal year for the industry.