US AI Startups Drive a Funding Boom Despite Venture Capital Fundraising Challenges

In the first half of 2025, funding for US startups surged by 75.6%, reaching $162.8 billion — the strongest showing since 2021’s record-breaking period. This impressive growth was largely fueled by the ongoing AI revolution, with major investments from tech giants and startups alike. The hype around AI, sparked by innovations like ChatGPT, has pushed investors to pour money into the sector, especially in deals involving companies like OpenAI and Meta.

AI-focused companies dominated the scene, accounting for 64.1% of total deal value and over a third of all startup deals during this period. Some of the largest funding rounds included OpenAI’s massive $40 billion raise and Meta’s $14.3 billion acquisition of a stake in Scale AI. Other billion-dollar investments flowed into emerging AI players such as Safe Superintelligence and Grammarly, signaling strong investor confidence in the future of AI technologies across multiple domains.

Despite the booming startup funding environment, venture capital firms themselves faced a tougher landscape. VC fundraising dropped by 33.7% year-over-year, with only $26.6 billion raised across 238 funds in the first half of the year. Fund managers are also experiencing longer timelines to close funds, with median fundraising periods hitting over 15 months — the longest stretch in more than a decade. This reflects growing caution among limited partners amid liquidity concerns and previous underperformance.

However, there is growing optimism as exit activity picked up, with IPOs and mergers and acquisitions increasing by 40% in Q2 compared to last year. This positive momentum is helped by easing antitrust pressures and a more welcoming IPO market, particularly in sectors aligned with national security, defense tech, fintech, and crypto. Experts believe this turnaround could signal a more robust venture capital ecosystem in the months ahead.

Source: Reuters