Q2 investment trends continue the shift to fewer but larger deals

Overall, the trends identified in SSTI’s Q1 2025 analysis continue. While funding levels continue their upward trajectory, the influence of AI mega deals on total VC market activity persists (see 8/14/2025 Digest article). The trend of investment activity moving away from smaller transactions and toward larger deals also continues. These movements in investor deal preference may be persistent enough to necessitate that some TBED organizations evaluate their existing portfolios and prospective pipelines to determine if there are structural risks to companies’ abilities to secure sufficient capital, continue operations, and successfully meet their goals and those of the TBED organization in supporting the firms. 

PitchBook’s recap of Q2 investments covers the entire spectrum of VC activity, and the findings are thus influenced by how very large deals move investment totals and add to some of the market volatility. For example, Pitchbook concludes that total dollars invested dropped from Q1, that likely is because there wasn’t another $40 billion deal like OpenAI in Q2.  

In this article, SSTI takes a closer look at investment sizes more relevant to most companies’ development. We examined Pitchbook data for transactions of less than $100 million (while still quite large) to illuminate trends with perhaps more relevance to TBED practitioners and the companies they support. 

The total number of deals under $100 million (Figure 1) continues its downward trend, with Q2 2025 hitting the lowest number of deals over the past 20 quarters. There were 1,787 deals in Q2, down from 2,180 in Q1 and 2,300 in Q2 of 2024, an 18% drop from the last quarter and 22% over the past year. Conversely, total dollars have been on an upward trend since the end of 2023. There was nearly $24 billion in investment in Q2, up from $22.4 billion in Q1 and $20.5 billion in Q4 2024. Overall, even with our view of investment activity restricted, fewer companies are raising more capital.

Figure 1: Quarterly investment metrics for VC investments less than $100 million.  

Both median investment size (Figure 2) and median pre-money valuation (Figure 3) have climbed steeply from Q1. Median deal size jumped to nearly $5.5 million from $3.3 million in Q1, a staggering 66% increase. Pre-money valuation jumped 37% to $37 million from $27 million in Q1. Rising valuations and funding rounds can be a good sign for companies, though the trends here are driven by an increased share of activity at the high end of the market. 

Figure 2: Quarterly median deal size for investments less than $100 million    

Figure 3: Quarterly median pre-money company valuation for deals less than $100 million    

SSTI next evaluated investment trends by deal size to identify how dollars and activity are distributed across the spectrum of VC investments. Total dollars increased over the past two quarters for deals larger than $10 million, with the largest increase from deals larger than $25 million (Figure4). All other deal size segments see a drop in investment totals from Q1 2025.  

The pattern of increasing activity for deals larger than $10 million and decreasing activity for smaller deals continues for the number of deals (Figure 5). Q2 has nearly as many deals between $10 million and $25 million as deals between $1 million and $5 million. There are also nearly the same number of deals for deals less than $500,000, between $5 million and $10 million, and larger than $25 million.

Figure 4: Quarterly investment totals by transaction size for investments less than $100 million    

Figure 5: Quarterly deal count by transaction size for investments less than $100 million


The volume of deals and dollars has natural variability from one quarter to the next that requires additional context to make effective comparisons. By looking at the relative proportions of activity within each deal size segment, we can control for overall market volatility and see how investors and funding are shifting within the spectrum of small to large deals (Figures 7 & 8). What we find is that larger deals continue the trend of taking a larger share of activity. Notably, there is a significant jump in the fraction of deals larger than $5 million. The share of deals in the $10-$25 million and over $25 million segments both increased 4%. Conversely, the shares of deals less than $500k and between $500,000 and $1 million dropped 3% and 8%, respectively. In terms of dollar share, the only segment to increase was deals over $25 million, which increased from 58.6% to 61.7% of invested capital. The share of dollars increased by over 3% for deals larger than $25 million, while every other segment saw a drop.
           
   

Figure 6: Distribution of quarterly deal count across investment sizes for transactions less than $100 million
           
   

Figure 7: Distribution of quarterly dollars invested across deal sizes for transactions less than $100 million

While larger investments can mean that companies have more funding to work with to support growth, in this case, it seems to come at the expense of smaller deals where companies typically get their starts. While there are likely some companies whose first funding rounds are in these larger deal categories, many more, particularly those outside of trending industries and leading geographic markets, may struggle to find critical funding. The overall decrease in deals, coupled with the shrinking share of activity less than $5 million could spell trouble for new firms if these trends continue. The truism that the best companies will find funding holds if we accept that finding funding is indeed the determinant of being a “good” company. If current investment trends continue, we may not know which companies could have been highly successful but were never able to secure the resources necessary to get started. 

TBED organizations should review investment activity in their service area to identify any nuanced gaps or opportunities that can be capitalized upon. If there are emerging trends in your area, please reach out to Aaron Hagar at SSTI. If you and the companies you work with are wrestling with changing market conditions, please consider joining our TBED Community of Practice to share your experiences and to learn from peers who may have found a way to confront these market dynamics.

This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.