*

AI investments drive 64.1% of total deal value in H1 2025

*

VC fundraising declines 33.7% year-over-year, faces longer

timelines

*

Exit activity up 40%, optimism for IPOs and M&A in H2

By Krystal Hu and Niket Nishant

July 15 (Reuters) - U.S. startup funding surged 75.6% in

the first half of 2025, thanks to the continued AI boom, putting

it on track for its second-best year ever, even as venture

capital firms struggled to raise money, a report from PitchBook

on Tuesday showed.

Startup funding in the first six months of 2025 jumped to

$162.8 billion, marking the strongest performance since the same

period in 2021 - the historic peak for venture capital

activity.

That previous surge came during the era of the Zero Interest

Rate Policy (ZIRP), when central banks slashed rates to

stimulate economic activity during the COVID-19 pandemic,

sending capital into higher-risk assets including venture

capital.

This year's boom has been driven largely by major AI

investments and bold bets from big tech companies, a wave of

activity set off by the debut of ChatGPT in late 2022. In the

past three months alone, $69.9 billion was invested in U.S.

startups.

Standout deals included OpenAI's $40 billion round and

Meta's $14.3 billion purchase of a stake in Scale AI.

Other AI deals exceeding $1 billion in the second quarter

included significant investments in Safe Superintelligence,

Thinking Machine Labs, Anduril, and Grammarly.

These deals underscore sustained investor conviction in the

AI sector, which accounted for 64.1% of the total deal value and

35.6% of the deal count in the first half of the year.

"I think it's downstream of the fact that OpenAI and

Anthropic continue to grow at unbelievable rates," said Davis

Treybig, partner at VC firm Innovation Endeavors. "If there's

even a chance you could see that sort of progress in other

domains, whether it's robotics, protein folding models, world

models or video models, then there's a lot of people who are

going to want to invest a lot of money."

HARDER FOR VC FUNDS

In contrast, U.S. venture capital fundraising continued to

face headwinds, with just $26.6 billion raised across 238 funds

in the first half of the year. This subdued environment

represents a 33.7% year-over-year decline in capital raised,

extending the downward trend from 2024.

It is also taking fund managers longer to close new

vehicles, with the median time stretching to 15.3 months by the

second quarter of 2025 - the longest in over a decade, data

shows.

The disconnection from the startup market reflects concerns

from limited partners on the asset class due to recent

underperformance and liquidity constraints.

A rebound in exit activity, including IPOs and M&A, has

brought a sense of optimism for the remainder of the year. Exit

activity in the second quarter was up 40% from last year, as a

loosening antitrust environment and a thawing IPO market boost

confidence.

Sectors aligned with President Donald Trump's priorities

such as AI, national security, defense technology, fintech and

crypto dominated IPO interest in the second quarter, the report

noted.

"The good news is we're starting to see the tide turn," said

Lucas Swisher, co-head of growth investing at tech investment

firm Coatue. "IPOs like Coatue portfolio companies Hinge Health

and Coreweave have been well received by the market, and there

are a dozen companies filed now."

(Reporting by Niket Nishant in Bengaluru and Krystal Hu in New

York; Editing by Lincoln Feast.)