Global venture funding is expected to continue its upward trajectory into 2026, driven primarily by sustained momentum in artificial intelligence, according to investor insights compiled by Crunchbase News. Preliminary data shows global venture investment in 2025 was on pace to become the third-highest year on record, trailing only the peak funding cycles of 2021 and 2022. A total of $205 billion was raised through mid-2025, reflecting a 32% increase compared to the first half of 2024, while the third quarter alone recorded a 38% year-over-year jump across all funding stages. Much of this capital concentration has flowed toward the largest AI companies, with both Scale AI and OpenAI securing the two largest venture fundraises in history during the same year, underscoring the scale at which artificial intelligence continues to dominate investor attention.
Against this backdrop, venture capital firms are broadly anticipating further expansion in deployed capital during 2026, with projections ranging between 10% and 25% growth compared to 2025. George Mathew of Insight Partners expects global venture deployment to rise into the high $400 billion range, while Menlo Ventures’ Tim Tully projects even stronger growth driven by expanding fund sizes and increasing round valuations across stages. Matt Murphy, also of Menlo Ventures, attributes expected growth to the rapid scaling of AI-native companies that continue to raise large expansion rounds, while noting that early-stage activity remains strong but may begin to stabilise in certain overheated segments. Sapphire Ventures’ Anders Ranum similarly anticipates an increase in total deployment, driven by larger checks from scaled funds and renewed activity in growth-stage financing.
The discussion among investors also highlights an evolving pricing environment in 2026, where valuation trends are expected to diverge sharply between AI-focused companies and the broader startup ecosystem. AI-native firms are projected to continue securing premium valuations, particularly in growth and later-stage rounds, while non-differentiated software companies may struggle to raise capital under tighter conditions. Investors describe a “bifurcated” market structure where leading AI companies attract disproportionate funding, while mid-tier competitors face increasing pressure to consolidate or pursue mergers and acquisitions. At the same time, previously high-growth SaaS companies from the zero-interest-rate period are expected to either recover with flat-to-up rounds or seek liquidity solutions through private equity pathways.
Sector-level investment shifts are also expected to intensify in 2026, with consensus pointing toward continued capital concentration in AI infrastructure, foundation models, and vertical AI applications. Additional areas expected to gain share include defence technology and robotics, supported by geopolitical demand and improving hardware cost structures combined with advances in AI capability. Conversely, sectors such as climate tech, crypto, and horizontal SaaS without strong AI integration are projected to lose relative funding share due to longer development cycles, market volatility, or lack of technical differentiation. Investors also suggest that capital allocation is already moving away from “AI wrapper” applications toward deeper infrastructure, data systems, and workflow-embedded solutions, although app-layer winners in specific enterprise categories are still expected to emerge.
On liquidity expectations, venture firms anticipate an increase in both IPO and M&A activity in 2026, alongside continued growth in secondary transactions as investors seek exit opportunities in a market where time to IPO has extended significantly. Median IPO timelines for large companies have surpassed 11 years, with stricter thresholds around revenue and growth rates narrowing the public listing pipeline. As a result, secondary markets and strategic acquisitions are expected to play a larger role in providing liquidity. Across the board, investors describe 2026 as a year where capital efficiency, revenue strength, and real AI-driven differentiation will determine funding outcomes, while companies lacking substantive technological advantage may face increasing difficulty in attracting venture support.
Follow the SPIN IDG WhatsApp Channel for updates across the Smart Pakistan Insights Network covering all of Pakistan’s technology ecosystem.
