VCs ‘Chasing The AI Wave’ But With Caution

Global venture funding in 2024 edged above 2023’s totals, with AI showing the biggest leap in amounts year to year. The trend continued in Q2 of this year, when global funding reached $91 billion, according to Crunchbase data — an 11% increase year over year.

Overall, the first half of 2025 marked the strongest half-year for venture investment globally since the first six months of 2022, signaling a tentative recovery in the private markets.

But what’s ahead for the remainder of 2025? Will we continue to see venture funding increase, led by AI? What kind of impact will the flurry of IPOs we’ve seen so far this year have on the private markets?

To get a sense of what’s ahead, Crunchbase News spoke with startup investors from four venture firms: Menlo Ventures, Founders Fund, Bain Capital Ventures and Left Lane Capital.

Not surprisingly, AI was a dominant theme. But there were varying opinions on just how much it would continue to dominate.

Let’s dive in.

AI momentum continues

Matt Murphy, partner at San Francisco-based Menlo Ventures, believes funding is exploding because “everyone is chasing the AI wave and many firms who started late are playing catch-up.”

It’s still early innings, though, in his view. The funding trend will only accelerate the rest of this year, primarily driven by a broad set of AI application and infrastructure companies “growing at unprecedented rates.”

For its part, Menlo entered the AI space by writing its first check into GenAI startup and OpenAI competitor Anthropic’s May 2023 $450 million Series C round. In May 2024, Menlo announced the launch of its $100 million AI fund — named the Anthology Fund — in partnership with Anthropic.

Murphy calls that venture a “big success” with more than 30 companies having gone from seed to Series A.

“We couldn’t be more excited about the next few quarters in the venture market as AI models get more powerful and more entrepreneurs dive into new and existing categories,” he predicted. “The pace of change in workflows, productivity and innovation will be unprecedented.”

Robert Windesheim, the newest investor at San Francisco-based Founders Fund, agrees that AI is “providing significant tailwinds,” calling it the “most important technology since the internet.”

He believes the AI boom is the primary driver behind the increased capital deployment — from venture funding to IPOs and public markets more generally.

“I expect this to continue over the next 12 to 18 months as models continue to improve and new use cases get unlocked,” he told Crunchbase News. “Most recently, reinforcement learning on domain-specific data has unlocked new product avenues.”

‘All in on AI’

Abby Meyers, a partner at Bain Capital Ventures, said that despite all the frenzy around AI, the San Francisco-based firm is trying to “stay conscious of overhyped AI rounds,” choosing to be “very deliberate in backing select companies within a vertical.”

For example, she noted, Bain only backed OpenAI among the multiple foundation model labs.

However, she concedes that “AI will continue to play a very significant role and unlock further opportunities” in the venture world.

Menlo’s Murphy agrees, noting that everything his firm is pursuing “has a strong AI component as the differentiator.”

“So for us, we’re really all in on AI,” he told Crunchbase News.

That means it may be harder for non-AI companies to raise.

“But good businesses will always be able to raise capital,” he acknowledged. “Defense tech is another area on the rise outside of your more classic AI apps and infra.”

Bain Capital’s Meyers agrees that AI is top of mind at her firm

“AI is in almost everything we do now,” she said.

To be clear, that doesn’t mean that the firm is only investing in straight AI companies. It has backed AI companies building for sectors such as law, customer service, sales, education and compliance, among others.

“We believe that we’re still in the early phases of harnessing this technology, and anticipate that there will be meaningful opportunities to invest in multiple generations of AI businesses for years to come,” Meyers told Crunchbase News.

And the firm is not just talking the talk.

Bain views AI as “a critical productivity multiplier for workers of all kinds,” including investors.

For example, she said, the firm is using AI to automate tasks like routine data analysis, synthesizing large volumes of product feedback, and benchmarking competitors.

“… We also increasingly recognize that we can’t just use AI — we have to use AI well, identifying where it can accelerate our efforts without eroding their substance or simply creating slop or noise,” Meyers added.

AI will also push adjacent sectors across the broader value chain — such as energy and semiconductors, which will most likely continue to draw significant attention, noted Founders Fund’s Windesheim.

Looking ahead, Meyers believes that supply chain, manufacturing and utilities “are each huge, important industries that need ways to better harness and leverage data and make processes systematic, and eventually, AI-driven.”

She “worries” about business models that hinge on cross-border trade or logistics, given geopolitical uncertainty.

“And, the first generation of relatively lightweight AI applications are at risk of being rendered superfluous as foundation models facilitate more and more use cases directly,” she said.

Investing smarter

Harley Miller, founder, CEO and managing partner of Brooklyn, New York-based Left Lane Capital, said his firm is overall “cautiously optimistic” about the remainder of the year.

Valuations recalibrated following the market correction that took place in the spring and summer of 2022, to Miller, “anecdotally felt good, up until recently.”

“The craziness of certain AI have and have-nots are pushing valuations to unprecedented levels, which are akin to 2021, frankly, especially for B2B/enterprise AI companies,” he added.

Still, the broader reset in valuations over the past two years has created a healthier foundation, in his view.

“That said, the bar is higher now,” he said. “We expect this momentum to continue, particularly for companies with clear profitability paths and consumer resonance. Fundamentals are back in focus, which is a net positive for the ecosystem.”

Back-to-back rounds

Indeed, AI companies are raising rounds in rapid succession, and thus significantly increasing their valuations in short periods of time. Anthropic, for example, saw its valuation jump from $60 billion to $170 billion in the span of six months.

“There are many examples of AI companies raising follow-on rounds in six to 12 months versus the more standard two years or more,” Murphy said.

However, he expects that it’s inevitable that there will be some “overfunding.”

“Many sectors of AI are overcrowded and potentially undifferentiated, so investors have to be smart about where to invest versus ‘playing the index,” added Murphy.

For now, Windesheim predicts that continued market growth and the unlocking of new markets will propel further “up” rounds in and around AI.

“Generally, I believe this positive market sentiment will continue in the short to mid-term,” he said.

Meyers said she’s continuing to see valuation reflect trajectory between rounds.

Companies that build momentum — through sustaining or accelerating growth, innovating on product, building favor with customers — are raising up rounds, often at valuations that give them credit for future growth, Meyers said.

However, she added, “companies that don’t demonstrate momentum across these vectors, or whose velocity slows, aren’t seeing large markups.”

The IPO outlook

Does all this mean we should expect to see more IPOs in 2025?

Despite a cloudy macroeconomic environment (such as tariffs and inflation), recent IPO performance has opened the door for more IPOs, “but not the floodgates,” notes Meyers.

Companies including ServiceTitan, Chime, Circle and Figma saw massive day-one pops in their public-market debuts, validating strong investor appetite for exposure to high-growth tech. Even companies like CoreWeave “with a quieter debut have delivered solid performance in the longer term,” she pointed out.

On top of that, blockbuster earnings from big tech companies investing heavily in AI encourages market enthusiasm.

“But there aren’t many companies like Figma — which has customer love, growth, high gross margins — so we can’t expect everyone to get a shot at an IPO,” Meyers said. “But the highest quality companies should feel more confident.”

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Illustration: Dom Guzman