We’re halfway through 2025, and on paper, the venture market looks like it’s thawing. Funding’s up, AI’s booming, and a few boldface names even made it out to the public markets. But peel back the top layer and what you see isn’t recovery, it’s consolidation. Capital is flooding into fewer, bigger companies, and the middle of the market is being left to dry out.
What we’re seeing now is a full-blown barbell effect.
At one end, you have early-stage founders scraping together pre-seed and seed checks from angels and microfunds. At the other, you’ve got ultra-unicorns — startups valued at $5 billion or more — sucking up capital at a historic pace.
According to Crunchbase data, just 13% of unicorns now command more than half the total valuation of The Crunchbase Unicorn Board, a curated list of the most valuable private companies in the world.
A staggering $70 billion went to only 11 companies in the first half of this year. Two of those rounds — $40 billion to OpenAI and $14.3 billion to Scale AI — were the largest private-venture deals ever raised. It’s a staggering level of concentration, and it’s also a market signal.
Founders in that elite club now raise more in a single round than most funds deploy in a decade. These aren’t just big checks, they’re gravitational anomalies that are distorting the rest of the ecosystem. If you’re not already one of these name-brand companies, good luck attracting follow-on capital at scale. Venture dollars aren’t flowing — they’re pooling.
The reasons aren’t hard to diagnose. LPs are still spooked and GPs are risk-off unless they see a story that feels like a sure thing. AI checks several key boxes: big vision, massive TAM and the sheen of inevitability.
That logic becomes self-reinforcing: Companies with momentum attract the most capital, which only adds to their momentum. Meanwhile, solid companies with actual revenue and burn discipline struggle to secure meetings.
Stuck between extremes
That’s the part I find maddening. I live in the growth-stage world, where companies are often 6 to 10 years old, flirting with profitability and grinding toward category leadership. These aren’t hype machines, but real businesses with real customers, and yet they’re the ones most squeezed by today’s dynamics. They’re too far along for seed investors but not flashy enough for the billion-dollar crowd.
While I’ve always worked with early-stage VCs to help them support their winners beyond Series A, today’s world has become a chasm so large that it’s essentially one extreme or the other — go stratospheric or starve.
To be clear, I’m not arguing against ambition. Ultra-unicorns such as Anduril and Anthropic are building foundational technologies with potentially world-changing applications. Many deserve the capital they’re attracting. But when the vast majority of funding is funneled into a tiny sliver of the market, we lose the breadth that makes venture resilient. The middle is where a lot of the next $1 billion to $3 billion outcomes are built — just not with the same PR teams or hype cycles.
Capital concentration and fragility
There’s also something historically precarious about markets that place huge bets on a small number of players. It creates fragility. And if one of those giants stumbles — or if their valuations prove untethered to fundamentals — the ripple effects could be wide and painful.
And let’s be honest, some of this behavior feels like déjà vu. In the dot-com boom, billions were sunk into laying fiber networks that no one knew how to monetize. Eventually, bandwidth became cheap and ubiquitous, but not before a massive correction. We’re watching the same infrastructure play out now in AI datacenters. Investors are overfunding the platform layer, and the assumption is that applications will catch up later.
That may be true, but it also means there’s a massive opportunity to invest in the lean, capital-efficient companies building real-world tools on top of this overbuilt AI infrastructure. These companies won’t need to raise $500 million to matter. They’ll create impact — and exits — with $50 million and a clear go-to-market plan.
The coming reality check
The second half of 2025 is going to expose which bets are real and which were just expensive storytelling. The firms that keep their heads down, run lean and can show hard ROI will be the ones who survive this cycle. And the investors who back them — before the herd catches on — will have the best shot at outsized returns.
This isn’t a moment for tourists, it’s a moment for conviction. The capital markets might look healthy at the top, but they’re starving in the middle. And as history has shown, it’s often the overlooked vintages — built in the shadows of mania — that end up delivering the real value.
Yes, let’s celebrate the $10 billion valuations, but let’s not ignore the capital-efficient workhorses quietly building generational businesses outside the spotlight. Because in five years, that’s where the smart money will say it started.
Steve Brotman is the founder and managing partner of Alpha Partners, a growth-equity firm that co-invests in venture-backed companies by leveraging the unused pro-rata rights of more than 1,000 early-stage VC partners.
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Illustration: Dom Guzman
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