Venture capital, as commonly conceived, is about investing in upstart companies in the hopes a few will grow into something big.
But looking at recent funding trends, it’s clear this conception is a dated one.
True, VCs do still back smaller rounds for promising seed and early-stage startups. However, such activities are accounting for a progressively shrinking share of spending.
Instead, in recent years funding is increasingly about pouring ever-larger sums into a few companies already considered a big deal in their respective industries. That practice culminated this year in a record $40 billion financing for OpenAI that constituted close to half of all first-quarter 2025 U.S. startup funding.
The predominance of mega-rounds isn’t limited to OpenAI. To illustrate, we used Crunchbase data to determine the percentage of annual startup funding in the U.S. that has gone to the 10 largest reported rounds. 1
The findings, charted below, show a steadily higher share of funding for venture-backed, private companies over the past three years going to the 10 biggest deals.
AI leads
Building a generative AI unicorn is an expensive undertaking, and it should surprise no one that companies in this sector were the heaviest fundraisers. Recipients of some of the largest rounds of the past two years include, predictably, OpenAI, xAI and Anthropic.
Other mega-round recipients, including Waymo, Databricks, and Anduril, also play in the AI space, although they are not building large language models.
Health and life sciences, meanwhile, looked under-represented in our mega-round list. There were none in the top 20 rounds of the past two years.
That said, there have still been some really large equity financings in the space. This includes a $1 billion round for Xaira, focused on AI-driven drug discovery, last spring.
So far this year, meanwhile, there’s also a list of companies outside the generative AI space that have secured megarounds. One is Saronic, an autonomous surface vessels maker that locked up a $600 million Series C. Two others — remote work IT management provider Nerdio and cybersecurity company NinjaOne — raised $500 million Series C rounds.
A shifting risk-reward calculus
Concentration of funding amid a few, giant rounds isn’t entirely a narrative about AI. Investors may also be reconsidering the risk and reward tradeoffs of small bets on nascent companies versus bigger wagers on mature startups that have already made waves in their industries.
Historically, the highest investment returns come from successful seed and early-stage financings. Early investments in Facebook by Peter Thiel and Accel, for instance, are famous as some of the most lucrative in venture history. And Sequoia Capital and Kleiner Perkins did pretty well in 1999 with their $25 million early-stage investment in Google.
Trouble is, successes are the exceptions. Most seed investments fail, and startups that secure early-stage funding rarely deliver on their visions of scale. Moreover, limited partners in venture funds won’t reinvest without some positive returns. So, the temptation to invest in a company that’s already successful by many metrics (profitability usually not one of them) is understandable.
Still, they’re getting in at pricey levels. OpenAI’s $300 billion post-money valuation is higher than the market caps of Samsung, Toyota and McDonald’s, to name a few famous companies. It could conceivably go down.
That said, no one expects OpenAI to go away. We’re far too addicted to its offerings.
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Illustration: Dom Guzman
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