While repeatedly writing about VC investment trends over the past year can feel a little like the movie Groundhog Day, like the film, the story is more nuanced than it would first appear. Sure, the overall message of high-dollar deals driving headlines and boosting investment levels to record heights persists, but there are some emerging trends deeper in the data that bear exploring to see if there are issues or opportunities that impact how TBED investors allocate resources going forward.
Using PitchBook data to look at total deals and dollars in rounds under $100 million, we see that both measures are down from Q1 and continue a general slide over the past year (Figure 1). Total Q2 dollars are down approximately $2 billion from the prior quarter and have returned to 2024 levels at $21.5 billion. Deal count is down by nearly 600 deals to a new low of 1,356 transactions. Importantly, the Q1 numbers are higher than initially reported as more data has come in, though the expected Q1 peak in deal volume is still relatively low.
Figure 1. Deal count and total invested by quarter for U.S. angel and VC deals less than $100 million from Q1 2023 through Q2 2026.
Looking more closely at what might be driving the totals, we see that all deal types other than angel deals exhibit similar downward trends (Figure 2). Angel deals are relatively flat, though their small number appears to be linked to how the category is defined rather than how many angels are investing in companies, since many angel investors participate in seed and VC deals. We do see that the bump in Q1 is linked to accelerator and incubator deals and begins to mirror other years’ first quarter activity, though at a lower level.
Figure 2. Deal count and deal type by quarter for U.S. angel and VC deals less than $100 million from Q1 2023 through Q2 2026.
Deal size, on the other hand, can begin to indicate where in the market companies are finding success or friction (Figure 3). While numbers at all transaction sizes are down, they are down more sharply in smaller rounds, particularly those below $1 million. Deals between $25 million and $100 million are on a slow rise over the past three years, even with quarterly variation. Deals either side of $10 million show where the split is, with deals below that level declining and above it holding steadier.
Figure 3. Deal count and deal size by quarter for U.S. angel and VC deals less than $100 million from Q1 2023 through Q2 2026.
As overall deals decline, examining the distribution of activity can help pinpoint more nuanced trends and where there might be relative strength (Figure 4). Indeed, as we look at the share of quarterly deal activity within each size segment, we see that the market is moving toward deals larger than $1M and away from smaller deals. If we take out the annual 18% Q1 bumps in deal activity between $500k and $1 million, deal activity in that segment appears steady at around 7%. The most significant decline is in deals under $500,000, a size that can be very important for startups launching out of universities or in areas of the country without deep venture pockets. The smallest deals have declined from a high of 36% of quarterly activity in 2023 to 13% in 2026. Deal segments larger than $10 million now account for 21% of activity, up from around 10% in Q1 2024.
Figure 4. Distribution of quarterly deal count by deal size for U.S. angel and VC deals less than $100 million from Q1 2023 through Q2 2026.
With VC activity continuing to shift from smaller deals to larger, early-stage companies not prepared or positioned to secure larger rounds may struggle to find initial funding. This puts dual pressures on TBED investors: first, to close financial gaps for promising companies, and second, to support the companies with resources that prepare them for credibly approaching investors with larger asks. While the market may find financial returns with a shift to larger investments, it begs the question of where companies that do not require, or do not yet have the data, to secure large checks will find the resources to move forward. Where will the pipeline of new companies be in 12-24 months if investment below $1 million continues to shrink? If TBED resources can position companies for seed rounds larger than $1 million, will local investors outside of the venture hubs have the resources to support them?
If these issues and questions resonate with your experience, please join our TBED Community of Practice to discuss early-stage investment and related topics with peers and experts in the field.
This page was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.