The End of Easy Money for Startups

The near-zero interest rate era of 2020 and 2021 flooded startups with capital and pushed valuations to the extremes. That cycle is now over though.

Headline venture capital (VC) deals remain elevated, but fundraising is slowing. Investors are more selective. And the terms are shifting in their favor.

Capital remains at the top with large AI deals receiving 64% of the funding in H1 2025. This means that for startups, it’s the end of “easy money.” Now, profitability, capital efficiency, and credible exit plans matter more than growth at any cost.

Did you catch the news?

Recently, Trump’s Treasury Secretary let slip:

“We’re going to monetize the most valuable asset of the United States.”

What did he mean, exactly?

As you’ll see, Trump could soon unleash a massive new boom in America. One that could dwarf the rise of crypto and NVIDIA, combined.

Former Presidential Advisor, Jim Rickards says:

“We’re talking about a state asset that’s so large – if you divide the figure by the number of households in America, it’d be enough to make every family millionaires.

And it will be unleashed starting as early as this summmer.”

For the full story, click here.

Fundraising pressure: American VC fundraising in H1 2025 totalled $26.6 billion over 238 funds. This is down -33.7% year-over-year following a decline in 2024.

Venture capital fundraising: $45.7 billion raised across 376 VC funds through Q3 2025. According to Pitchbook, this is on track for the lowest annual total since 2017, showing “the market’s difficulties.”

Deal concentration in AI: Year to end of Q3, VCs saw over 100 megadeals each quarter representing 70% of the annual deal value. It’s a level last observed in 2021 and 2022.

Venture funding might appear healthy in the headlines, but underneath, it tells a different story. Capital is tighter. But not absent. Fundraising is definitely slowing though.

Investor implications: With less capital chasing more companies, investors now demand a sound plan to profitability. Not to mention capital discipline and near-term sustainability.

Less capital available for startups: LPs are more cautious and the share of smaller deals (those under $5 million) has fallen from 55.4% last year to 48.5% this year. It’s a low not seen in a decade. That combination leaves many young companies reliant on shorter timelines and stricter milestones. Not to mention that it builds a higher bar for follow-up capital.

Global trend: Global VC funding reached $97 billion in Q3 2025. This represents a 38% increase year over year.

Beneath the headlines: What the numbers don’t say is that deal counts have softened. And the activity skews towards large round AI investments. Part of the reason these companies are attractive is that they have a sound path to profitability.

Implications for startups: Easy money allowed a generation of startups to grow first and worry about exits later on. That era is ending. In its place is a market that rewards immediate capital efficiency, sustainable business models, and a credible path to liquidity.

Tighter funding can blunt America’s innovation, putting startups to the test. When early-stage funding contracts, fewer companies can scale their businesses. And less private firms make it into the public markets. That ultimately narrows the pipeline of high-growth stocks available to public-market investors.

Takeaway

Historically, investors would need to chase the next unicorn in startup investing. But not anymore. Now, the challenge is to understand which companies can not only survive, but thrive when capital is no longer free.

— Lauren Brown
Editor, American Ledger

Sources:

Trading Economics, November 2025 https://tradingeconomics.com/united-states/interest-rate

Reuters, July 2025 https://www.reuters.com/business/us-ai-startups-see-funding-surge-while-more-vc-funds-struggle-raise-data-shows-2025-07-15/

Clipperton, November 2025 https://www.clipperton.com/wp-content/uploads/2025/05/From-VC-to-PE-The-2025-Guide-for-Tech-Startups-2.pdf

Pitchbook NVCA, October 2025 https://nvca.org/wp-content/uploads/2025/10/Q3-2025-PitchBook-NVCA-Venture-Monitor.pdf

Pitchbook NVCA, July 2025 https://nvca.org/wp-content/uploads/2025/07/Q2-2025-PitchBook-NVCA-Venture-Monitor-19728.pdf