AI Investment Boom Intensifies Divergence in Venture Capital Market, Small and Medium Funds Face Challenges

The venture capital market is experiencing significant structural divergence, with funds concentrating on top artificial intelligence startups. Many small and medium-sized venture capital funds are facing challenges such as fundraising difficulties, declining performance, and narrowing exit channels. Only five companies—OpenAI, Anthropic, xAI, Waymo, and Nscale—accounted for 78% of all venture capital transaction volume in the first quarter of this year. Funds are flowing to a few top investors who made early bets on AI, such as Founders Fund and Andreessen Horowitz, making it difficult for small emerging fund managers to compete. Fundraising data shows that newly established management companies raised only about $62 billion last year, a significant decline of approximately 60% from the pandemic peak of $163.4 billion in 2022. Even experienced management teams raised only $84 billion last year, just one-third of the amount raised in 2022. Many limited partners (LPs) are facing liquidity pressures and are more inclined to demand returns on existing investments rather than commit new funds.

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