Fenwick partners Kat Duncan and Al Cooper recently joined Venture Capital Journal to share insights and analysis from the Q1 2025 Venture Beacon report, produced by Aumni, a J.P. Morgan company, in collaboration with Fenwick.
Average Q1 deal sizes declined across all funding stages compared to the previous quarter as investors allocated more capital to existing portfolio companies rather than pursuing new investments. But AI stands out as a significant driver of activity, accounting for nearly one-third of early-stage capital raised and close to two-thirds at later stages, Duncan told Venture Capital Journal.
“AI continues to be a huge part of fundraising in Q1,” illustrating that strong AI-focused companies are commanding valuations well above other sectors even as overall deal sizes change, she said.
What appears to be a large early-stage round often reflects substantial groundwork completed before the first priced round, according to Cooper.
“Oftentimes, when companies are doing their first priced round, they’ve actually gone through a little bit more,” she said, explaining that the preparation gives investors greater confidence to deploy capital at higher valuations.
Cooper also highlighted that extension rounds rose to 28% of funding activity last quarter, while the median time between rounds shortened, indicating that founders are moving more quickly to secure capital and reach milestones.
While the market remains selective, both partners noted signs that founders are in a somewhat stronger position than before. The report shows an improvement in dilution levels, suggesting many founding teams are able to hold on to more ownership when raising new funding, even as investors stay cautious. At the same time, investors are looking for added protections to manage risk.
The quarterly Venture Beacon report is designed to help founders, investors, and the broader startup community stay informed and ready for what’s ahead.
Check out the full Venture Capital Journal article for more insights.