#254: Q2'25 VC Valuation Policy & Insights
Valuation policy matters more than ever. AI dominates. The exit window creaks open.
As we move through 2025, the venture market is beginning to feel familiar—but with new rules. Valuations are trending up. Deals are harder to close. Founders are getting more favorable terms—but only if they can clear a higher bar.
Behind the headlines, a deeper shift is underway: valuation policies are becoming central to LP conversations, audits, and follow-on fundraising. Markups are back in style—but how you get there matters more than ever.
Here’s a tactical recap of Q2 2025, with updated data from Carta’s State of Private Markets: Q1 2025, PitchBook-NVCA, and siliconAngle—and a full archive of past valuation deep dives at the end.
📈 Valuation Trends: Early-Stage Stability, Late-Stage Rebound
Early-stage is leveling off
From Carta’s Q1 2025 report:
“Pre-money valuations rose across all early-stage rounds… driven by increased competition among VCs for high-end deals, even as deal activity continues to slow.”
Median Seed valuation: $16M (+18% YoY)
Median Series A: $48M (+9% YoY)
But:Seed deal volume: −28% YoY
Series A: −10% YoY
Late-stage capital is back—but cautious
Median Series D: $618M (+211% YoY)
Series E+: up 138%
These gains reflect confidence in revenue-backed leaders—not across-the-board optimism.
Dilution is shifting in founders’ favor
Series A: 17.9%, down from 20.9% last year
Good teams are commanding better terms—especially in competitive rounds.
📚 Valuation Policy: Why It Matters Now
With Q2 exits rebounding and fundraising cycles reopening, GPs need clear valuation frameworks. Markups are no longer enough to justify performance.
Key issues LPs are flagging:
Is your valuation policy consistent across funds and vintages?
Are you applying third-party pricing (e.g., 409A, public comps, secondary data) appropriately?
Do you revisit valuations quarterly—or only when fundraising?
If your pricing logic feels aggressive, it will be questioned.
Recommended resources for GPs:
These are essential reads for anyone preparing for year-end audits, LP meetings, or follow-on raises.
🔍 Market Structure: Fewer Deals, Bigger Rounds, AI Dominance
Deal count is shrinking, but check sizes aren’t
Carta’s data shows continued contraction in volume—but rising valuations. It’s a flight to quality and a return to fundamentals.
AI still pulls capital like a black hole
AI deals made up ~2/3 of all U.S. VC deal value so far in 2025 (PitchBook-NVCA via SiliconANGLE)
Mega-rounds for Safe Superintelligence, Grammarly, Thinking Machine Lab, and Anduril accounted for $24B+
Carta: 48% of late-stage capital went to AI
Seed-stage AI valuation: $17.9M (42% higher than non-AI)
“Nearly half of all late-stage capital raised went to AI… even at seed, AI valuations outpaced the rest of the market.”
— Carta Q1 2025 Private Markets Report
💸 Exit Activity: Healthier, But Still Selective
Q2 exits totaled $67.6B, the strongest quarter since the downturn began.
“While IPO activity remains limited, the size and value of exits are trending upward… driven by M&A and a few blockbuster public listings.”
— SiliconANGLE
It’s not a full recovery—but it’s no longer a drought. DPI pressure is softening. Secondary liquidity is thawing.
📊 Sector Movements: Deep Tech, Climate, and Health Are Climbing
GVCLab reports that Deep Tech & Robotics overtook traditional AI/ML in deal count and capital in Q2. It reflects a growing appetite for higher-risk, longer-duration innovation—especially in hardware, automation, and core scientific R&D.
Also seeing renewed momentum:
Fintech (especially AI-powered back-office tools)
Digital Health (AI-enabled diagnostics and clinical ops)
Climate Tech (storage, carbon removal, grid tech)
These aren’t just thematic bets—they’re becoming core allocations.
🗂 Not Our First Rodeo: Historical Posts to Reference
We’ve covered valuation strategy and policy rigor before. If you're building your own policy—or just prepping for LP questions—here’s your starting point:
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key Q for GPs re: valuation policy — “tell me about the companies you have you marked down that haven’t raised since before Q2/22, how much you marked down, and why?”
“now tell me about the companies that have not raised in the past 3 years that you are still holding at pre-2022 valuations — are they profitable? are they growing @ >30% YoY? if not, why haven’t you marked them down?”