Some Insights on the Current State of the VC Industry (2026 Edition)

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Armilar Investors' Day 2026 - State of the Venture Capital Industry by Pedro Ribeiro Santos Armilar

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At Armilar’ s 2026 Investors’ Day, we once again paused to reflect on the state of Venture Capital — where the industry stands, what’s changing, and where the next opportunities may lie.

Last year, we called the arrival of Spring, but on a different planet. Capital was starting to flow again but liquidity remained scarce, with AI becoming the dominant investment theme that was changing the rules of the game. One year on, the Spring is still alien — and if anything, stranger than before.

Here’s a glimpse of what we covered:

• Capital is flowing — global VC investment volumes have recovered, growing 25% to over €460B deployed at scale in 2025 against the trough lows of prior years
• But we’re placing fewer bets — deal count fell by more than 40% since 2021 and keeps dropping; more capital is chasing far fewer companies
• A new giant species has emerged — funding rounds of over €500M accounted for 31% of capital and just 0.2% of deals, with the top 5 companies alone (AI companies, all of them) consuming 50%
• The exit backlog is starting to move — M&A exit values from VC-backed companies have more than doubled in 2025; but the IPO window has barely cracked open, with only 21 tech companies listing their shares
• Going public requires powerful rockets — high valuations in a context of low multiples, demanding revenues in the range of $1B, and a substantive level of growth of at least 20% yearly
• The secondary market is filling the liquidity gap — annualized US VC secondary market value reached $106B in 2025 — a value comparable with that of the two “traditional” exit routes, M&A and IPO
• The VC funds market is bifurcating — while “traditional” VC funds saw primary capital raised fall by 40%, with larger funds hit hardest, large growth/expansion funds, who started placing large bets in the world of startups, have felt no shortage of funding and are seeing increased concentration: approximately 50% of all capital raised went to just 6 firms
• AI is consuming most of the oxygen — 55–60% of all VC investment now goes into AI-related companies, across all stages, with €220B deployed in 2025 and valuations increasing sharply
• The software industry is under fundamental attack — a rapid succession of product / technological announcements by the world’s leading AI companies has triggered a massive sell-off of software stocks, sending revenue multiples to a historic low, reaching levels of discount that seem to contradict the actual performance of large and established software companies and triggering the largest stock buyback in history
• But the AI-driven “SaaSpocalypse” is not the end of software — while SaaS companies without a compelling moat or the capacity to adapt will suffer and indeed risk disappearing, for the stronger software companies AI is massive tailwind: they can use it to greatly expand the value offered to their customers and, with it, increase their incumbency and widen their moats, even if they need to rethink their business fundamentals
• What we’re witnessing is a Cambrian explosion, not an extinction event — in addition to the development of the stronger incumbents, AI opens the doors to new opportunities that were inaccessible before; the world is still short of software to help solve relevant problems, and the software industry ahead will be larger and more value-adding than the one we know today.