PitchBook: 15.9% of VC-backed deals in 2025 so far have been down rounds, a 10-year high, with AI and ML startups accounting for 29.3% of the down rounds
Chime executives, along with family, celebrating the company's IPO at the Nasdaq. — The soaring valuations of the early 2020s are, finally, coming back to earth. Bluesky: @hsliwinski . X: @koolhead17 and @pitchbook Bluesky: Heather Sliwinski / @hsliwinski : But the All In podcast VC bros said Trump was better for entrepreneurs?! [embedded post] X: Atul Jha / @koolhead17 : AI startup on down round? Woot? ☹️☹️ @pitchbook : The soaring valuations of the early 2020s are, finally, coming back to earth. This week, PitchBook data revealed that 15.9% of venture-backed deals in 2025 so far have been down rounds, marking a decade high. Read more in @AGarfinks latest issue of @TheTermSheet ⬇️
Context & Ripple Effects
This valuation reset follows a period in which AI absorbed an outsized share of venture dollars: AI captured roughly two-thirds of US VC funding in H1 2025. The new down-round rate shows that abundant capital for the category has not eliminated repricing risk for individual companies.
The backdrop was already a constrained venture market, with the US VC investor base shrinking from its 2021 peak and limited exits restricting new activity. Down rounds are a concrete marker of how that tighter financing environment reaches existing portfolios.
First-order effects
- Startups raising at lower valuations face immediate dilution for founders and earlier investors, while employees may see the value of equity compensation reset.
- AI and ML companies account for 29.3% of these down rounds, placing a meaningful portion of the most heavily funded startup segment into valuation renegotiations.
Second-order effects
- Investors will have more leverage in follow-on financings, increasing pressure on portfolio companies to extend runway, cut spending, or accept more investor-protective terms.
- The gap between companies able to attract large AI rounds and those needing bridge financing may widen, even as AI remains a major destination for new venture capital.
Third-order effects
- If elevated down rounds persist, venture returns will depend less on paper markups from the 2021-era valuation cycle and more on realizable exits and disciplined follow-on pricing.
- The market may become more concentrated around firms with capital reserves and clear financing access, while weaker venture-backed companies face recapitalization, consolidation, or shutdown risk.
The trend: Venture capital is moving from broad, valuation-led expansion toward a bifurcated market in which AI funding remains abundant but companies are increasingly repriced on financing durability.