Funding rebound ahead? 5 key predictions for VC in 2025

The venture capital industry has struggled in recent years, with 2024 being the second straight year in which global fundraising was less than half of its peak in 2021, despite some optimism early in the year.

Singapore-headquartered firms saw a decline in 2024 deal value to S$4 billion (US$2.9 billion), a dip from the S$8 billion (US$5.9 billion)-plus levels in 2021 and 2022.

Are we in for another gloomy year? What sectors will VCs focus on in 2025? Here are five trends to look out for.

VC funding to pick up in H2

As interest rates fall and the IPO market rebounds, we’ll see things improve for the VC sector, with more activity toward the second half of 2025.

IPOs are expected to surge this year for three reasons. First, IPO activity in the US tends to follow a cyclical trend, where activity peaks every three years, and the end of 2024 marks the end of the third year.

See also: Should Indonesian startups brace for a stormy 2025?

Second, US IPO activity tends to be 39% higher in post-election years compared to election years.

Third, we’ve seen strong performance in 2024 IPOs, with those in the US outperforming the S&P by almost 10%. Leaders usually analyze peers that have gone public when deciding whether to go public, so this suggests more firms will take the plunge.

Grab co-founders ring the opening bell in Singapore as Grab goes public on Nasdaq in 2021 / Photo credit: Grab

With a rebound in IPO activity, VC firms are set to realize returns on investments and disburse funds to their limited partners (LPs). This is critical as it’s been a tough period for VCs without much liquidity, and LPs are placing more emphasis on distributions to paid-in capital (DPI).

Funds with the potential to deliver DPI faster and benefit from exits will instill confidence in their LPs, and will then find it easier to raise capital for future investment vehicles.

Southeast Asia will continue to attract founders

The region will continue attracting capital globally as its consumer base grows. Gross merchandise value of Southeast Asia’s digital economy reached US$263 billion last year, a 15% growth from the year before, indicating sustained demand for digital services.

Moreover, an increasing number of founders, both from the region and beyond, are choosing to capitalize on the relatively low-cost operating environment in markets like Vietnam and Indonesia to build ventures. While there are fewer risks when building in developed markets like the US, emerging economies present untapped opportunities.

Web3 is back

AI will continue to dominate

Trump isn’t the end for climate tech