State of Markets Report: AI Not More Efficient, VC Dollars Increasing

The most recent SVB State of the Markets report has just been released, encompassing all venture and startup activity up to 12/31/25. This is the 30th edition of the report, and within its 34 pages lie crucial truths that every B2B founder, operator, and investor should take to heart.

Here are the top 10 key insights gleaned from the report. Some insights may confirm your existing perceptions, while others could potentially alter your approach to fundraising, burn rates, or exit strategies.

#1. Despite headlines proclaiming the resurgence of venture capital, the reality may be less rosy when mega-deals are removed from the equation. While the US saw a record $340B in VC funding in 2025, a significant portion of these funds—almost two-thirds—went to deals exceeding $500M. In contrast, activity in deals under $100M, where the majority of businesses operate, has remained largely stagnant, hovering around 1,150 deals per month. This suggests that outside the realm of mega-deals, the VC landscape may not be as buoyant as headline figures might suggest.

#2. While AI companies are currently receiving a substantial share of VC dollars, data from SVB indicates that these companies may not necessarily be more efficient. Despite the prevailing narrative of AI facilitating lean operations and swift growth, the report reveals that AI companies exhibit lower revenue per employee, weaker profit margins, and higher burn multiples compared to non-AI counterparts. This challenges the common assumption that AI equates to streamlined capital efficiency.

#3. Another worrying trend highlighted in the report is the marked decline in graduation rates among startups, with the average time to progress from seed funding to Series D now stretching to a decade. The report indicates that only a fraction of startups are successfully transitioning to the next funding round within a reasonable time frame, underscoring the need for founders to plan for extended runways and potentially embrace bridge rounds as a strategic necessity.

#4. SVB’s analysis further reveals that a significant proportion of VC-backed tech companies—approximately 20%—are at a standstill in terms of growth and profitability. These companies, termed “dead in the water” by the report, face limited options for survival beyond soft-landing M&A, acquihire, or closures. This underscores the harsh reality that persistent cash burn in the absence of revenue growth can spell the end for many ventures.

#5. Revenue benchmarks for startups are on an upward trajectory, with investors now demanding higher revenue thresholds for each funding round. The report highlights the escalating revenue requirements for top quartile companies at Series A, B, and C, indicating a shift towards risk aversion among investors and a greater emphasis on established revenue streams.

#6. Concerns regarding potentially inflated AI valuations are also addressed in the report, with SVB suggesting that the sector may be approaching bubble territory. Premiums for AI valuations compared to non-AI companies have reached significant levels across all funding stages, raising questions about the sustainability of current valuations and the likelihood of a correction in the future.

#7. The impact of immigration policies on the startup ecosystem is a pressing concern, with data revealing that foreign-born founders play a disproportionately large role in driving value creation within the US unicorn landscape. However, declining rates of F-1 student visa applications and issuances could potentially hinder the influx of future entrepreneurial talent, posing a long-term risk to innovation and economic growth.

#8. Despite the current window of opportunity for IPOs, the regulatory landscape has evolved, necessitating a shift in how companies approach the public markets. The report highlights changes in IPO norms and investor expectations, indicating a more stringent environment for companies looking to go public.

In conclusion, the SVB State of the Markets report offers a sobering assessment of the current state of the venture capital and startup landscape, urging stakeholders to reassess their strategies in light of evolving market dynamics and emerging challenges. As the industry continues to navigate uncertainty and volatility, adaptability and foresight will be key attributes for success in the B2B sector.