Venture Funding Undergoes Adjustment, But SaaS Stands Out Amid AI Boom
Venture funding is undergoing an adjustment, with a slight drop in total amounts, a slowdown in new investments, and a more selective environment among fund managers. But that doesn’t mean there’s no activity. In fact, according to an analysis by U.S.-based firm Carta, the Software as a Service (SaaS) segment is particularly shining, capturing the enthusiasm for artificial intelligence (AI) that is permeating international markets.
Aggregate figures from the firm’s startup network—around 4,500 companies—show a total capital raise of $46.9 billion in new venture funding during the first half of the year. This came from a total of 2,248 funding events.
Extrapolating this, the firm noted that the pace of investments is slightly slower than in 2024. Projecting the January–June figure across the rest of the year, Carta estimates that 2025 would close with around $93.8 billion—below the $97 billion recorded last year.
That said, this slowdown has not been felt equally across all sectors within the venture capital universe. SaaS, in particular, has attracted significant investor interest.
The firm’s data shows that SaaS-model startups in its network raised $9.7 billion in new funding during the second quarter of 2025, far outpacing other industries. In fact, over the past two years, funding in this segment has grown by 91%.
According to Carta’s report, this reflects “the explosion of interest in AI as a tool, with transformative potential for many companies that create and sell software.”
The only sector to surpass SaaS in funding growth between June 2023 and June 2025 is hardware. In that period, capital raised by such startups jumped by 110%. This, they add, is also tied to AI: “Likely influenced by the full arrival of AI and the powerful new chips required to train and deploy the latest models.”
In contrast, Carta highlights that other sectors within the startup space have experienced sharp declines in venture capital fundraising over the past two years. The most dramatic drops were seen in education (down 88.5% over two years), energy (84.8%), and consumer (25%).
A Challenging Environment
The strong performance of software and hardware companies comes at a time when liquidity is less available and managers are becoming increasingly selective.
In addition to less capital invested than last year—so far—Carta also noted that the pace of new investments has slowed “more substantially” since 2024. The number of deals in the first half of the year, they emphasized, fell 10% year over year.
Capitalization round data also show some weakening, with 13% fewer venture rounds in the second quarter. “This marks the fourth consecutive second quarter in which the number of new investments has declined year over year,” the firm stated in its report.
Still, Carta highlights that despite the slowdown, the total number of funding rounds and the total capital raised has remained fairly consistent over the last 10 quarters. Since Q4 2022, most quarters have seen between 1,100 and 1,400 new investments, and have raised between $20 billion and $25 billion.
Moreover, the firm points out that valuations continue to rise—at least in the early stages of company development. “In seed and Series A rounds, the median valuation was higher in the second quarter than it has ever been. Over the past year, the median valuation in Series A primary rounds has risen 20%,” they noted.
According to Carta, the combination of these funding dynamics points in one direction: that the venture capital industry is changing in the early days of the AI era. “Investors have become more selective in their investments, resulting in fewer deals. Powered by AI, many companies are able to do as much (or more) with less funding, reducing the need for massive checks,” they stated. Furthermore, they added, rising valuations suggest that “VCs believe many of these young, lean startups are poised for explosive and lucrative growth in the coming years.”
By Gabriela Huerta
