We run capital raises for a living. Series B, growth rounds, the occasional structured secondary. We sit in the room when term sheets land and when they don’t. We hear what investors say to founders and what they say to each other after the founders leave. That perspective shapes everything in this piece.

The venture market in 2025 deployed $425 billion globally.1 That is an enormous number. It is also deeply misleading. A third of all US venture dollars went to the top 1% of companies by valuation. Just 7% reached the bottom half.2 Five AI companies alone, OpenAI, Anthropic, Scale AI, xAI, and Project Prometheus, absorbed $84 billion, roughly 20% of all global venture capital for the year.3 If you are building an AI infrastructure company with a billion-dollar narrative, capital has never been more available. If you are building anything else, you are operating in a fundamentally different market.

This is the bifurcation. Two markets wearing the same name. And it defines every conversation we have with founders and boards who are planning raises right now.

The Growth-at-All-Costs Era Is Over

Every few years, the venture industry collectively decides what it cares about. In 2017, it was growth rate. In 2021, it was TAM and narrative. Right now, it is efficiency. Not as a talking point. As the thing that determines whether you get a meeting.

We have had investors tell us, directly, that they will not look at a company with a burn multiple above 2x. Not won’t fund. Won’t look. The top-quartile Series B companies we see are running at 1.0 to 1.5x burn multiples, meaning they generate roughly a dollar of net new ARR for every dollar and a half they burn.4 The median across Series A and B SaaS companies has settled around 1.6x.5 That is the new center of gravity.

The Rule of 40 used to be something people talked about at board meetings and then ignored. Now it is a gating criterion. Your revenue growth rate plus your profit margin needs to clear 40%. We have seen term sheets evaporate when diligence reveals a Rule of 40 score in the mid-30s. It happens quietly and it happens fast.

What is more interesting is how investors are weighing the components. A company growing 30% with 10% positive margins will often generate more interest than one growing 80% while burning 40%. The math works out the same on the Rule of 40, but the first company signals control. The second signals dependency on continued capital infusion. Investors have been burned enough to know which one they prefer.

The ARR bar has moved up meaningfully. The median Series B company now shows about $8.4 million in ARR. Top quartile is closer to $15 million.6 That is up roughly 20% from the year before.7 When we advise companies on timing, we generally want to see $8 to $12 million in ARR with a credible path to $15 to $20 million within 12 to 18 months of close.

The AI Question

Half of all global venture funding in 2025 went to AI-related companies. Over $211 billion.8 The OECD puts the number even higher, at 61%.9 However you measure it, AI is absorbing the majority of available venture capital and distorting the entire market in the process.

But here is what we see in practice that the macro numbers miss: having AI in your deck is not enough. Everyone has AI in their deck. The investors we work with have gotten very good, very quickly, at distinguishing between companies where AI is structural and companies where it is decorative. The first category changes the cost structure, creates capabilities that did not exist before, and shows up in the financials. The second is a features page update.

Companies in the first category are commanding valuations two to three times higher than non-AI peers at similar revenue levels. The median AI Series B is coming in around $90 million, compared to $38 million across all sectors.10 These are materially different raises with materially different investor expectations.

The capital intensity cuts both ways. Investors writing larger checks into AI companies expect faster scaling, wider moats, and more defensible positions. The tolerance for ambiguity is lower, not higher, when the check is $90 million instead of $35 million. Founders in AI need to understand this.

What Happens in Diligence Now

The Series B diligence process has become something unrecognizable compared to even three years ago. Term sheets used to come first, with real diligence happening after. That order has flipped. Today, investors spend months picking apart a company before they will commit to anything.

Customer reference calls now include churn analysis and NPS deep dives. Security audits are standard. Organizational assessments have moved from nice-to-have to mandatory. Multiple investors we work with have built internal data science teams whose sole job is to independently model a company’s unit economics before a term sheet goes out. Background checks on founders go well beyond LinkedIn. Competitive positioning analysis now includes mapping potential acquirers.

The timeline reflects this. The median gap between Series A and Series B has stretched to 2.8 years, up from 18 months in 2017. Almost one in five Series A deals in 2025 were raised by companies that had already done a seed extension, which tells you how long the path to each next stage has become.11

This has a direct, practical consequence for runway. We tell every Series A company we work with to plan for 24 to 30 months of runway. If you enter a Series B process with less than a year of cash, you have given away your leverage. Valuations compress. Terms get worse. Investors can afford to wait you out, and they know it.

Down Rounds and the Valuation Reset

Nobody likes talking about down rounds, but the data is impossible to ignore. Nearly 16% of all venture-backed deals in 2025 were down rounds, the highest rate in a decade.12 In Q2 2025 specifically, the number was over 20%.13 For companies that raised at inflated valuations in 2021 and 2022, the correction is real and it is not going away.

We have helped boards navigate several of these situations. The conversation is never easy. But a well-structured down round that resets the cap table, brings in strong new investors, and gives the company real runway is almost always better than the alternative: an extension round that delays the reckoning while burning through what cash remains.

The median Series B pre-money valuation rose to about $119 million in Q3 2025, up from $103 million a year earlier.14 But that number is heavily skewed by AI. The typical non-AI company we advise is pricing between $80 and $100 million pre-money. Round sizes are landing between $25 and $40 million for most sectors, with AI companies pulling the overall median up toward $40 to $53 million depending on which dataset you reference.15

Geography still matters. California accounted for 48 of 115 tracked Series B rounds in early 2025, with $17.9 billion in deployed capital. New York and Massachusetts were distant runners-up.16 That said, we are seeing real appetite for companies outside traditional hubs, especially those that have used distributed teams to keep burn rates low.

The Exit Picture

There is some genuinely good news here. Venture exit value nearly doubled in 2025, reaching roughly $300 billion across about 1,400 transactions.17 That is one of the strongest exit years in a decade. The IPO window is cracking open. M&A is picking up, with VC-backed buyers now involved in 46% of deals.18

Secondary markets have also become a real tool. Secondary transaction volume hit $210 billion in 2025, up from $160 billion the year before.19 We are actively advising companies on structured secondaries as both a bridge to primary fundraising and as a standalone liquidity option for early investors and employees. The secondary market is still underpenetrated, with only about 2% of unicorn market value trading on secondaries, so there is room for this to grow substantially.20

Why does the exit picture matter for Series B? Because investors care about paths to liquidity. A company that can articulate a credible three to five year exit narrative, whether that is IPO, strategic acquisition, or a structured secondary, has a materially easier time raising. A company without that narrative is asking investors to take a leap of faith that the market simply does not reward right now.

What We Tell Founders

When a founder or board comes to us and says they want to raise a Series B, the first thing we do is an honest assessment of readiness. Not everyone is ready. That is not a bad thing. Going to market too early is far more damaging than waiting an extra quarter.

The companies that raise well right now share a few things in common. They have go-to-market infrastructure that matches their product. Brilliant engineering paired with immature sales and marketing is the most common gap we see in Series A companies, and it is the one that kills Series B processes. They have cohort-level data on every metric that matters: burn multiple, NRR, CAC payback, Rule of 40. Not just current snapshots but trend lines that show improvement. They have a real AI thesis, not a slide but a thesis that shows up in their cost structure or their product capabilities. And they have runway. At least 18 months, ideally 24 or more.

The market is not broken. There is more capital available than almost any year in history. But it is concentrated, the bar is higher, and the process is longer and harder than it has been in a decade. The question for founders is not whether capital exists. It is whether you are positioned to access it.

If you are thinking about a raise in the coming quarters, we are happy to have the conversation. That is what we do.

Notes and Sources

1 Crunchbase, “Global Venture Funding In 2025 Surged As Startup Deals And Dollars Hit Third-Largest Year,” January 2026.

2 SVB, “State of the Markets H1 2026: The Bifurcated VC Market,” March 2026.

3 Crunchbase, January 2026. OpenAI, Anthropic, Scale AI, xAI, and Project Prometheus each raised over $5 billion in 2025.

4 Runway Financial, “Burn Multiple Benchmarks for 2026,” February 2026.

5 CFO Advisors, “Burn-Multiple Benchmarks 2025: What VCs Expect Pre-Series B,” July 2025.

6 Carta, State of Private Markets Q3 2025, as reported by Peter Walker.

7 Carta Q3 2025 vs. Q3 2024 data; median ARR at Series B increased approximately 20% year-over-year.

8 Crunchbase, January 2026. Roughly 50% of all global venture funding in 2025 went to AI-related fields, totaling $211 billion.

9 OECD, “AI Firms Capture 61% of Global Venture Capital in 2025,” February 2026.

10 LeadMagic, “187+ Series B Startups,” March 2026. Median AI Series B round at $90M vs. $38M overall median.

11 SaaStr, “$340 Billion in VC, But Fewer Deals Than Any Year This Decade,” February 2026.

12 PitchBook, as reported by Yahoo Finance and Fortune, August 2025. 15.9% of venture-backed deals were down rounds.

13 JD Supra, “Deal Count Increases and Invested Capital Down for Late-Stage,” August 2025. Q2 2025 showed 20.5% down rounds.

14 Carta, State of Private Markets Q3 2025. Median Series B pre-money valuation: $118.9M (primary rounds).

15 Fundraise Insider (median $38M) and LeadMagic (median $53M), March 2026. Zeni/Carta reported average of $29.4M in Q3 2025.

16 Fundraise Insider, “List of Funded Series B Startups,” March 2026. Geographic data from January-April 2025.

17 Forbes/TrueBridge, “The State of Venture Capital in 2026,” March 2026; Fidelity Private Shares, March 2026.

18 SVB, “State of the Markets H1 2026,” March 2026.

19 Wellington Management, “Venture Capital Outlook for 2026,” December 2025.

20 Wellington Management, December 2025.

‍