Tariffs, turbulence, and tightropes

Edward Lance Lorilla
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163 minute read
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Also: Ranking the most active investors of Q1; New tech research on enterprise SaaS and crypto; AI versus everyone else in venture capital dealmaking.
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The Research Pitch
May 17, 2025
Presented by Fidelity Private SharesSM
2025's top investors: Our Global League Tables have been updated to reflect Q1's most active investors by region, industry, and more—plus top advisors, acquirers, and law firms. See the rankings.

Tech VC trends: You can access previews of our new client-only reports on enterprise SaaS and crypto, two verticals that had a huge Q1 for deal value.

Private credit focus: Our US Private Credit Monitor provides a high-level view of estimated volume and counts, spread distribution, and much more. We've also launched our quarterly survey, where you can help us understand the trends you're seeing.
 
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PE in 2025: Unrealized and unsettled
The handoff from 2024 to 2025 came with a bit of a buzz.

There was a growing sense that we might be heading into a new cycle, one defined by stronger growth, lower interest rates, and a clearer runway for buyout dealmakers.

That optimism may have been short-lived.

Q1 brought renewed uncertainty, particularly around trade policy. Talk of new tariffs had been swirling for weeks, and when they were officially announced in early April, it prompted many companies to hit the brakes on big decisions. That kind of wait-and-see environment tends to freeze business activity.

Private equity is not immune to these pressures. While PE is often seen as more resilient in the face of short-term noise, buyout dealmaking still hinges on stable conditions, predictable financing, and healthy exit channels.

Deal and exit activity improved throughout 2024, but those gains merely brought activity back to long-term trend levels, not beyond. Looking forward, the macro backdrop appears unlikely to support continued momentum.

On the exit side, there is still a hefty backlog. We estimate that close to $100 billion in exit overhang has built up relative to what long-term trends would suggest. Clearing that backlog would require a sustained period of above-trend exit activity, which seems unlikely in the near term.
 
Click for a larger view of this chart on buyout fund NAVs.

This exit drag is slowing the capital recycling mechanism. The median holding period for buyout-backed companies is 3.5 years, and more than 30% have been held for 5+ years; both figures are at decade highs.

As realizations slow, fund NAVs are aging. Roughly 40% of buyout fund NAV, or about $826 billion, is 7+ years old.

Typically, buyout fund NAV peaks around year five or six at about 80% of the total commitment size. In recent vintages, NAV has peaked higher and later, and it's not winding down as quickly as expected. This pattern suggests GPs may be either unable or reluctant to realize investments.

All of this has kept a lid on distributions. The result is a growing mismatch between the distributions LPs expect and the capital currently being returned.

Given the current level of fund NAVs, we estimate that distribution demand in 2027 will be close to $360 billion, which is far more than the $191 billion distributed in 2024.

You can read more about the buyout landscape in our free report: Q2 2025 Quantitative Perspectives: False Start

Please reach out if you have any questions or feedback.
 
Thanks,

Nathan Schwartz
Sr. Quantitative Research Analyst
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A tale of two markets: AI strength and VC weakness
Tariff tensions have delayed VC's anticipated liquidity rebound to Q4 at the earliest.

For most sectors, this means continued fundraising challenges and softening valuations, particularly at later stages.

But for AI, the story is strikingly different.

In Q1 2025, AI & ML captured over 70% of VC deal value and one-third of deal count, with valuations and deal sizes commanding significant premiums.
 
AI's share of deal value has skyrocketed up from 25% in 2022.

Outside of this AI-driven surge, the broader VC landscape remains sluggish.

Over a quarter of rounds were flat or down, valuation growth between rounds remained modest, and many mature startups are deferring their next raise.

Although the one-year IRR turned positive, it's more a signal of a bottoming market than a bounce back. And while secondaries and early-stage M&A offer glimmers of liquidity, their impact remains limited.

Overall, 2025 is shaping up to be a bifurcated market.

AI continues to defy gravity, while the rest of VC grapples with a volatile market and elevated valuation overhangs.

Until there is more policy certainty, expectations for a broader recovery may need to wait until next year.

For more data and analysis, download the full report: US VC Valuations and Returns Report
 
Best,

Emily Zheng
Senior Analyst, Venture Capital
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Webinars & Events  

Upcoming events to watch:

May 27: From diagnostics and digital health to robotics and remote care, the medtech sector is evolving rapidly—and so is the funding environment. Senior analyst Aaron DeGagne will break it all down with a panel of industry professionals. Register here.

June 2-6: PitchBook is sponsoring SuperReturn in Berlin, where our head of credit and US PE research, Marina Lukatsky, will share findings on the state of the private credit market.

June 3: As startups remain private for longer and traditional exit avenues stall, VC secondaries have emerged as a compelling yet often misunderstood path to liquidity. We'll discuss the new trend with professionals from Industry Ventures and Caplight. Register here.
 
 
In the News  

Our insights and data featured in the press:

 • "The view of where we see performance headed is murky at best." [AltAssets]

 • Flat and down rounds are at the highest level in more than a decade. [Institutional Investor]

 • Why it will take longer than expected for consumer retail M&A and dealmaking to recover. [Axios Pro]

If you're a journalist interested in interviewing our analysts or requesting data, contact our PR team.
 
 
ICYMI  

More of our recent research (* - preview):

Market updates

 • 2029 Private Market Horizons
 • Global Fund Performance Report
 • Global M&A Report
 • Italy Market Snapshot

Thematic research

 • Medtech Tariff Impact Roundup
 • Stripe Sessions 2025
 • 2025 LSX World Congress
 • Paris Blockchain Week

Industry & tech research

 • Consumer Retail & Services Report*
 • Enterprise Fintech VC Trends*
 • Supply Chain Tech VC Trends*
 • Construction & Engineering: Launch Report*

Credit research

 • US Credit Markets Weekly Wrap
 • US High-Yield Bond Weekly Wrap*
 • Global CLO Weekly Wrap*
 • Global Distressed Credit Weekly Wrap*
 • US Private Credit & Middle Market Weekly Wrap*

Coming next week (subject to change)

 • European VC Valuations Report
 • France Private Capital Breakdown
 • Tech VC Trends: Healthtech*, Clean Energy*
 • Aerospace & Defense Report*
 • Tech Landscape: Restaurant Tech*
 
 

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