Investing in venture capital and growth equity today

So, what themes can be accessed?

AI Integration beyond tech

We see artificial intelligence not as a sector-specific theme but as a broad-based force for innovation affecting nearly every industry. The defining shift is from “software as a service” to “services as software.” This transition could represent a ~$6 trillion opportunity by decade-end as AI disrupts segments of the services industry. Promising sub-sectors, in our view, include:

• Agentic AI: Agents can be thought of as autonomous “digital employees” with the potential to automate half of supply chain tasks by 2030.
• Horizontal AI software: AI enabling workflow automation across core business functions such as customer relationship management.
• Vertical AI software: AI integrated into industry-specific tools, and being used to create entirely new ones.
• Industrial AI and automation: As part of a broader U.S. reindustrialization, industrial companies are expected to allocate 25–30% of capital expenditures to automation over the next five years, compared with just 15% average capex during the past five years.¹

The access point for this opportunity is overwhelmingly in VC and growth equity, given that the vast majority of software companies remain private through their highest-growth phase.

More than tech: Finding opportunities in healthcare, evolving definition of security

Venture capital and growth equity’s enduring appeal lies in their ability to capture long-term secular themes that are underrepresented or inaccessible in public markets. AI is a major theme, but we believe the opportunity is larger than that. Innovation in healthcare (drug engineering, digital health) and security represent robust multi-year growth themes.

• Healthcare:
  • We see an opportunity to speed drug development, as scientists move from testing compounds in a lab to using software to accurately model these interactions more quickly and at scale. Early studies indicate that AI could cut drug development timelines in half (typically a 15-plus-year process) by improving productivity from drug discovery to clinical trials to regulatory processes.
  • AI can help improve operational efficiency throughout the healthcare system, streamlining or eliminating much of the paperwork that plagues healthcare providers, hospitals and researchers.

• Security
  • 2025 was a record year for defense tech VC deal value at almost $50 billion across almost 1,000 transactions, with venture growth and late-stage VC capturing ~87% of deployed capital, and the growth, innovation and price-performance improvements are increasingly happening in private markets.²
  • Autonomous/unmanned systems are transitioning from R&D to market-ready commercialization, driving adoption across defense and commercial markets—the real-combat effectiveness of drones and AI systems in Ukraine converted defense tech from a speculative category to a battle-proven one, unlocking mainstream VC participation.
  • Next-generation cybersecurity, threat detection and AI-driven intelligence platforms are becoming essential as conflict moves into digital domains. Companies in these spaces are asset-light and software-driven and able to scale.
  • While still early stages, satellites, launch services and secure communications are increasingly becoming mission-critical infrastructure as the definition of “security” broadens beyond missiles and fighter jets, the space economy (~$613 billion today,³ with McKinsey projecting that spending will reach ~$1.8 trillion by 2035⁴) is becoming a commercial market with a government demand floor beneath it.
  • Energy and supply chain resilience: Securing supply chains and stable, efficient sources of power have become priorities for national security.

Is it too late for investing in venture capital given run-up in 2025?

A common question we get is, given the valuation increases we have seen in later-stage venture, is it too late? Parsing through venture further, the current environment suggests a thoughtful balance between early- and late-stage exposure may be warranted, with early-stage venture offering a particularly interesting risk/reward profile given where late-stage valuations sit today. A couple of supporting points:

• Valuation divergence across stages: Valuations have run much harder at later stages in the current cycle, dominated by LLM leaders, while Seed and Series A have stayed relatively more insulated. Over the trailing three years, median pre-money valuations are up roughly +170% (Seed) and +197% (Series A) versus +368% (Series C) and +564% (Series D+).⁵ Early-stage value tends to be more founder- and product-driven than public-market-multiple-driven, which may offer a degree of downside protection in a frothy environment.
• The AI “application” opportunity extends well beyond frontier models: While late-stage venture has been dominated by a handful of LLM infrastructure leaders, the emerging “application layer” of AI represents a broader and more diverse opportunity set. Innovation is increasingly happening at earlier stages, where founders are building vertical-specific tools, workflow automation and domain-adapted solutions on top of foundational models. This next wave of value creation may be better captured through early-stage exposure than through concentrated late-stage bets on incumbents.

Bottom line: A well-constructed venture allocation may benefit from exposure across stages, capturing the liquidity and de-risking advantages of late-stage while leaning into the alpha potential and valuation insulation that early-stage can offer. In today's environment, tilting toward smaller-cap, early-stage managers may represent an attractive way to enhance return potential without fully concentrating late-stage valuation risk.

Exit activity: Promising signs and implications

A market reawakening

Global capital markets activity is surging. M&A volumes are up roughly 45% year-over-year to about ＄3.5 trillion year-to-date, IPO issuance is on pace to exceed ＄200 billion in 2026 (approaching 2021 levels),⁶ and GP-led secondaries continue their multi-year climb. If these trends hold, 2026 could surpass 2021 as the biggest capital markets year of the past decade. The exit machinery (M&A, IPOs and secondaries) is clearly on the upswing, a welcome shift for an asset class that has run below-average distributions for years.

Mega-IPOs: A catalyst, not a cure-all

A handful of mega-IPOs are poised to validate the public listing route for two cohorts: thematically oriented companies in AI and defense/security and high-quality, profitable businesses with the scale and franchise value to command public-market interest. But these listings are unlikely to open the floodgates broadly. Companies that fall short on size, thematic relevance or profitability will keep exiting through alternative channels: GP-led secondaries, continuation vehicles, sponsor-to-sponsor deals and strategic M&A.

Critically, mega-IPOs could just as easily monopolize capital and crowd out smaller listings, reinforcing rather than undermining the "private for longer" thesis. The alternative exit ecosystem is here to stay: 2025 secondary volumes exceeded ＄240 billion (up 48% year-over-year), the GP-led market reached ＄115 billion and has compounded at roughly 30% annually since 2017, and single-asset continuation vehicles surged from ＄2 billion in 2018 to ＄31 billion in 2024, the fastest-growing segment of the secondary market.⁷ VC secondaries are gaining traction too. These options keep the private-for-longer dynamic structurally intact even as the IPO window reopens.