AI's Unchecked Dominance in Venture Capital Leaves Smaller Funds Behind
Venture capital has become increasingly concentrated in AI startups, leaving smaller funds and those focused on crypto struggling to compete.
In the first quarter of 2026, global VC deployment reached a record $297 billion, with AI startups capturing 81% of that total, roughly $242 billion. This represents a significant increase from 30% just two years prior in 2022 and 61% across all of 2025.
The majority of this funding is going to mega-rounds exceeding $100 million, which accounted for approximately 73% of total AI deal value in 2025. Fewer than 3% of all deals generated the majority of invested capital, with OpenAI alone raising $122 billion in a single funding round during Q1 2026.
The squeeze is hitting crypto-focused VCs particularly hard, with several reporting a drain of both talent and limited partner interest toward AI-focused strategies. LPs are increasingly asking why they should back a crypto fund when AI funds are posting eye-popping deployment numbers.