Venture capital outlook for 2026: 5 key trends

1. The IPO market builds on momentum

The heavily prophesized reopening of the IPO window built significant momentum in 2025 and, despite stumbling during the volatility in April, saw substantial progress in the third quarter of the year. IPO volumes and proceeds grew 20% and 84%, respectively,¹ in the last 12 months. Critically, success in 2025 required a new playbook. Namely, down-round IPOs (though once taboo) became commonplace. But many then traded up substantially post-listing (Figure 1), indicating investor appetite at realistic valuations.

We believe that the strong performance of high-profile IPOs in 2025, combined with a growing backlog of IPO-ready companies, suggests pent-up supply that should extend momentum into 2026. Allocators should consider whether they are positioned to benefit from these liquidity catalysts either directly or indirectly through later-stage exposure. 

Figure 1

2. M&A activity poised to accelerate

 Global M&A volumes are looking even rosier, surging in the third quarter of 2025 and on track to surpass 2021’s record highs.² Total announced deal volume was up 40% year over year, signaling robust demand for high-value strategic transactions, notably in the tech sector.³ This resurgence was fueled by a wave of late-quarter megadeals (namely, eight US$10 billion+ transactions globally), buoyant equity markets, and increased confidence in a potential Federal Reserve (Fed) rate-cutting cycle. Private equity sponsors led the charge, with global sponsor-backed M&A value up ~58% relative to 3Q24⁴ as buyout firms looked to capitalize on improved market conditions. Regulatory scrutiny remains a wildcard, though mid-market deals are expected to face fewer hurdles.

We believe M&A activity in 2026 will likely be driven by interest rates, with the ongoing rate-cutting cycle potentially accelerating with a new Fed chair in the spring.

3. Secondary markets go mainstream

Secondary transactions, which ballooned to ~US$160 billion in 2024, are projected to finish substantially higher in 2025, exceeding US$210 billion.⁵ This is largely due to successful fundraises for many large secondaries funds, as well as LPs, GPs, and founders increasingly turning to secondaries as a progressively more established avenue for liquidity.

As we’ve written previously, VC secondaries remain underpenetrated relative to other private equity strategies, with only ~2% of unicorn market value traded on the secondary market.⁶ We expect that 2026 will likely see secondaries increasingly become a core liquidity tool, and that the market will continue its growth as record 2025 fundraising is deployed. As liquidity normalizes and capital flows increase, we believe secondary pricing is likely to tighten, favoring early movers and primary investors exploring exit optionality.

Figure 2

4. The convergence of public and private markets

A fundamental part of Wellington’s private platform thesis over the past decade has been that startups are staying private for longer, and that more of their value is accruing to private investors. The distinction between private and public markets continues to blur as companies are reaching IPO at larger scale, private valuations are increasingly converging with public comparables, and information flow across the continuum is accelerating. 

Traditional silos between private and public allocations have begun to give way to integrated approaches, and allocators should consider whether their strategies capture value creation across both sides of the liquidity spectrum.

Figure 3 compares the 10 largest private companies a decade ago versus today. Though going public remains a critical exit opportunity for private companies, we believe these trends signal that there continues to be significant runway for value creation across the private markets. 

Figure 3

5. Venture capital’s flight to quality

We made it through four trends without talking about AI, but it would be a poor venture outlook that ignores it entirely. The VC opportunity set is bifurcated, with strong (often AI-driven) companies attracting capital while all others struggle. It’s no secret that AI startups are commanding significantly higher valuations and round sizes across all stages (Figure 4). The US led this trend, accounting for 85% of global AI funding and 53% of AI deals.⁷ It’s not just the home of the financing either: Four of the seven largest AI rounds were US-based.⁸

Critically, this hyperfocus on AI has had widespread impacts on fundraising for other sectors. Given the tighter purse strings in non-AI opportunities, only companies with the strongest competitive positions are attracting substantial funding. Investors are prioritizing companies with strong unit economics, growth, and defensible market positions. As concentration in top-tier assets persists, we believe 2026 will continue to reward selectivity and conviction. 

Figure 4

Bottom line on the venture capital outlook for 2026

As we look to the venture landscape in 2026, we’re optimistic about the potential for: 1) the IPO market to extend its momentum, 2) M&A activity to accelerate, 3) secondaries to increasingly become a mainstream liquidity option, 4) continued value creation in private markets, and 5) selectivity and conviction to be rewarded in venture capital. 

In our view, the 2026 venture environment will be defined by recovery but not uniformity. Capital is returning, but success will depend on selectivity, insight, and access. For investors, this moment represents both a return to activity and an opportunity to reenter the market with discipline.

¹“Q3 2025 has revitalized IPO enthusiasm,” EY, 24 October 2025. | ²“Q3 2025 Global M&A Report,” Pitchbook, October 2025. | ³“US M&A Activity Insights: September 2025,” EY. | ⁴Ibid. | ⁵“H1 2025 Global Secondary Market Review, July 2025,” Jefferies. | ⁶“Q2 2025 Pitchbook NVCA Venture Monitor,” July 2025. | ⁷“Q3 2025 State of Venture,” CB Insights | ⁸Ibid.

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