As per Silicon Valley Bank report published on trending impacts on private market, The second half of 2025 brings both challenges and opportunities for private equity (PE) and venture capital (VC) funds. Recent reports on private market trends highlight the global evolution of venture capital, emphasizing the rise of AI, cybersecurity, and fintech sectors.

Notably, 50% of AI VC deals are now outside North America, and India is emerging as a leader in IPO activity. It underscores the increasing role of institutional investors and the growing trend of outsourcing tax operations among private funds.

Market High  slights

• Tech & AI Acceleration: Funds with exposure to AI and frontier technologies are experiencing faster capital call activity, reflecting investor interest in high – growth sectors. AI and frontier tech remain where excess capital is most likely to concentrate (and may shield funds from broad fundraising drag).

• Fundraising Headwinds: Fundraisingwill be harder, but managers with resilient models, liquidity flexibility, and institutional appeal will fare better. Despite pockets of optimism, fundraising remains challenging due to slower exit markets and tighter LP scrutiny.

• Institutional LP Base Growth: Mature funds are increasingly attracting institutional LPs, emphasizing governance, transparency, and stickier capital.

• Operations, Governance, and Institutional – Friendly Infrastructure are no longer just “nice to have” – they are competitive necessities.  Nearly 90% of surveyed funds outsource at least half of tax and compliance work, highlighting the importance of operational efficiency

Adoption of AI in Private Marke

AI Hesitancy Disappearing

• The largest concentration of responses falls under “Adopting & Optimizing AI,” indicating that for most VC and PE firms, AI has moved from theoretical exploration to practical integration and enhancement within their operations.
• Only a small minority of firms’ report having already meaningfully integrated AI or are dealing with implementation hurdles, suggesting that widespread adoption and optimization are the current priorities.
• Secondary segments include those still exploring AI tools (17% VC, 27% PE) and those experiencing excitement without extensive real use (29% VC, 25% PE), showing a clear gap between enthusiasm and meaningful AI deployment.

Implications

• The data demonstrates that the majority of VC and PE firms are neither lagging in initial exploration nor fully mature in AI implementation. Instead, their efforts are concentrated in optimally scaling AI-driven initiatives.
• This indicates a shift in mindset from experimental to execution-focused, with AI adoption now becoming mainstream in investment firm strategy and operations.

The high percentages in the “Adopting & Optimizing AI” category imply that 2025 is a pivotal year for scaling up, operationalizing, and deriving measurable value from AI investments in the VC and PE ecosystems.

• This confidence profile suggests that while firms are actively engaging with AI, they acknowledge ongoing challenges and uncertainty.
• The large majority expressing “somewhat confident” points to a pragmatic, realistic outlook—AI adoption is underway, but mastery and full strategic benefit are still future goals.

Overall, most investment and corporate firms are amid building expertise and learning as they adopt AI, as shown by their moderate confidence levels rather than absolute certainty

Finval Insight

In a complex market, strategic positioning and operational resilience are critical. Our perspective emphasizes:

AI & Deep Tech: The Differentiator in Fund Momentum

• Across global VC markets, generative AI and large model infrastructure continue to dominate deal flows. According to recent outlook, software and AI companies now command ~45% of global VC funding, with “development tools” emerging as a faster-growing subcategory.
• This means that even within a tight fundraising environment, funds with credible exposure to AI / adjacent stacks may enjoy a premium in LP attention and capital deployment cadence.

FinVal Insight: If your fund has meaningful AI or frontier tech exposure, double down on narrative, IP moats, and milestone clarity. You can carve out a “differentiated lane” even when broader capital is cautious.

Fundraising Friction Amid Weak Exit Markets

• Exit markets remain soft, creating longer hold-periods, more write-downs, and muted distributions.
• The global private markets report from different sources suggests that VC saw a sharper decline in deal count and growth in deal value compared to buyout or mature strategies

FinVal Insight: Managers should revisit their return models to incorporate longer exit timelines, increased capital retention, and possibly hybrid liquidity mechanisms (e.g., GP-led secondaries). Emphasize downside protection and cash-flow resilience in your LP communications.

Institutional LPs: The “Safe Harbor” in Stormy Times

• Institutional LPs tend to be more process-driven, require greater transparency, and demand robust governance.
• However, they also tend to be stickier, more patient (within reason), and more willing to fund established track records under stress.

FinVal Insight: Early-stage or emerging managers might prioritize building “institution-friendly” infrastructure (reporting systems, ESG frameworks, audit standards) now, even before full scale, as a signalling tool to future LPs.

Operational Backbone & Efficiency as a Strategic Lever

• Because outsourcing is widespread—especially in tax, compliance, back-office—funds that can streamline operations without sacrificing control gain an edge.

FinVal Insight: Invest in tech-enabled operations (portfolio analytics, real-time dashboards, scenario modelling). Efficiency becomes a differentiator when “alpha potential” is more compressed.

Geographic and Regional Differentiation

• In Asia, capital flows remain sensitive to regulatory shifts (e.g., China) and sovereign bond yields.
• In India, domestic PE/VC is showed the signs of a rebound, with 2024 investments touching ~USD 56 billion, but couldn’t achieve the targets and showing declining trend.
• Emerging markets, particularly in Southeast Asia, are seeing earlier-stage deals but more fragmented exit paths.

FinVal Insight: Funds must calibrate strategies to regional idiosyncrasies—structuring fund vehicles, tax wrappers, investment horizons, and exit routes accordingly.