‍TL,DR:
Venture funding is recovering but unevenly, with North America dominating while new hubs like India, Mexico and Riyadh are on the rise. AI now attracts almost half of all venture capital, yet defensibility and differentiation matter more than speed to launch. Investor behavior has shifted toward quality and profitability, creating better opportunities in climate, health and deep tech. For founders, the mandate is to build with depth, resilience and global perspective. For investors, conviction and focus are now more critical than ever.

After a whirlwind first half of the year with our Summits in Porto Alegre, Madrid and our European Roadshow, I finally took a few weeks offline to recharge. That pause gave me the distance to digest the conversations we had on stage and the countless insights shared in hallways, investor roundtables and founder meetups. When I step back, a few clear signals emerge about where the global startup ecosystem is headed and what this means for founders and investors navigating the second half of 2025. Here are a few reflections:

A Recovery, but Not for Everyone

The first signal is that capital is flowing again, but unevenly. Global venture funding reached 91 billion dollars in Q2 2025, the strongest half year since early 2022. At first glance that sounds like a solid recovery, yet dig deeper and the divergence is striking.

North America is powering ahead, capturing 70 percent of all VC dollars, largely thanks to large scale AI transactions. Europe by contrast has seen its share shrink from 19 percent to 13 percent as late stage deals dried up. Meanwhile, India is seeing a surge in fintech and mobility, Mexico has overtaken Brazil for the first time in a decade, and Riyadh’s ecosystem score more than doubled on the back of Vision 2030 investments.

The takeaway is clear. Opportunity is no longer concentrated in a handful of hubs. The most resilient ecosystems are those that build bridges across regions and do not confine their outlook to Silicon Valley or any single city.

AI at the Center, but the Story is Defensibility

The second signal is that AI is everywhere. It now attracts around 45 percent of global venture funding, and in the first half of 2025 generative AI startups raised more than they did in the whole of 2024. I have seen founders launch AI products in a weekend, stitching together open source models and APIs with impressive speed.

But speed alone does not build lasting companies. Many of these products can be replicated within weeks. What matters now is defensibility. The founders who will succeed are those who can combine AI with proprietary data, deep domain expertise and real traction in the market. Without that, AI is just another commodity. The investors I speak to are increasingly alert to this, moving past the hype and looking for evidence of moats, not just clever demos.

The Investor Reset

The third signal is a reset in mindset among investors. The days of growth at all costs are gone. Valuations have corrected by 20 to 50 percent since 2021 in most sectors, and investors are concentrating capital in fewer but larger bets. This means late stage companies are under pressure to demonstrate profitability, but it also creates better entry points for long term ideas.

I see this as healthy. It forces both sides of the table to sharpen their focus. For founders, it means being crystal clear on the path to revenue and profitability. For investors, it means rediscovering conviction, the willingness to back bold ideas in areas like climate, health and deep tech where timelines are long but the impact could be enormous.

Shifts in Key Sectors

Beyond AI, three sectors stand out in 2025:

Climate technology is maturing. Funding has dipped 40 percent since its 2021 peak as the wave of generalist capital recedes. But this is not a sign of decline. It is a sign of focus. Serious climate investors remain, and they are betting on fusion energy, grid infrastructure, sustainable agriculture and AI applications for climate. The challenges are massive, but so are the opportunities.

Deep tech and robotics are rising. From semiconductors to drones to space technology, investors are showing appetite for harder sciences and engineering breakthroughs. These ventures may not produce instant unicorns, but they build high barriers to entry and shape the industries of tomorrow.

Health and biotech are mixed. Traditional biotech is struggling with cautious capital and tough public markets, yet digital health is reviving. Sixty three percent of recent funding went to AI powered health startups, from drug discovery to diagnostics. Here again, AI is not the whole story. The winners will be those who pair AI with rigorous science and clear clinical impact.

New Rules for Founders

What does all of this mean for founders? A few patterns stand out:

First, the bar has shifted. It is easier than ever to launch, but much harder to sustain. Defensibility is essential, whether through proprietary data, superior algorithms or strong network effects.

Second, the talent crunch is real. More than half of IT leaders now report a shortage of AI skills, nearly double from the year before. Founders not only compete with big tech for top engineers, they also need to build cultures of learning to keep pace with the demands of emerging technologies.

Third, corporate partnerships remain both an opportunity and a challenge. Many startups rely on large enterprises for growth, but the pace of adoption is slow. Savvy founders are diversifying customer bases, starting with smaller or mid market clients, and using product led growth to build resilience while still courting the big players.

Finally, governance matters more than ever. Regulation is lagging, particularly in AI, which means founders must self regulate, anticipate future rules and build trust with customers and investors alike. Responsible practices are no longer optional, they are a differentiator.

Looking Ahead

As I look to 2026, I see a startup ecosystem that is more global, more disciplined and more demanding. The easy capital cycles of the past are over, but what remains is healthier and more purposeful.

For founders, the mandate is to embrace AI while building real moats, to align with big global challenges like climate and health, to think beyond borders, and to invest in both talent and governance. For investors, it is a time to lean into conviction, to back ideas that may take longer to mature but that will matter in the decades ahead.

The startup ecosystem of 2025 is not defined by hype, but by focus, resilience and global opportunity. And this is only the beginning.
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Thank you for reading!

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Image Source: Courtesy of South Summit