The Institutionalization of Venture From Cottage Funds to Capital Platforms

Venture capital has outgrown its cottage-industry roots. Once defined by small partnerships along Sand Hill Road, the asset class has now entered a new phase, one that more closely resembles private equity than early-stage investing. The latest State of the Markets: H2 2025 report from Silicon Valley Bank captures this structural evolution with striking clarity.

Megafunds Reshape the Venture Landscape

US VC fundraising is on track to hit $56 billion in 2025, a 21% drop from 2024 and the lowest total since 2017. Yet, more than contraction, the story is one of concentration. Over the last three years, 36% of all venture capital raised in the US went to funds of $1 billion or more, up from just 22% six years ago. In other words, even as the overall pool softens, the gravitational pull of vehicles that are a billion dollars or more is strengthening, reshaping the market’s center of gravity toward a handful of platforms that can repeatedly lead, anchor, and extend late-stage rounds.

This top-heaviness has redefined what venture looks like. The largest firms are no longer pure venture players. They are diversified capital platforms that manage multibillion-dollar vehicles spanning early-stage venture, late-stage growth, private equity, and even credit.

Industry participants observe that venture is still early in its maturation and is progressively taking on private-equity characteristics as company counts, global reach, and ambition expand. That maturation is visible in behaviors: price-setting at scale, longer holding periods, and a willingness to underwrite sector outcomes (AI, climate) that require deep follow-on capacity and portfolio construction discipline.

The Math of Megascale

The rise of these super-funds challenges the traditional VC model of high-risk, high-reward multiples. For instance, SVB’s analysis shows that Coatue’s $8 billion vehicle would need $240 billion in exit value to deliver a conventional 3x return, based on a theoretical calculation that assumes ~10% ownership at exit and uses OpenAI’s latest private valuation as a contemporary scale reference.

To get to this valuation at exit, it would mean the fund achieving three IPOs the size of Uber’s IPO. That math would have seemed implausible a decade ago. But with OpenAI now valued at roughly three times Facebook’s IPO valuation, and the generative AI ecosystem commanding unprecedented deal sizes, the scale of potential outcomes is finally catching up to the capital behind them.

New Fund Structures for a New Era

The State of the Markets report also traces how the largest managers are reinventing fund mechanics to sustain their size. To support their size, top managers have re-engineered fund mechanics in ways that mirror institutional private-equity platforms. Since 2019, several have moved under Registered Investment Adviser status to enable exposure to public markets and crypto alongside private holdings.

Starting in 2021, evergreen master/sub-fund structures began pooling exit shares across vehicles to smooth liquidity and reduce timing risk for LPs. By 2024, a number of firms had added non-venture products, notably buyouts and wealth management, creating diversified revenue lines and broader mandate flexibility.

And in 2025, a small set of “CTEK” retail-access funds lowered LP minimums to $50k, opening venture exposure to affluent individuals for the first time at scale within this cohort. Taken together, these steps mark a shift from “single-strategy funds that raise episodically” to “capital platforms that manage across cycles,” with more tools to match LP liquidity needs and to keep compounding winners in-house.

For founders, this architecture can translate to steadier follow-on support and more structured guidance on governance and reporting; for LPs, it offers clearer pathways to interim liquidity (via evergreens and secondaries) in an environment where distributions have lagged marks.

Capital is pooling into AI and into mega-deals

Deal flow has concentrated dramatically at the top end. On a run-rate basis, about two-thirds of US VC dollars now go to $500M+ rounds, compared with 18% at the 2021 peak. AI dominates this pattern, accounting for 36% of deals but 58% of capital. The six largest “mega-managers” have touched roughly one-third of all US VC dollars in the past 12 months, up from under 10% a year earlier, a shift driven largely by massive AI financings that require deep, repeatable follow-on capacity.

This concentration doesn’t mean the broader market is dead; sub-$100M deal activity and counts are roughly back to pre-pandemic norms, implying a healthier (if slower) base while the headline totals are skewed by a handful of giant AI rounds.

Strategically, AI is functioning as both a capital magnet and a sorting mechanism, pushing non-AI companies to demonstrate sharper operating discipline while mega-platforms crowd into the few AI assets that can absorb multi-billion-dollar checks.

Venture’s Next Epoch

This evolution has consequences for founders and LPs alike. At the top end, megafunds can underwrite larger rounds, bridge downturns, and shape entire sectors such as AI or climate tech. But in the middle, traditional sub-$200 million managers face increasing difficulty competing on follow-on capacity and network reach.

SVB’s data shows the “middle class” of VC funds, those between $200 million and $1 billion, shrinking from 70% of market share two decades ago to about 43% today. The bifurcation of venture capital is now clear: capital is pooling at the extremes, between boutique specialists and global megaplatforms.

The Takeaway

Venture’s next decade will hinge less on fundraising totals and more on design: who can architect long-duration, multi-strategy platforms that compound winners, manage liquidity intelligently, and underwrite sector-scale outcomes. The center of gravity is shifting to a few platforms that look more like Blackstone than Benchmark

Brand Manager

Aayushi Thakur

Frequently Asked Questions

Q: What do you mean by “institutionalization” of venture?

A: Large managers are evolving from episodic, single-strategy VC funds into multi-strategy capital platforms. That shows up in RIA registrations, evergreen structures, public/crypto exposure, and adjacent products like buyouts and wealth, which are closer to PE-style operating models.

Q: Are smaller deals gone in the global VC markets?

A: No. Sub-$100M rounds and deal counts have drifted back toward pre-pandemic norms. Headlines skew large because a few AI mega-rounds now account for a big share of total dollars.

Q: What’s driving the “middle-class” squeeze in VC?

A: The $200M–$1B band has lost share as capital pools at the ends: boutique specialists on one side and global mega-platforms on the other. The latter can repeatedly anchor mega-rounds; the former compete on sharp sector focus and expertise.

Q: Is AI a bubble or a durable capital sink?

A: The report doesn’t call the cycle, but shows AI capturing 36% of deals and 58% of dollars, with mega-managers touching ~one-third of all US VC dollars, all of which is evidence of a durable capital magnet today, albeit one that raises concentration risk.

Sources

1. State of the Markets: H2 2025. Silicon Valley Bank, 2025.