Will advisors increase their VC allocations in 2026?

Will wealth managers funnel more client funds into VC funds in 2026?

Based on last year’s allocations, it would be hard to allocate less.  

U.S. venture-capital fundraising dropped 35% in 2025 to $66 billion, which is a 70% drop from the record levels seen in 2022 when firms raised over $222 billion, according to data from PitchBook and the National Venture Capital Association (NVCA). The total marks the weakest fundraising period in at least six years.

Financial advisors generally attribute the decline to a lingering liquidity crunch, characterized by a shortage of IPOs. The scarcity of public listings means investors in VC funds have not been getting their cash back, which in turn makes them hesitant to commit capital to new funds.

So will this vicious cycle break in the coming months?

Blair Cohen, managing Partner at GoalVest Venture Capital, says that despite the recent troubles in VC-land, capital is still abundant, particularly at the growth stage. He points out that large platforms continue to raise meaningful funds specifically to carry forward their early-stage investments. That said, he believes capital concentration is likely to compress returns at the very top end of the market.

“Venture simply does not scale the same way other asset classes do because the number of truly great companies is limited. As fund sizes grow, strategies tend to shift from finding a small number of exceptional outcomes to deploying across hundreds of companies, which looks much more like beta exposure than alpha generation,” Cohen said.

In his view, these large firms will still produce solid results because venture is a strong asset class overall, but the probability of top-decile performance declines as fund size increases. There is also structural pressure to deploy, which can push entry prices higher further compressing returns.

“From an LP perspective, I would be cautious underwriting a billion-plus venture fund with the expectation of outperformance. Scale brings access, but it also brings constraints that are often underappreciated,” Cohen said.

Similarly, Juliet Bailin, co-head of the venture program with CIO Group, says GPs aren’t materially adjusting deployment strategies, in part because they have limited levers to pull. Meanwhile, she says LPs seem to be overcorrecting and reducing allocations when they should optimally adopt relatively consistent deployment strategies across all phases of the market cycle. 

“Capital concentration has led to a bifurcation of the asset class, even if LPs continue to refer to it by a single label: venture. Many LPs are allocating into a smaller number of increasingly large firms, with serious implications for their long-term returns. We believe LPs should take classic early-stage venture-risk via modestly-sized funds in pursuit of right-tail returns,” Bailin said.

Zenetta Burger, partner at Giant Ventures, for one, believes investment strategies are shifting toward higher-conviction portfolios, with firms allocating more capital per company and placing greater emphasis on capital efficiency, resilience, and long-term ownership. She adds that there is also increased focus on AI-enabled businesses that can demonstrate tangible productivity gains, faster paths to scale, and defensible data or infrastructure advantages.

She also feels that as capital concentrates, larger and more established firms gain disproportionate access to competitive AI deals, later-stage rounds, and follow-on opportunities, reinforcing their influence over pricing and outcomes.

“This concentration can narrow diversification across firms and strategies, increasing exposure to shared themes, particularly in AI, making disciplined entry points and differentiated sourcing critical for risk management,” Burger said.

SPACEX, OPEN AI, ANTHROPIC, OH BOY!

According to GoalVest’s Cohen, a delta has emerged between private and public market valuations, and that gap is going to be tested in meaningful way likely this year with the anticipated IPOs of SpaceX, Open AI, and Anthropic.

“While AI demand and speculation in the private markets has pushed valuations higher, public market investors tend to be less speculative and more valuation-sensitive. The result of these IPOs, whether positive or negatives, is likely to reverberate in the private markets potentially leading to a flood of IPOs or rerating across the asset class,” Cohen said.

Giant Ventures’ Burger, for her part, believes valuations are being recalibrated toward sustainable cash generation and AI-driven efficiency rather than near-term exit multiples, with longer holding periods now an explicit assumption. “Firms are setting more conservative exit expectations and communicating more clearly with investors around extended timelines, alternative liquidity options, and how AI adoption may accelerate value creation even in a slower exit environment,” Burger said.

Finaly, CIO Group’s Bailin, feels that later-stage investors need to be more in tune with public market valuations and realistic about IPO windows.

“It is a core tenant of ours at CIO Group that LPs should be adequately paid for illiquidity and risk. Developing broad VC portfolios with exposure to the most promising startups is the optimal way to capture alpha and build wealth. It makes no sense to tie up long-term capital and achieve below public market returns,” Bailin said.