Venture Capital's Dangerous Divide: The $6.6 Billion Mega Deals And Everyone Else

Forbes

29-03-2025

For elite VC investors backing companies like OpenAI and SpaceX, 2024 has been an amazing year with multi-billion-dollar deals and sky-high valuations. But step outside this exclusive circle, and you'll find a very different story—especially in Europe, where funding has dropped to less than half of what it was in 2021. Money is now going mostly to a few famous companies, creating a clear split between winners and losers in the global startup world. This division is changing the innovation landscape in major ways. Founders, investors, and entire tech regions need to understand these changes to survive in today's venture capital reality.
The 2024 numbers reveal two completely separate venture capital markets operating at the same time. According to Crunchbase, North American funding jumped in late 2024, driven mainly by AI deals and billion-dollar investments in established companies. Meanwhile, European funding fell to $51 billion in 2024, down 5% from $54 billion in 2023.
"European tech funding has stabilised at $45 billion in 2024 after a significant drop in 2023," reports Atomico's State of European Tech 2024. This is less than half of the $100 billion peak reached in 2021.
This decline isn't hitting everyone equally. Early-stage companies are suffering the most, with seed-stage funding dropping 18% compared to last year, according to Crunchbase's mid-2024 data. By the end of 2024, things got even worse, with seed funding down 29% compared to the same period in 2023.
The contrast with late-stage funding is clear. While early-stage rounds struggled, late-stage funding in North America grew 23% year-over-year in late 2024, showing how money is increasingly going to safer bets.
What's causing this split? A major factor is the huge concentration of money in a handful of massive deals that have taken most of the available investment dollars.
Over the past year, companies like OpenAI, Anthropic, Anduril, SpaceX, and Databricks have dominated fundraising, securing multi-billion-dollar rounds:
These mega-deals are changing how venture capital flows globally. While Europe raised $51 billion across all of 2024, the U.S. market saw funding go past $140 billion, with these headline-grabbing deals capturing most investor attention and dollars.
"Europe's share of global VC funding fell to 16% in 2024 from 18%," Dealroom reports, suggesting that these mega-deals, mostly in the U.S., are pulling money away from other regions and companies.
For these top companies, fundraising has fundamentally changed. Money is now like a commodity—investors offer similar terms, and the difference often comes down to who can invest fastest and with the largest amounts.
This creates a cycle that further concentrates investment. As Atomico notes, "startups raising larger rounds at earlier stages are seeing higher valuations," meaning that for top-tier firms, money is plentiful and terms are similar across investors.
The largest European funds are trying to compete in this environment. Sifted reports that "the biggest VC funds in Europe have got bigger—Balderton raised $1.3 billion and Atomico $1.24 billion in 2024." These funds aim to invest in the most promising companies at scale, suggesting a race to invest rather than a careful selection process.
However, even Europe's largest funds can't match their U.S. counterparts. The IMF highlights this gap, stating that "Europe lags the U.S. in the scale of VC funds," with U.S. investors putting in $140 billion in 2024 compared to Europe's $45-51 billion.
This new reality is creating serious challenges for the rest of the venture ecosystem—especially in Europe, where VC activity has sharply declined.
Mid-2024 was Europe's lowest funding quarter since 2020, with just $10 billion raised, down 36% from the previous quarter and 39% from the same period in 2023, according to Crunchbase. This sharp decline signals trouble across the ecosystem, particularly for smaller players.
While the largest European funds have grown, smaller funds are "struggling to raise capital," creating a market where only the well-connected succeed. This threatens innovation across the continent, as the IMF warns: "Europe's lag in VC scale risks undermining its tech competitiveness."
European funding stabilizing at around $45 billion in 2024—far below the $100 billion+ peaks of 2021—highlights a broader challenge for the region as global money goes to safer, more visible bets elsewhere.
Early-stage tech deals have been hit especially hard by these changes. Crunchbase reports that in mid-2024, "seed funding fell 18% year-over-year," while early-stage funding overall dropped 12%, marking the "lowest quarter since Q3 2020."
By the end of 2024, the situation worsened: seed funding hit $1.6 billion, down 29% from the same period in 2023, and early-stage funding reached $5.1 billion, down 7%, showing a continued squeeze on the newest ventures.
This downturn reflects a shift in investor priorities, leaving Europe's young startups particularly exposed. Dealroom's data confirms that "early-stage investment in Europe remains below historical highs," with 2024's €47 billion total going more toward later stages, not seed.
The consequences go beyond immediate funding challenges. As seed and early-stage investment shrinks, the pipeline of future growth-stage companies narrows, potentially limiting innovation and economic growth in the years ahead.
For founders, investors, and policymakers, adapting to this transformed venture landscape requires clear strategy and decisive action:
The transformation of venture capital from a diverse ecosystem to a market dominated by mega-deals represents a fundamental shift, not a temporary change. The effects will impact the innovation economy for years to come.
For Europe, the challenge is especially serious. As Dealroom notes, with funding levels "far below the 2021 peak of €100 billion," the region faces tough questions about its ability to compete for capital in a global market increasingly drawn to scale and visibility.
Yet within this challenge lies opportunity. The concentration of capital creates gaps in the market that nimble, specialized players can fill. Founders with truly different technology and clear paths to profitability can still raise money, even in a more selective environment.
The venture capital industry is indeed undergoing a transformation—one that is leaving much of the industry behind. But transformation also creates new winners. Those who understand the new rules and adapt will find ways to succeed, even as the mega-deals continue to grab headlines and dollars.