The VC market deployed $97 billion in Q3 2025, yet 84% of 2022 seed companies still haven't raised Series A. How both things are true, why the market split into two different games, and what founders should do about it.
The paradox that made me investigate:
- Three years ago I was raising capital, met incredible founders who raised seed/Series A
- Checked in last week - only handful raised additional rounds since 2021
- Meanwhile VCs on Twitter celebrating record fundraises, expanding, thriving
- How can founders be struggling while VCs are thriving? Both things true simultaneously
Q3 2025: The data nobody talks about:
- VCs deployed $97 billion total in Q3 2025 (looks like record territory)
- One-third ($32B) went to just 18 companies
- Anthropic raised $13B, Elon's xAI raised $5B, Mistral raised $2B
- Those 18 companies averaged $1.8 billion each
- Other 7,500 companies split remaining $65B = average $8.7 million each
- That's a 200x difference between the two groups
The market has split into Game A vs Game B:
Game A (The AI Elite):
- AI companies, especially LLM and foundational models
- Repeat founders with previous exits
- Top-tier accelerator graduates (YC, etc.)
- Companies fitting current narrative
- Based in San Francisco
- AI captured 55% of all US funding in Q3 2025
- Anthropic alone got 35% of all AI funding
Game B (Everyone Else):
- First-time founders
- Non-AI companies
- Companies that raised in 2020-2021
- Anyone outside SF/NYC/Boston
- Anyone without previous exit
- Fighting for scraps with terrible odds
The Series A crisis gets dark:
- 84.6% of companies that raised seed in early 2022 STILL haven't raised Series A
- Not struggling to raise - haven't raised at all, period, in 3 years
- Back in 2020-2021: 50-60% chance at Series A
- Now: 15% chance (one in six)
- Some have $1M ARR (used to be golden ticket) but investors won't return emails
The VC conversation that explained everything:
- Spoke with top-50 Silicon Valley VC two weeks ago at pitch competition
- His answer: "I'm just investing in AI. Our firm's thesis has turned to AI"
- "If it's not AI, it's really hard to get partnership approval"
- "We have a mandate from our LPs - they want AI exposure"
- "We cannot physically invest in anything else right now, even when we want to"
- VCs have bosses (LPs) who are pension funds, foreign investors, Middle Eastern money
Real founder stories from my network:
- Friend stuck for 4-5 years since last round, has revenue and customers
- Can't get down round without getting crushed
- Can't raise at current (pandemic-level) valuation
- Can't pivot fast enough
- Options: bridge round with massive dilution, down round that kills you, or shut down
What you can actually do - if trying to raise VC:
- Be brutally honest: Are you building AI? Previous exit? $2M+ ARR with 3x growth? In SF?
- Yes to most = Game A, keep pushing
- No to most = Game B, change strategy or accept VC isn't right fit now
Critical runway math:
- Takes 6-9 months minimum to raise right now (used to be 3 months for seed)
- If you have less than 12 months runway and no interested VCs yet, you won't make it
- Need to pivot to profitability RIGHT NOW, not next quarter
- Open Excel today and calculate exactly how many months you have left
The hardest advice - if you raised in 2020-2021:
- If it's been 3 years since last round with zero additional funding despite revenue/customers, consider shutting down
- Bar went up 200x, the 15% making it to Series A now are playing different game
- No shame in shutting down - return money to investors, be honest with team, move on
- Don't spend another 5 years struggling against rigged game
- Your time is worth more than that
Why bootstrap founders have the advantage:
- Best time in 20 years to be bootstrap founder
- 7,500 companies fighting for $65B will struggle because funding goes to Anthropic/OpenAI
- Bootstrap founders compete for customers and revenue, not VC money
- Customers don't care if you're VC-backed or AI-powered - just if you solve problems
- Even if you want to raise later, stabilize profit/revenue first
YC was right (and I didn't want to believe it):
- 2022: YC told all portfolio companies to survive until 2026
- I thought it was hyperbolic and ridiculous
- They were right - they saw something we didn't
- Only thing they didn't predict: ChatGPT and AI wave
- Changed math again but only for AI companies - tech winter continues for everyone else
Key insights on the "record VC deployment" headlines:
- 20 companies building AGI got billions each
- 7,500 other companies split what's left
- 84% of seed companies can't raise Series A
- Bar went up 200x for everyone not in Game A
The mistake most founders make:
- Think they're in Game A when actually in Game B
- Two completely different games happening in same market
- Partners matter way more than firm names
- Must understand which game you're actually allowed to play
Red flags you're playing the wrong game: Raised 3+ years ago with no follow-on funding, investors not returning emails despite $1M+ ARR, trying to raise at 2021 valuations, thinking "just one more pivot" will fix it, spending years on something clearly not working.
Bottom line: VCs deployed record capital but only to 20 companies building AGI. For 84% of seed companies who can't raise Series A, the bar went up 200x. If you're not in top 5%, you need completely different strategy: pivot to profitability, consider shutting down if stuck 3+ years, or go bootstrap where you compete for customers not VC money.
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