Introduction: The Venture Market Did Not Crash and Recover. It Reset.
Every venture cycle has a story founders want to believe.
In 2021, the story was abundance.
Capital was everywhere.
Rounds moved fast.
Valuations climbed.
Investors chased deals.
Startups raised earlier, faster, and larger.
Founders learned to speak in total addressable markets, not immediate revenue.
Growth mattered more than efficiency.
Narrative mattered more than durability.
That market did not last.
By 2023, the venture capital market had changed dramatically. EY’s article, “Will venture capital market rebound in 2024 or seek new floor?” captured the mood perfectly.
The question was not simply whether venture capital would come back.
The question was whether the market needed a new floor.
A new pricing level.
A new funding rhythm.
A new definition of quality.
A new relationship between founders and investors.
A new understanding of what kind of startup deserves capital.
EY’s analysis showed a market under pressure. U.S. VC-backed startups raised just over $140 billion in 2023. The market declined 35% year over year from already weaker 2022 levels. Deal volume dropped. Fund formation fell sharply. Mega-round activity reached its lowest level since 2017. More than 50,000 VC-backed startups remained in the system, many still carrying old valuations, needing liquidity, or eventually needing to raise again.
EY’s article was written before the later AI funding explosion became fully visible.
But the core warning was correct.
The venture market was not returning to the old boom.
It was becoming something different.
The next market would be more selective.
More AI-driven.
More concentrated.
More liquidity-constrained.
More demanding about profitability.
More cautious about valuations.
More concerned with founder resilience.
More focused on whether a startup could survive without constant easy money.
That is exactly what happened.
By 2024, global venture funding had regained some footing, but AI drove much of the improvement. By 2025, AI captured an even larger share of funding. By Q1 2026, headline venture numbers looked extraordinary, but the market underneath was still highly concentrated and liquidity remained tight for most companies.
This is the new venture reality:
The market can look strong at the top while still being hard everywhere else.
Founders need to understand that contradiction.
1. EY’s “New Floor” Was Really a Warning About Reality
EY did not argue that entrepreneurship was over.
It argued that the 2021 market had made entrepreneurship look easier than it actually is.
That is an important distinction.
A down cycle does not mean startups stop mattering.
It means weak assumptions get exposed.
The 2021 boom allowed many startups to raise before proving enough. Some deserved the capital. Many did not. When markets tightened, the difference became obvious.
The “new floor” means the market began asking:
What is this company really worth?
Can it raise without inflated valuations?
Can it survive without a mega-round?
Can it grow efficiently?
Can it become profitable?
Can it attract customers without subsidies?
Can it justify the team size?
Can it raise from new investors or only insiders?
Can it exit?
Can it survive a down round?
Can the founders keep going mentally and emotionally?
The new floor is not only a funding number.
It is a discipline level.
The market stopped rewarding every growth story equally.
It started sorting.
2. 2023 Was the Year the Boom Fully Broke
EY reported that the 2023 VC market dropped 35% year over year from already declining 2022 levels and fell to its lowest level in four years.
That matters because the correction was not just a pause.
It was a repricing of risk.
Founders who raised in 2021 expected one market.
They found another.
Investors became more cautious.
IPO exits slowed.
M&A slowed.
LPs received fewer distributions.
Fundraising became harder for venture firms.
Late-stage rounds became more difficult.
Growth-stage companies had to cut burn.
Down rounds became more possible.
Companies that had not raised since 2021 entered the market needing money at the same time.
This created pressure.
Not just financial pressure.
Emotional pressure.
Founder pressure.
Team pressure.
Board pressure.
The venture market was no longer willing to fund every company forward simply because it had raised before.
That was painful.
But it was also necessary.
Markets cannot build strong ecosystems if they never force companies to prove quality.
3. The 50,000-Startup Overhang Was the Hidden Problem
EY’s article highlighted more than 50,000 existing VC-backed startups still affecting the investing landscape.
This is one of the most important points.
The problem was not only new funding.
It was the backlog.
Thousands of startups raised money during the boom.
Many had not yet raised again.
Many were carrying old valuations.
Many needed liquidity.
Many needed insider support.
Many needed new investors.
Many needed to sell.
Many needed to shut down.
Many needed to reset.
This overhang made the market harder for everyone.
Investors had to decide whether to support existing portfolio companies or make new bets.
Founders had to compete against other companies also seeking capital.
Boards had to decide which companies deserved follow-on funding.
Employees had to decide whether equity was still meaningful.
Acquirers had more distressed or near-distressed options.
The overhang meant the market could not simply rebound because investors wanted to do deals again.
First, the system had to digest the boom.
That digestion is still not fully complete.
4. Mega-Rounds Collapsed, Then Came Back Only for the Few
EY reported that only 228 mega-deals happened in 2023, the lowest total since 2017.
It also suggested that $50 million checks could start feeling like the new mega-round compared with the $100 million-plus standard of the boom.
That was a powerful observation.
During the boom, mega-rounds became common.
Startups raised huge amounts long before public market readiness.
The correction changed that.
Investors became reluctant to write big checks unless the company looked exceptional.
But AI changed the story.
Not for everyone.
For a narrow group of companies.
Large language models, foundation model companies, AI infrastructure, data centers, semiconductors, robotics, defense AI, and applied AI leaders began raising huge rounds.
The result was not a broad return of mega-rounds.
It was a concentrated return.
The market moved from many companies raising large rounds too easily to a few AI companies raising enormous rounds.
That is the new distortion.
A founder looking at the headlines may think capital is back.
A founder raising outside the top AI categories may discover the opposite.
5. AI Became the Exception, Then the Center of Gravity
EY saw AI’s growing influence early. It noted that AI fueled several mega-deals in 2023 and expected AI to continue dominating mega-round activity because of the deep investment required for large language models.
That became one of the defining venture trends of the next two years.
Crunchbase later reported that global startup funding in 2024 reached about $314 billion, up only around 3% from 2023, but AI-related companies raised more than $100 billion, up more than 80% year over year.
That means the market was not broadly booming again.
AI was carrying the improvement.
By 2025 and Q1 2026, AI concentration became even more extreme.
The lesson is clear:
AI did not reopen the venture market for everyone.
It reorganized the venture market around a smaller number of extremely capital-hungry companies.
This matters for founders.
If you are building AI infrastructure, foundation models, enterprise AI, vertical AI, AI security, AI developer tools, robotics, or AI-enabled biotech, investors may lean in.
If you are building a normal software company with a thin AI layer, investors may be skeptical.
If you are not building AI, you may still raise, but you must prove strong fundamentals.
AI changed the funding market.
It did not remove discipline.
6. 2024 Was Not a Full Rebound. It Was a Narrow Recovery.
EY warned that 2024 might record a sub-$100 billion year in U.S. VC investment if 2023 patterns continued, though disruptive deals could change the outlook.
The actual global market did improve, but the improvement was narrow.
Crunchbase reported global venture funding of about $314 billion in 2024, compared with about $304 billion in 2023. That is a small increase, not a broad boom.
The important detail is that AI took nearly one-third of global funding.
Without AI, the market would have looked much weaker.
This is the danger of headline numbers.
A small number of sectors and companies can make the market look healthier than it feels.
Founders should not ask:
Is venture funding up or down?
They should ask:
Is funding available in my category, at my stage, in my geography, for my metrics?
That is the only market that matters.
7. 2026 Proved That Headline Strength Can Hide Weakness Underneath
By Q1 2026, venture headlines looked extraordinary.
PitchBook-NVCA reported $267.2 billion in U.S. quarterly deal value and $347.3 billion in exit value.
Those numbers sound like a boom.
But the same report said excluding the five largest deals and exits would reduce those figures by 73.2% and 86.6%, respectively.
That is the key lesson of the new market.
The top is booming.
The rest is constrained.
PitchBook-NVCA also noted that liquidity remained tight for most of the market, IPO registrations had not significantly moved, and many VC-backed tech startups still struggled with elevated past valuations and uncertain market conditions.
This means EY’s 2024 “new floor” framing still matters in 2026.
The market did not simply rebound.
It became more concentrated.
A few companies can create record totals while many founders still face hard fundraising.
8. Liquidity Is the Real Bottleneck
Venture capital is a recycling system.
LPs invest in VC funds.
VC funds invest in startups.
Startups exit through IPOs, M&A, secondaries, or other liquidity events.
Capital returns to LPs.
LPs recommit to funds.
Funds invest again.
When exits slow, the recycling system weakens.
EY pointed to low liquidity as a major issue in 2024. PitchBook-NVCA later confirmed that liquidity remained tight for most of the market even during record-looking Q1 2026 headline activity.
This is crucial.
A venture market can have large funding rounds and still have a liquidity problem.
If funds are not returning cash, LPs become cautious.
If LPs become cautious, fund formation slows.
If fund formation slows, emerging managers struggle.
If emerging managers struggle, non-consensus founders lose funding sources.
If exits remain constrained, portfolio companies stay private longer.
That delays employee liquidity, investor distributions, and capital recycling.
Liquidity is not a boring back-office issue.
It shapes founder fundraising.
9. Public Markets Are No Longer Just an Exit. They Are a Discipline Standard.
EY said it was watching public market activity because a significant backlog of venture-backed companies needed liquidity, and companies might shift toward public growth financing if IPO activity picked up.
This remains important.
Startups that stay private longer eventually face public-market discipline.
Public markets ask:
Can the company grow predictably?
Can it show margins?
Can it explain losses?
Can it govern itself?
Can it report cleanly?
Can it survive analyst scrutiny?
Can it communicate risk?
Can it justify valuation?
The IPO window does not reward every private valuation.
It tests it.
That is why founders should prepare earlier.
Even if you are not going public soon, public-market discipline should influence how you build:
Clean financials.
Internal controls.
Governance.
Revenue quality.
Retention.
Margin structure.
Customer concentration management.
Cybersecurity.
Compliance.
Board strength.
The IPO may be years away.
The discipline should start now.
10. Valuation Reality Is Not Optional
EY advised founders to be open to different views on valuations because markets may have changed significantly since the last round.
This is one of the most practical founder lessons.
Many founders hurt their companies by defending old valuations too aggressively.
A valuation is not identity.
It is a market price at a point in time.
If market conditions change, the price changes.
If growth slows, the price changes.
If multiples compress, the price changes.
If competitors weaken, the price changes.
If the company becomes more efficient, the price may improve.
If AI shifts the category, the price may change again.
Founders should not cling to 2021 marks if those marks block survival.
A down round can be painful.
A flat round can feel disappointing.
A strategic deal can feel imperfect.
But survival matters.
The goal is not to protect pride.
The goal is to build the company.
11. The New Investor Question Is Quality of Growth
In the boom, growth often overwhelmed other questions.
Now investors ask about quality of growth.
They want to know:
Is revenue recurring?
Do customers renew?
Is gross margin strong?
Is growth efficient?
Is customer acquisition sustainable?
Is burn controlled?
Is pricing durable?
Is retention improving?
Is the product mission-critical?
Is the market large enough?
Is AI creating real leverage?
Is the company likely to raise again?
Can it become profitable?
The market still funds growth.
But it does not fund all growth equally.
A company growing 100% with terrible retention, high burn, weak margins, and no pricing power may be less attractive than a company growing 50% with strong retention and clear profitability.
Growth is no longer enough.
Quality matters.
12. The Founder Must Build for Resilience, Not Just Fundability
EY’s article included a rare but important founder note: founders need to take care of themselves and their teams because the market is a marathon, not a sprint.
This matters more than most financial reports admit.
Funding winters are emotionally brutal.
Founders face:
Runway stress.
Layoffs.
Investor pressure.
Team anxiety.
Customer delays.
Board conflict.
Personal financial strain.
Identity crisis.
Rejection.
Comparison to AI mega-round headlines.
The 2021 boom taught many founders to expect momentum.
The reset taught them endurance.
A founder who cannot manage themselves cannot manage the company through a down cycle.
Resilience is not motivational language.
It is operational capacity.
A tired founder makes worse decisions.
A scared team leaves.
A burned-out executive misses risk.
A culture built only for hype collapses under pressure.
The best founders build emotional durability into the company.
13. The New Fundraising Market Rewards Preparation
EY said many companies would compete to fundraise in 2024, including companies that had not raised since 2021.
That meant founders needed to be ready.
In the new market, preparation matters more.
A founder should not enter fundraising with a vague story.
They need:
Updated market narrative.
Clear metrics.
Realistic valuation expectations.
Clean data room.
Customer proof.
Unit economics.
Runway plan.
Use of proceeds.
Milestone map.
Investor target list.
Board alignment.
Backup financing options.
M&A awareness.
Downside plan.
Fundraising is no longer a simple process of creating scarcity and waiting for term sheets.
It is a credibility test.
The prepared founder has an advantage.
14. Investor Time Horizon Has Changed
EY noted that investors are taking time to get to know founders, their markets, and their plans.
This is very different from the boom.
In 2021, rounds could move extremely fast.
Some investors had limited time to diligence.
Founders could create fear of missing out.
Now, investors want more time.
They want references.
They want customer calls.
They want data.
They want competitive mapping.
They want evidence.
They want to understand the founder.
This is not necessarily bad.
It can lead to better investor-founder fit.
But founders need to start relationship-building earlier.
Do not wait until you need money.
Build investor trust months before the round.
Share progress.
Ask for feedback.
Show discipline.
Demonstrate consistency.
The best fundraising process begins before the official fundraising process.
15. Corporate Venture Capital Became More Important
EY cited a CEO pulse survey showing that 93% of CEOs planned to increase or maintain investment in corporate venture capital funds in 2024.
That is important because corporate capital can expand the funding pool and create M&A pathways.
Corporate investors can bring:
Capital.
Customers.
Distribution.
Data.
Industry expertise.
Regulatory support.
Manufacturing.
Infrastructure.
Strategic validation.
Acquisition optionality.
But corporate capital is not automatically better.
A slow corporate investor can waste time.
A strategic investor can scare other customers.
A corporate can demand exclusivity.
A CVC can invest without business-unit adoption.
A corporate can create future M&A confusion.
Founders should treat CVC carefully.
Ask:
What strategic value does this corporate provide?
Will they become a customer?
Will they introduce customers?
Will they help with distribution?
Will they restrict us?
Will competitors avoid us?
Will financial VCs still invest?
Corporate capital can help founders survive the new floor.
But only if it brings real business value.
16. The Bay Area Remains Powerful, but Regional Dynamics Are Changing
EY noted that the San Francisco Bay Area continued to lead in Q4 2023, but annual deal counts fell below 2,000 for the first time since 2011.
That is symbolic.
The Bay Area remains dominant, especially because of AI.
But the market is no longer just about where the founder is located.
Remote work, global talent, AI tools, and distributed startup ecosystems have changed company formation.
At the same time, capital concentration around AI has strengthened certain hubs again.
The Bay Area regained gravity because many AI companies, investors, labs, and talent networks are there.
Boston remains strong in biotech, healthcare, deeptech, and university-linked innovation.
New York remains important for fintech, enterprise software, media, and AI applications.
Toronto, Montreal, Vancouver, Waterloo, Austin, Miami, Los Angeles, Seattle, Atlanta, and other hubs all have roles.
The founder lesson:
Location still matters, but not the old way.
You need access to the right customers, investors, talent, and category networks.
For AI foundation models, San Francisco may matter more.
For healthcare, Boston may matter more.
For fintech, New York may matter.
For climate, energy, or industrial tech, customer geography may matter more than investor geography.
Choose your ecosystem strategically.
17. Healthcare, IT, and Business Services Remained Core Categories
EY reported that IT, healthcare, and business and financial services continued to rank as top sectors in Q4 2023.
That is still a useful map.
These categories remain central because they contain large, expensive, inefficient workflows.
IT and software remain core because every company needs digital infrastructure and AI adoption.
Healthcare remains core because cost, access, workforce pressure, clinical workflow, biotech, medtech, and AI diagnostics create huge opportunities.
Business and financial services remain core because companies need productivity, risk management, compliance, fintech infrastructure, payments, accounting, and automation.
But these sectors are also more competitive.
Founders must show:
Why now?
Why this team?
Why this workflow?
Why this business model?
Why this can scale?
Why incumbents will not copy it?
The category may be attractive.
The company still needs differentiation.
18. Energy’s Promise Was an Early Signal
EY noted that energy showed promising signs in Q4 2023, and renewable energy was among the top subsectors.
This is important because energy is now one of the most strategic venture categories.
AI data centers require power.
Electrification requires grid capacity.
EVs require charging.
Industrial decarbonization requires new energy systems.
Climate adaptation requires resilience.
Energy security is a national priority.
The venture market has recognized that energy is no longer a slow old-economy sector.
It is becoming a technology frontier.
Startups are building in:
Grid software.
Storage.
Transmission.
Renewables.
Nuclear.
Geothermal.
Hydrogen.
Industrial heat.
Power electronics.
Energy efficiency.
Data center energy systems.
Demand response.
The energy sector also shows why the new VC market is more complex.
These companies often need hardware, project finance, corporate customers, policy knowledge, and long timelines.
Not every energy startup fits traditional venture capital.
Founders must match capital to risk.
19. The New Floor Is Different for Every Stage
The “new floor” does not affect every stage the same way.
Pre-seed
Still active, but investors expect sharper founder-market fit and faster validation because AI tools lower build costs.
Seed
Still fundable, but seed investors want proof that the company can reach a strong Series A milestone.
Series A
Harder than before. Investors want revenue, retention, product-market fit evidence, and high-quality customer signals.
Series B
Often the toughest checkpoint. Companies must show repeatability, not just early traction.
Growth stage
Capital exists for clear leaders, especially AI leaders, but valuations and liquidity paths matter.
Late stage
Large rounds are available for top companies, but the rest face valuation resets, insider rounds, secondaries, or M&A decisions.
Founders must know their stage-specific bar.
Do not raise with the wrong expectations.
20. The New Floor Is Different for AI and Non-AI
The venture market now has two realities.
AI companies, especially perceived category leaders, may receive premium valuations, fast rounds, and large checks.
Non-AI companies face a more disciplined market.
But even AI companies are not equal.
There are at least four types:
Foundation model and infrastructure companies
Highly capital-intensive, potentially massive, but extremely competitive.
AI-native workflow companies
Attractive if they own valuable workflows and show ROI.
AI-enabled incumbency challengers
Promising when AI creates a real advantage in a large existing market.
AI-decorated products
Weak if AI is only a feature or pitch-deck label.
Non-AI founders should not panic.
Great companies will still be built outside AI.
But they should probably use AI internally to operate more efficiently.
The worst position is not being non-AI.
The worst position is ignoring AI’s effect on customer expectations, productivity, and competition.
21. The 2024 Reset Forced Founders to Rethink Burn
High burn was tolerated during the boom.
Not anymore.
Investors now examine:
Burn multiple.
Runway.
Team size.
Sales efficiency.
Marketing spend.
Gross margin.
Customer payback.
Hiring plan.
Cash conversion.
Working capital.
A company that burns aggressively without strong growth or proof will struggle.
A company that runs lean but grows too slowly may also struggle.
The goal is not austerity for its own sake.
The goal is intelligent capital use.
Every dollar should buy learning, traction, technology, revenue, or risk reduction.
Founders should ask:
What does this spending prove?
Does this hire change velocity?
Does this marketing channel pay back?
Does this market expansion create real learning?
Does this product investment increase retention?
A new floor market punishes lazy burn.
22. M&A Becomes More Important When IPOs Are Scarce
If IPO markets are not broadly open, acquisitions matter more.
EY noted that corporate venture activity could increase the capital pool and create off-ramps through M&A.
That is still true.
For many startups, acquisition may be the realistic exit.
That is not failure.
A strong strategic acquisition can be a good outcome for founders, employees, customers, and investors.
But founders should think about M&A before they are forced to sell.
Who might buy this company?
Why?
For product?
Talent?
Customers?
Data?
Regulatory position?
Technology?
Market entry?
Defensive reasons?
What milestones make the company more valuable?
What acquirers care about this category?
What integration risks exist?
M&A readiness is part of founder strategy in a liquidity-constrained market.
23. Canada’s Version of the New Floor Is a Scale-Up Problem
The Canadian venture market faces a related but distinct challenge.
BDC’s 2026 venture landscape says investment held near $8 billion in 2025, but activity is concentrating into fewer deals and Canada is not consistently capturing the value of its innovation.
BDC also warns that the step from seed to commercialization remains a structural bottleneck, and that later-stage growth remains heavily reliant on foreign capital.
This is Canada’s new floor.
Seed can be relatively strong.
Talent is strong.
AI research is strong.
But scaling is difficult.
Canadian founders often need U.S. customers, U.S. capital, U.S. investors, or foreign growth-stage funding to reach scale.
That can be useful, but it also creates value-capture risk.
If ownership, decision-making, IP, and exits move elsewhere, Canada becomes a producer of innovation but not a long-term owner of value.
For Canadian founders, the lesson is:
Build globally, but build with capital strategy.
Do not assume local capital will be enough.
Do not assume foreign capital will preserve Canadian value.
Do not wait too long to build U.S. investor relationships.
Do not ignore domestic corporate customers.
Do not treat scale-up financing as an afterthought.
24. Canada’s AI Capital Concentration Mirrors the Global Pattern
BDC’s 2026 release says AI accounted for nearly half of all venture capital invested in Canada in 2025.
That is a major signal.
Canada has world-class AI research and talent.
But Canada also faces the risk that AI value gets captured elsewhere.
The global AI funding cycle is heavily U.S.-centered.
Large AI companies need capital, compute, customers, and scale.
Canadian AI founders may need to cross the border for growth capital.
This does not mean Canada should isolate its AI ecosystem.
It means Canada needs stronger pathways to scale Canadian AI companies from Canada.
More domestic growth capital.
More corporate customers.
More AI infrastructure.
More government procurement.
More pension participation.
More university commercialization.
More strategic sectors such as defense, healthcare, mining, energy, climate, and public services.
Canada’s AI challenge is not only invention.
It is ownership.
25. The Founder’s New Floor Playbook
Founders should treat the new venture market as a discipline test.
1. Extend runway before you are desperate
Do not wait until the company has three months of cash.
2. Reset valuation expectations early
A realistic round is better than no round.
3. Build investor relationships before fundraising
Investors now take more time.
4. Improve capital efficiency
Every dollar should reduce risk or increase value.
5. Know your category market
AI, health, climate, SaaS, fintech, consumer, and deeptech all have different funding bars.
6. Prepare multiple financing paths
Equity, venture debt, strategic capital, grants, M&A, and inside rounds may all matter.
7. Support the team emotionally
A down market tests culture.
8. Get better advice
Board members, investors, operators, and fellow founders matter more in hard cycles.
9. Build toward profitability
Even if you are not profitable yet, show a credible path.
10. Stop comparing yourself to AI mega-rounds
Your company’s market is the only market that matters.
26. The Investor’s New Floor Playbook
Investors also need discipline.
1. Do not mistake headline recovery for broad recovery
AI mega-rounds distort the market.
2. Support existing portfolio companies honestly
Do not keep weak companies alive indefinitely, but do not abandon real companies too early.
3. Be realistic on valuations
Founders need truth, not fantasy marks.
4. Watch liquidity
DPI matters. Paper gains are not enough.
5. Fund resilience
Strong teams, durable revenue, efficient growth, and market clarity matter.
6. Avoid AI FOMO
AI is real, but not every AI company is durable.
7. Back non-consensus excellence
Great companies will still be built outside fashionable categories.
8. Help founders with M&A and strategic options
Exit planning is now part of portfolio support.
9. Support founder mental stamina
Burned-out founders make worse decisions.
10. Use the down cycle to become a better investor
Hard markets reveal real judgment.
27. The LP’s New Floor Playbook
LPs should interpret the new floor carefully.
They should ask venture managers:
What is real DPI?
How much value is trapped in private marks?
How exposed is the portfolio to 2021 valuations?
How much depends on AI exits?
How many companies need follow-on support?
How much capital is reserved?
How are down rounds being handled?
What is the exit plan?
How are secondaries being used?
Which emerging managers still deserve backing?
The venture market cannot rebuild only through mega-funds.
It needs a healthy capital stack.
LPs should support managers with real discipline, differentiated access, and the ability to help companies survive hard markets.
28. The Corporate Playbook
Corporate investors should take EY’s survey signal seriously.
If CEOs want to increase or maintain CVC activity, they must do it properly.
Corporate venture capital should not be theatre.
It should be tied to:
Strategic themes.
Business-unit adoption.
Customer access.
M&A pathways.
Technology scouting.
Market intelligence.
AI strategy.
Climate strategy.
Cybersecurity.
Supply-chain resilience.
New business building.
Corporate investors should become useful partners.
They should not only write checks.
They should help startups find customers, deploy products, access data, navigate regulation, and scale.
The best corporate capital gives founders unfair advantage.
The worst corporate capital gives founders meetings.
29. What Founders Should Stop Doing
In the new market, founders should stop:
Pretending 2021 valuations still apply.
Raising without a milestone plan.
Treating burn as ambition.
Confusing AI branding with AI advantage.
Ignoring M&A options.
Waiting too long to build investor trust.
Avoiding hard conversations with boards.
Overhiring before repeatability.
Assuming every bridge round will happen.
Neglecting mental health and team morale.
The market is not as forgiving as it was.
That is not cruelty.
It is reality.
30. What Founders Should Start Doing
Founders should start:
Building clean metrics.
Tracking unit economics.
Preparing data rooms early.
Having valuation conversations honestly.
Building investor relationships continuously.
Using AI to operate leaner.
Mapping strategic acquirers.
Exploring corporate partnerships carefully.
Supporting team resilience.
Designing milestones that matter.
Fundraising should become a byproduct of company quality.
Not a substitute for it.
Conclusion: The Venture Market’s New Floor Is Not the End. It Is the Beginning of a Better Test.
EY’s 2024 venture article asked whether the market would rebound or seek a new floor.
With the benefit of hindsight, the answer is clear:
It sought a new floor.
Then AI built a tower on top of it.
The venture market did not return to the broad, easy-money environment of 2021.
It became more selective, more concentrated, more AI-driven, and more focused on resilient companies.
In 2023, the market had already fallen sharply.
U.S. VC-backed startups raised just over $140 billion.
Mega-rounds dropped to the lowest level since 2017.
More than 50,000 VC-backed startups remained in the overhang.
Fund formation slowed.
Liquidity was weak.
Founders had to shift gears.
By 2024, global funding improved only modestly, and AI captured much of the upside.
By 2025 and Q1 2026, AI and mega-deals drove huge headline numbers, but PitchBook-NVCA data showed extreme concentration and continued liquidity constraints for most of the market.
That is the modern venture market.
Strong at the very top.
Selective underneath.
Punishing toward weak companies.
Open to resilient founders.
Still full of opportunity.
But no longer willing to fund every story.
This is not the end of entrepreneurship.
It is the end of pretending entrepreneurship is easy.
The founders who win now will be the ones who build companies that can survive without fantasy markets.
Companies with real customers.
Real revenue.
Real margins.
Real AI advantage where relevant.
Real discipline.
Real valuation logic.
Real exit optionality.
Real founder stamina.
The venture market found a new floor.
The best founders will use that floor to build something stronger.