The small-fund layer is starved: 12 firms take nearly three-quarters of commitments

PitchBook's Q2 2026 US VC Fundraising and Returns Report describes a clearly two-tier market. At the top, $1 billion-plus funds take 68.3% of committed capital, and just 12 firms account for nearly three-quarters of all limited partner money entering the asset class. Below, sub-$50 million funds have swelled to 67.7% of fund count while collapsing to 4% of capital. At the same time, PitchBook notes first-time fund formation is on pace for its lowest year since 2016.

Fundraising and deployment tell the same story

Deployment matches fundraising. The Q2 2026 PitchBook-NVCA Venture Monitor reports $412.7 billion deployed in the US in the first half of 2026, with rounds of $100 million or more capturing 87.5% and AI accounting for 86% of all dollars. Three firms — Andreessen Horowitz, Thrive Capital and Founders Fund — took in 48.1% of all capital raised. Globally, Crunchbase counts $510 billion in the first half of 2026, above the $440 billion of all of 2025. The aggregate sets records; everything below the top contracts.

What matters to founders is not the total but who still has money to lead a mid-single-digit-million round for a company outside the AI theme. That is the job of small and mid-sized funds — precisely the layer receiving 4% of commitments. With first-time fund formation at its lowest pace since 2016, the supply of new lead investors for seed and Series A thins accordingly, however many records the headlines report.

Paper returns versus cash

PitchBook also explains why LPs are cautious. Venture's one-year horizon IRR reached 17.1% in Q4 2025, nearly triple private capital's 6.2% — but that figure rests on unrealised marks. NAV grew 21.6% while the distribution yield sat well below its historical average. Strip out AI-driven paper gains concentrated in a handful of megafunds and the median 2025-vintage IRR is -2%, against 17.4% just two years earlier.

The causal chain is simple: marks rise, cash does not come back, LPs lack the source to re-up, so they favour manager brands they already know. The consequence lands on the layer below. For first-time managers the door opens slowly; for angels, the gap between seed and Series A stretches — and that gap is usually filled by a bridge round on terms that are unkind to early shareholders.

• How much cash has actually been returned (DPI), not just book value (TVPI)?
• What share of the markup comes from a new round led by a third party, versus an internal step-up?
• What is the reserve ratio for follow-on, and across how many companies?
• If the next fund does not close, who keeps monitoring and defending the capital already deployed?
• Who are the regional strategic buyers for this portfolio — has any real conversation happened?