When it comes to venture capital (VC) activity this year, if you’re just reading the headlines, you aren’t getting the full story. We recently discussed a similar issue with the current state of merger & acquisition (M&A) activity specifically, and as CB Insights reports in their State of Venture Q2’26 report, the current snapshot of the overall venture industry is no different.
Their data shows two consecutive quarters above $200 billion, indicating one of the “strongest stretches on record.” However, when you start drilling down further, deal count is at the lowest it has been in over a decade, meaning we have a smaller number of mega rounds propping up the rest. In fact, those mega rounds accounted for 81% of all funding, with one company alone making up 40%.
An overview of the CB Insights report illustrates the discrepancy in the market right now. The headline is that total funding came in at $212.9 billion for Q2. While this is down 26% QoQ, it is still the second highest quarter ever. At the same time, deal count was 7,086, down 11% QoQ and hitting a decade low. Then you have the median deal size of $4.2 million, up 5% QoQ. M&A and IPO exits were also down 10% and 6% respectively, despite the SpaceX IPO which was the largest on record.
So, what we have here is what they refer to as record funding coupled with a narrowing market, which is great for the 263 companies participating in the mega rounds, but not necessarily good news for the broader market.
It is of course no surprise that some blockbuster AI financings are what is fueling these numbers, keeping quarterly totals elevated. In terms of deal count, Industrial humanoid robot developers led the pack with 20 deals valued at $2.7 billion. That was closely followed by other companies in the robotics/AI space, including robot foundation model developers, with 15 deals valued at $9.2 billion.
But when you look at deal value, large language model (LLM) developers were clearly in the lead, with 12 deals valued at $76.2 billion. Coding AI agents were close behind with 13 deals valued at $67.3 billion, and legal AI agents had 13 deals valued at $66.2 billion. Again, mega deals were responsible for driving a great deal of the value in these categories much higher, so deal count might provide a better idea of what market activity really looks like.
In terms of geography, every major market saw a decline in deal count, with all seeing double-digit drops. North America was in the lead, with 68% of total global funding, but the US still showed a 31% decline in deal momentum Q0Q. China, the United Kingdom, India, and Japan rounded out the top 5 countries for deal count.
The takeaway here is that the venture market is increasingly concentrated. Capital remains available, but it is flowing disproportionately to a small group of large, AI-focused companies. For founders outside that circle, record funding totals should not be mistaken for an easier fundraising environment. Q2 demonstrated that investor appetite is still substantial, but a true market recovery will require more than a handful of blockbuster rounds. It will require broader deal activity, stronger exit markets, and capital reaching a much wider range of companies.
