Venture capital investment: Key sector themes

In the face of volatile stock markets, tariff uncertainty and sustained elevated interest rates venture capital investment has proven remarkably resilient. In the first three months of 2025 global venture investment reached a 10 quarter high of US$126.3 billion and up 53 percent year-on-year from US$82.3 billion in Q1 2024, according to KPMG figures.

Investment in AI and machine learning technology funding rounds has been the single biggest driver of venture capital investment resilience, accounting for close to 60 percent of combined venture deal value in Q1 2025, according to Pitchbook.

But while the importance of AI to the health for the venture deal ecosystem in the current market is undeniable, but behind the AI-driven headlines, other sectors are also generating and interest and deal flow.

Alter Domus reviews five key sectors attracting investment from venture capital managers:

1. AI and machine learning:

Without the contribution of AI funding round activity, overall venture capital funding round investment figures would have come in much weaker.

AI has been a hot ticket for investors, with the long-term growth trajectory and application of AI technologies supporting robust valuations and investor appetite for exposure to fast-growing AI start-ups with proven technologies.

The US AI space has been particularly active, with OpenAI, the developer of ChatGPT, closing the largest private tech in history with a US$40 billion funding round that valued the business at US$300 billion. In other US AI deals large-language model (LLM) competitor Anthropic raised US$4.5 billion across two closings and AI-powered augmented reality company Infinite Reality raised a US$3 billion round to lock in a US$12.5 billion valuation.

AI investment activity also corner-stoned the European venture market, although the focus was more on AI-industrial applications as opposed to the LLM deals that led the US market. Healthcare-led AI companies such as Neko Health and Cera landed funding rounds of US$260 million and US$150 million respectively.

AI also animated Asian venture capital, with the release of Chinese LLM AI company DeepSeek, which can operate with less computing power than other models, opening up AI to a wider pool of users and driving Asian technology giants Alibaba and Tencent to launch their own AI-offerings.

2. Healthtech and biotech:

The healthtech and biotech segment also showed positive investment growth, rising by 30.4 percent in Q1 2025 to reach US$3.5 billion from 185 transactions.

Investment in health and biotech has benefitted from overlaps with the red-hot AI sector, with numerous large funding rounds secured by businesses straddling both segments, such as the abovementioned deals involving preventative healthcare group Neko Health and in-home care platform CERA.

But while AI shaped investment in healthtech and biotech, other sector verticals have also managed to progress funding rounds. Windward Bio, for example, a clinical stage drug developer, landed a US$200 million Series A funding round, while FIRE1, a medical devices developer focused on heart failure care, landed a US$120 million round.

Other funding rounds – for companies spanning a range of therapeutic drug research, digital health technology and scanning and drug delivery areas – have also progressed, illustrates the sustained interest in the healthcare space from venture capital investors.

3. Cleantech

Despite policy shifts in the US on energy transition and environmental, social and governance (ESG), cleantech and climate-focused assets have continued to attract interest from investors.

Even as the policy focus on energy transition shifts, venture capital investors around the world have continued to bank on the long-term requirement for diversified energy sources, energy security and decarbonization in all modern economies.

In the US, X Energy, a developer of small, modular nuclear technology, raised US$700 million in an upsized Series C funding round, while Helion, a fusion reactor business, raised US$425 million in a Series F round.

Outside of the US, Chinese cleantech group SE Environmental secured a US$688 million round, while German real estate energy management company Reneo and Australian vertical farming group, Stacked Farm, closed rounds of US$624 million and US$150 million respectively.

4. Defencetech

Escalating conflict in Eastern Europe and the Middle East, coupled with a shift to satellite-, autonomous- and AI-powered defense system has supported a strong growth in defencetech venture investment, with CB Insights forecasting that at the current run rate defencetech investing will reach US$6 billion by end of 2025 – a 62 percent increase on 2023 levels.

In Europe funding round highlights have included sizeable funding rounds for Defence AI software company Helsing and drone manufacturer, Tekever. The US generated even bigger defensetech deals – including a $600 million raise by autonomous naval defense technology group Saronic Technologies, a $240 million raise for aerospace-focused ShieldAI, and a $250 million raise by anti-drone systems developer Epirus.

5. Fintech

The fintech sector has been focused on the exits and realizations of existing assets, but investment opportunities have continued to emerge, with CB Insights tracking an 18 percent quarter-on-quarter increase in fintech funding to US£10.3 billion for Q1 2025.

A rally in investment in crypto and blockchain assets, including large rounds such as the US$2 billion deal for Maltese crypto exchange Binance, contributed to the increase in fintech investment, with a number of crypto assets also testing out markets for exits.

Outside of the crypto and blockchain space, Mexican buy-now-pay-later (BNPL) platform Plata secured a US$160 million round to achieve unicorn status, while Israeli fintech services provider Raypd landed a US$500 million round to support its acquisition of PayU.

Other areas to watch:

In addition to the core investment themes listed above, venture managers have also kept tracking longer-term investment trends. These are other investment themes to watch:

6. Quantum computing:

Quantum computing – an advanced form of computing based on the principles of quantum mechanics – has the potential to solve calculations and complex problems that current computing systems can’t deliver.

The sector is still relatively nascent, but venture managers are moving actively to build exposure to the sector, with quantum computing groups raising more than US$1.25 billion in Q1 2025 – more than double the year-on-year comparison.

As the sector moves into the commercial domain, and is not solely used in a research and development context, more commercial applications and investment opportunities are opening up.

7. Graphene:

Graphene – a feather-light but incredibly strong substance with huge potential across the construction, manufacturing and industrials sectors – is expected to grow at a compound annual growth rate (CAGR) of 35.1 percent between 2024 and 2030 and become a US$1.61 billion market, according to Grand View Research.

Compared to other venture verticals, funding rounds are still relatively small, but with demand for the substance expected to increase across the energy storage, aerospace and car-making industries, this is an area venture firms are going to be paying ever closer attention to.

8. Synthetic biology:

Synthetic biology – a science applying engineering principles to living systems – has the potential to transform the availability of personalized medicine and food production and is forecast to grow at a compound annual growth rate (CAGR) of 23.2 percent between 2025 and 2035, according to Vantage Market Research.

Venture capital players have invested steadily in synthetic biology research, but commercial applications are still some way off and transitioning the sector from one receiving steady private sector capital flows at seed level, into a sector the presents an attractive risk-reward proposition for venture investors deploying scale-up levels of capital is still some way off.

9. Robotics:

Venture investment in robotics has cooled since 2021, when funding rounds totaled US$14.7 billion versus around US$7.5 billion last year, according to Dealmaker reports.

The sector, however, has continued to attract sizeable, albeit concentrated funding rounds, as companies combine physical robotics capability with AI tools.

Physical Intelligence, for example, a start-up that develops “brains” for robots secured a US$2 billion valuation when closing its recent US$400 million funding round.

In another notable deal Apptronik, a humanoid robotics company based in Texas, closed a Series A funding round at US$350 million. The company is building intelligent robots that can be deployed in the manufacturing, health care and social care sectors, among others.

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