Greetings, I'm Saxon Baum, a partner at FLF, where we've built our reputation as one of the most active venture capital firms in the Southeast by turning market intelligence into strategic advantage. In this quarterly briefing, I'll walk you through the critical data points from Q2 2025's PitchBook-NVCA Venture Monitor and reveal how these market shifts are directly shaping our investment decisions at FLF.

The second quarter delivered a masterclass in market volatility. But beneath the turbulence, we're seeing clear signals that savvy investors can capitalize on. While others retreat to the sidelines, our data-driven approach is revealing unprecedented opportunities for those prepared to act with precision and conviction.

Here’s what the numbers are telling us and how we’re acting on them.

Deal Activity Down, But Not Out

Venture firms deployed $69.9 billion across 4,001 deals in Q2. That’s a 24.8% quarter-over-quarter drop, but context matters: Q1 was boosted by OpenAI’s $40B outlier round. When you strip that out, deal activity is quite steady. We’re not witnessing a pullback; we’re seeing a normalization.

The sharpest investors are using this recalibration to their advantage. Founders are becoming more realistic, and valuations are adjusting to make great companies more accessible. 

At FLF, we’ve leaned in with discipline, backing early winners in our Fund 3 portfolio that are already seeing follow-on interest from Tier 1 VCs like a16z and SoftBank.

Fundraising Is Slower, Unless You’re Proven

One of the more striking stats is that median VC fund close times have stretched to 15.3 months, the longest we’ve seen in over a decade. First-time fund managers are getting squeezed, with fundraising activity down 40.5% year-over-year in both capital raised and fund count.

This environment is punishing for anyone without a track record. But for repeat performers, especially those in undercapitalized regions, it’s a tailwind. Our strong LP base and performance across Funds 1 and 2 have helped us sustain momentum, with Fund 3 on track for a December 2026 close.

We’re seeing the same dynamic at the founder level. Founders with clear execution plans and capital efficiency are still raising, sometimes even on up-rounds. In Q2, Betr completed a strong raise, Manifest secured a strategic investment from a16z, and Flex continues to generate inbound interest from both acquirers and investors.

AI Still Owns the Top End of the Market

Artificial intelligence remains the undisputed leader in capital allocation. In Q1, 71% of all VC dollars went into AI-related companies, and that momentum held steady in Q2. Five billion-dollar-plus AI deals closed last quarter, including Scale AI’s $14.3 billion raise, featuring Meta taking a 49% stake.

But here’s what matters most: AI is evolving. Expanding beyond AI infrastructure, investors are now backing second-order tools, compliance models, safety layers, and enterprise adoption frameworks.

We’ve positioned ourselves ahead of this shift. Our bets on infrastructure-first AI companies like Autonoma and OpenHome give us exposure to the backbone of what’s next. As the application layer matures, we’re already close to the center of value creation.

The Secondary Market Isn’t a Backdoor, It’s a Strategy

The secondary market is quietly becoming a pillar of the venture ecosystem. With an estimated market size of $60 billion, it’s no longer a “Plan B” for liquidity; it’s a smart, tactical move.

We tapped into this shift in Q2 by selling 50% of our Rewst position. This calculated decision gave us partial liquidity while keeping upside. Our secondary sale of TSO Life from Fund 1 is another example. These weren’t fire sales; they were smart moves made in a selective exit market.

And we’re not alone. According to Hiive, 83% of Q1’s secondary volume came from just 20 companies. It’s a top-heavy market, and we’re fortunate to hold positions in companies that fall into that “elite” band of pricing confidence.

Southeast Validation: Data to Match the Momentum

For years, we’ve been bullish on the Southeast. Now we’ve got the numbers to back it up. Miami posted 73 deals worth $700 million in Q2, making it the sixth most active VC hub nationwide.

PitchBook also reports that 27.7% of total VC deal value is now flowing into non-traditional regions, a steady rise from 18% just three years ago. The infrastructure is here, the talent is arriving, and the arbitrage is real. These are exactly the conditions that generate alpha.

Four of our newest Fund 3 companies are already outperforming expectations, with national VCs circling and early customer traction accelerating. More than niche regional plays, these are world-class businesses built in cities like Tampa, Nashville, and Atlanta.

Early-Stage Gains, Late-Stage Pain

While late-stage valuations continue to compress, early-stage rounds are holding strong and in some cases, expanding. Pre-seed deal sizes were up 42.3% year-over-year in Q2, and seed rounds rose 16.1%. Investors are going earlier, backing higher-conviction teams, and writing bigger checks to winners.

This is exactly where FLF plays best. Our thesis is built around identifying strong founding teams early and supporting them with more than just capital. Our operator-first model, through partners like Dragonfly, helps these companies scale faster and avoid early-stage pitfalls.

We’re seeing a growing bifurcation between companies with true traction and those that merely checked the boxes. Capital is flowing into fewer companies, but in larger amounts, and that benefits investors who get it right early.

Looking Ahead

There are still macro clouds to navigate, tariff policy, interest rates, and geopolitical tension all loom large. But we’re also watching several near-term catalysts:

• A potential Trump-backed rate cut could revive PE exit appetite
• The next wave of IPOs, Figma, Cerebras, and Wealthfront, could set the tone for Q4
• Secondary markets will likely become even more liquid and mainstream
• AI monetization is entering its proving phase, and winners will break out fast

At FLF, we’re positioned to lead through this moment. We’ve built a firm that thrives on volatility, finds signal in noise, and operates in markets where competition is still catching up.

The Q2 2025 data is both a report and a reminder. When others wait, we move. And we’ll keep doing just that.

Interested in our investment initiatives? Discover more about venture capital investment opportunities with FLF.