Venture is on fire right now. AI rounds are closing at speeds and sizes we haven’t seen before, and the VC asset class has held up better than most people expected a year ago.
Private equity is in a very different spot.
PitchBook data in the WSJ shows U.S. PE fundraising down again in 2026. Through September 30, U.S. PE firms had raised roughly $222 billion. Annualize that and you get about $296 billion for the year, versus roughly $330 billion in 2025 and a peak of around $405 billion in 2023.
That’s about 27% off the peak unless Q4 comes in well above trend.
For a lot of B2B founders, a PE buyout historically has been the most likely exit. Far more likely than an IPO, and often more likely than a strategic. But those PE exits will be much tougher with fewer funds to make them with.
VC Fundraising Was Down 3.6%. PE Fundraising Was Down 29%.
In PitchBook’s Q1 2026 data, private equity had the steepest drop among major categories, with trailing 12-month raises at $385 billion, down 29%. Venture capital raised $189 billion, down just 3.6%.
The LPs are the same in both cases. They’re still writing checks to venture because AI is the trade everyone wants exposure to. They’re pulling back on PE because PE hasn’t been returning enough cash. A GP can’t raise Fund VI easily when Funds IV and V are still holding companies bought at 2021 prices.
Middle-Market PE Fundraising Fell 43% in 2025
Fundraising by middle-market U.S. private equity firms fell more than 43% to $94.8 billion in 2025, the worst year for that segment since 2018 and a much steeper drop than the broader industry.
The middle market is where most B2B companies sell. If you’re at $10M to $75M in ARR, the mega-funds aren’t your buyers. The mid-market sponsors are, and they’re having the hardest time raising.
The Number of Funds Closing Dropped 45%
Fewer dollars also means fewer buyers. The number of funds closing dropped 45.1% to 2,613 in PitchBook’s Q1 2026 report.
Fewer funds closing means fewer firms with fresh capital and a mandate to deploy it. That means fewer bidders in your process, and competitive tension between bidders is what gets you a great price.
When I sold EchoSign to Adobe, having real alternatives is what moved the price. Lose two or three credible bidders and the whole negotiation changes.
$2 Trillion in Dry Powder, Mostly in Funds That Need to Return Cash
PE still has plenty of money to spend. PE deal activity in Q1 2026 came in at 5,100 transactions valued at $481.6 billion, and PitchBook analysts expect $2 trillion in dry powder and lower borrowing costs to keep supporting deal activity.
And 2025 was the second-best year for exits ever, behind only 2021, with just over 1,600 exits and nearly $730 billion in exit value.
But much of that dry powder sits in older funds that need to show returns before the GP can raise again. That changes how buyers behave:
- They’re more selective. A sponsor that can’t easily raise its next fund can’t absorb a bad deal in this one.
- They’re underwriting AI risk on every B2B company. Seat-based software with flat NRR is a hard sell to a buyer who has to hold it for five years.
- They care about cash. Profitability and free cash flow carry more weight than growth, because the exit math has to work without a big multiple at the end.
PitchBook’s view is that fundraising won’t fully recover until exits stay high long enough to restore LP liquidity. That could take a few more years.
Selling to PE in 2026 Means Fewer Bidders and Tougher Diligence
Venture is having one of its best stretches in a decade. U.S. PE fundraising is in its third straight year of decline from the 2023 peak, the middle market fell 43% in 2025, and 2026 is tracking lower again.
By the numbers, selling your company to PE has gotten harder every year since 2023. The B2B companies still getting strong sponsor outcomes are profitable, have retention data that holds up to AI questions, and run processes wide enough to keep several bidders at the table.
