2025 was the year venture capital stopped pretending the 2021 hangover was temporary. Global funding hit $425 billion — up 30% — yet deal count fell 32%. The headline looks like recovery. The fine print looks like a fire sale on everything that isn't AI.

Five companies absorbed 20% of all capital deployed globally. Strip them out, and the broader market is flat at 2023 levels. The industry didn't grow; it concentrated. Mega-funds above $10B increased their share of industry assets from 33% to 42% in twelve months, while 574 firms quietly transitioned to zombie status — a 50% increase year-over-year. The emerging manager moment is over. LPs aren't saying it loudly, but they've stopped writing the checks.

The exit environment told the real story. Secondary transaction volume hit $240 billion, with 71% of venture exits now happening through secondary sales rather than IPOs or M&A. The ecosystem is circulating capital internally to manufacture the DPI metrics LPs now demand. Public markets have largely stopped validating venture pricing — and most GPs are hoping nobody notices until the next fund closes.

AI captured nearly half of all deployed capital, and the honest debate isn't whether that's rational — it might be — but whether the firms not riding that wave have a coherent reason to exist. The generalist mid-market fund has no clear answer. Too large to be differentiated, too small to compete on check size, and sitting on 2021 vintage portfolios that 52% of founders still haven't exited from.