Raising Capital in 2026: A Higher Bar for Founders

From Vision to Proof

James Norman, Managing Partner at Black Ops VC, believes fundraising is undergoing a structural reset:

“Raising in 2025 requires a shift from ‘visionary’ to ‘battle-tested.’”

He explains that capital alone is no longer a sufficient advantage. Investors are increasingly cautious of “pilot purgatory,” where enterprise customers test AI products without committing to purchases. By 2026, founders must show durable advantages such as repeatable sales processes, proprietary workflows, and deep industry expertise.

“VCs no longer care about who’s first to market with a flashy demo. They want to know who’s building something that can last, earn trust, and scale long-term.”

Fewer Mega Seeds, More Scrutiny

Morgan Blumberg, Principal at M13, expects funding to remain accessible for top founders—but with tighter filters:

“We believe the funding markets will always be available for the best founders, but the bar will rise.”

He anticipates fewer oversized seed rounds in AI application software due to crowded markets and existing capital deployment. At Series A and B, investors will demand unmistakable momentum and sustainable revenue.

Blumberg summarises investor expectations succinctly:

“Bigger, faster, better: bigger total addressable market, faster growth, better unit economics.”

Standing Out in an AI-Saturated World

Dorothy Chang, Partner at Flybridge Capital, notes that generative AI tools have made it easier than ever to build products—but also far more competitive:

“Those tools are leveling the playing field for everyone, and competition is more fierce than ever.”

She emphasises three non-negotiables for venture-scale companies: tackling a genuinely large problem, operating in a space where founders have unique advantages, and offering something truly difficult to replicate.

Proving ROI to Enterprises

For Dawn Capital Partner Shamillah Bankiya, measurable value is key—especially in enterprise sales:

“Proving — showing line of sight to ROI — will be more important than ever to investors.”

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Where Investors Are Deploying Capital

High-Context Founders and Distribution from Day One

Norman says Black Ops VC remains sector-agnostic but increasingly focused on founders with deep, lived industry experience:

“In a world where AI has commoditized the ability to write code, the winning edge is now lived experience.”

The firm prioritises founders who already know their buyers before building products.

Legacy Industries and AI Infrastructure

Blumberg highlights interest in overlooked sectors where AI can deliver dramatic returns:

“Sleepy or legacy industries… have lower competition and moats driven by complexity.”

He also points to infrastructure supporting foundational models, embodied AI, world models, and healthcare platforms—particularly systems of record.

Outside Silicon Valley

Investor Taylor (quoted by TechCrunch) sees the strongest risk-adjusted returns beyond the U.S.:

“The best risk-adjusted venture returns are not in Silicon Valley anymore. They are in markets like Poland, Turkey, and Greece.”

He notes that over half of global venture investment and unicorns are now outside the U.S., with founders building globally from day one across Latin America, Africa, the Middle East, and South Asia.

Platform Shifts Over Point Solutions

Chang remains focused on large-scale technological transitions:

“I’m much more interested in the larger platform shifts that will define this era of technological and societal progress.”

Software Meets Hardware

Bankiya believes the next wave of value creation will move beyond software:

“Most of the world’s GDP is locked up in physical industries, and software-only solutions aren’t enough.”

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Will the IPO Market Finally Reopen?

Pressure Is Building

Norman expects IPOs to return—not because conditions are perfect, but because alternatives are running out:

“The system is running out of viable alternatives.”

He argues that private credit has delayed valuation resets without solving liquidity challenges, making public markets increasingly necessary.

Mega Listings as Catalysts

Blumberg expects a backlog-driven reopening, potentially led by high-profile names:

“Many large tech IPOs are anticipated, including darlings like Anthropic and OpenAI.”

A Global Thaw

Taylor predicts IPO activity will accelerate worldwide:

“People underestimate how global the thaw will be.”

He points to potential listings in New York, Latin America, and the Middle East, including Saudi Arabia’s Tadawul exchange:

“When companies like Tabby go public locally, it will challenge assumptions about where global tech outcomes happen.”

A Hard Reset Required?

Bankiya is more cautious, suggesting a major shock may be needed:

“Something akin to mega AI players facing unprecedented cost increases or sharp revenue declines.”

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The Venture Market Outlook for 2026

A Clearing Event for Funds

Norman describes 2026 as a decisive moment for venture capital:

“Next year will separate durable platforms from transient ones.”

He expects pressure on early fund managers, reduced institutional LP appetite, and a growing role for family offices pursuing high-conviction strategies.

“There is no viable middle ground.”

Strong AI Vintage, with Discipline

Blumberg views 2026 as a promising investment year but advises balance-sheet strength and long-term focus.

Liquidity Tools Are Expanding

Taylor notes meaningful progress on exits:

“Last year we had 12 liquidity events — all through M&A and secondaries.”

He highlights fintech and stablecoins moving from experimentation to infrastructure, especially in emerging markets.

Europe Still Matters

Bankiya concludes:

“Great companies are formed in all cycles.”

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The Next Phase of AI Investment

From Models to Businesses

Norman believes AI is entering a new phase:

“We are moving from the era of building models to the era of building businesses.”

He says investors are no longer chasing “AI startups” but founders who apply AI to scale complex, high-value markets.

Consolidation Ahead

Blumberg expects continued enthusiasm, alongside acquisitions and shutdowns in crowded sectors like sales, marketing, and coding automation.

AI Becomes Invisible

Taylor predicts that by the end of 2026:

“AI will stop being a separate category, as it will just be a part of all new technology companies being built.”

Chang echoes this, emphasising real-world impact over hype:

“The opportunity isn’t in labeling everything as ‘AI.’ It’s in understanding where AI meaningfully changes cost structures, speed, or decision-making.”

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What Could Surprise the Market in 2026?

The End of the “ChatGPT-First” Era

Norman forecasts a shift to multi-model architectures:

“The winners in 2026 won’t be the companies that ‘use GPT,’ but the ones that orchestrate multiple models seamlessly.”

He points to Anthropic, Google Gemini, and growing specialisation as signs of this transition.

Capital Efficiency Redefined

Blumberg expects more startups to reach profitability with minimal funding:

“AI tooling… enables many early-stage companies to accomplish profitability without excessive burn.”

New IPO Geographies

Taylor anticipates unexpected momentum from Ukraine, Latin America, and the Middle East:

“When companies like Tabby go public on the Saudi Stock Exchange (Tadawul), it will reset expectations about where global tech leadership lives.”