Fund Formation

Fund formation is the raising of new venture capital funds from limited partners (LPs), the banks, universities, family offices, state-backed lenders and individual operators whose commitments venture firms then invest in startups over the following years. New funds signal how much startup investment will follow over the next few years, and in 2026 much of the new money went to AI-focused vehicles.

Fundraising rebounded in 2026 from 2025, the weakest year since 2017, with the largest quarter since 2021, while the share of capital raised by the biggest funds had grown. Some firms raised or sought larger funds for bigger AI-era rounds, among them Union Square Ventures, which raised $900 million, and Disruptive, which sought up to $10 billion. Others went deliberately smaller or built on operator networks, as Pear VC and BAG Ventures did, and new limited partners and regional vehicles appeared in the UK, Saudi Arabia and India.

Disruptive had $7.5 billion committed towards its target as of October 2026, and an IIT Madras deep-tech fund in India, at its first close in September 2026, was aiming for a final close in December 2026.

Rebound and concentration

Venture fundraising recovered in 2026 from 2025, the weakest fundraising year since 2017. The first quarter of 2026 brought more than $80 billion of new US venture and private equity capital, the largest quarter since 2021, and monthly trackers logged 39 new funds with roughly $12 billion in disclosed capital in July 2026 alone. Much of the money went to AI: Menlo Ventures announced a $3 billion fund tied to its Anthropic stake, and Greylock raised $1.5 billion for Greylock 18, built around AI-native company formation.

The capital also concentrated in the largest vehicles. The National Venture Capital Association, using PitchBook data, reported that US firms raised $67 billion across 585 funds in 2025, with the 10 largest taking 32.9%, up from 13% in 2021.

Larger funds for larger rounds

Some firms raised larger funds to keep pace with AI-era round sizes. Disruptive sought up to $10 billion for its first conventional megafund, with $7.5 billion committed as of October 2026, to back roughly 10 late-stage to growth-stage companies in AI, AI infrastructure and defence technology. The Dallas firm had formally raised only one fund before and otherwise invested deal by deal through special purpose vehicles (SPVs) raised for single companies. The Wall Street Journal credited Groq's $20 billion licensing deal with Nvidia, the payoff on Disruptive's best-known bet, as the trigger, and said SPVs had fallen out of favour as Anthropic, Anduril and OpenAI moved to restrict the secondary trading they typically enable. The Journal also reported that, by October 2026, only Thrive Capital and Andreessen Horowitz had raised more than $10 billion for a new fund that year.

Union Square Ventures raised $900 million across a $500 million early-stage fund and a $400 million opportunity fund, more than triple the $275 million early-stage fund it raised in 2024. The firm attributed the jump to "bigger rounds and higher prices" and planned a similar number of investments as before, with larger cheques per deal. It paired the larger fund with a smaller team, narrowing its core investing group to four partners plus incoming general partner Michael Mignano.

Smaller and operator-backed funds

Other managers bet that access counts for more than cheque size. Pear VC closed a $333 million Fund V in October 2026, about $99 million below the $432 million it raised in May 2023, after weighing as much as $450 million, according to the Wall Street Journal, which named Mizuho, Duke University and StepStone Group among its limited partners. Pear planned to put most of the fund into new pre-seed and seed investments over roughly two and a half years, keeping reserves for follow-ons, faster than the three and a half to four years it historically took to make its initial investments. Co-founder Mar Hershenson argued that "capital is becoming commoditised" while access is not.

BAG Ventures, founded by former Google vice president Bonita Stewart and former CapitalG partner Jackson Georges Jr., closed an $11.3 million debut fund in September 2026 to back early-stage enterprise AI startups. More than 150 limited partners backed it, 85% of them senior operators from companies including Google, Snowflake and Nvidia, and Georges described the firm's edge as warm introductions into enterprise buyers rather than capital alone.

New limited partners and regional funds

New kinds of limited partners also entered venture funds. NatWest made its first direct limited-partner commitment to an independently managed venture fund in September 2026, investing across Phoenix Court's Localglobe, Latitude and Solar funds alongside £50 million from the British Business Bank and backing from M&G and HSBC. The British Business Bank had made a £75 million cornerstone commitment to Molten Ventures' Growth Fund I weeks earlier, and said more than 80% of the scale-up funding raised by the UK's most successful companies came from overseas investors.

Specialist vehicles formed around national industrial goals. MASNA Ventures, Saudi Arabia's first defence-focused venture fund, asked regulators in September 2026 to raise its cap to $150 million from the $100 million target it launched with in February 2026, as conflict in the Gulf exposed regional military gaps. The sharia-compliant fund, anchored by a Saudi family office, had drawn commitments only from Saudi nationals and was weighing international capital.

In India, IIT Madras and Unicorn India Ventures reached a ₹450 crore (about $47 million) first close on the IITM Unicorn Frontier Fund I in September 2026, three months after approval from the Securities and Exchange Board of India. The fund targets ₹1,000 crore (about $104 million) by a final close planned for December 2026 and had put about ₹55 crore into four deep-tech startups building rocket engines, quantum instrumentation, battery cells and carbon capture. Its backers were largely IIT Madras alumni and family offices.