The venture landscape is shifting in two directions at once. On the primary side, deal volumes are down, but round sizes are larger, VCs are placing bigger bets on fewer companies, especially in AI.
On the secondary side, exits are cooling, with IPOs and M&A activity well below recent peaks. It’s tempting to read this as the end of the cycle, but the reality is more nuanced.
Look closer, and a different story emerges. What we’re seeing is not a freeze, but a fundamental reset. The rules of the game have changed, shifting away from the growth-at-any-cost playbook of the past toward a renewed focus on sustainable, fundamentals-first execution.
A Market That Rewards Strength
While overall exit volumes have contracted, the quality of companies successfully going public has improved. Today’s market rewards scaled, profitable businesses with valuations anchored to real-world comparables. This recalibration is healthy, cleaning up the aftermarket and bringing serious institutional demand back to the table.
Across the startup ecosystem, this shift is creating more resilient companies. Key metrics are improving, with businesses demonstrating greater capital efficiency and stronger customer value. These are the signals of durable, long-term growth not promotional revenue.
The current phase rewards builders. In the B2B SaaS world, where capital efficiency has always been critical, the filter for success has tightened. Companies that can demonstrate strong unit economics and a clear path to profitability are the ones thriving.
Building for the Long Game
For investors and founders alike, the environment presents a unique opportunity. The secondary market has matured into a sensible bridge for liquidity, allowing for rational price discovery without forcing premature exits. It’s a sign of a maturing ecosystem, not one in distress.
At Pentathlon, these are the conditions we were built for. Our approach has always been simple and consistent: back capital-efficient builders with strong unit economics and support them toward building list-ready businesses.
We believe that strong operating fundamentals will always convert to long-term value. You won’t read headlines about these companies every week, but the compounding is real.
For founders, the entry point for new ventures is healthier. Valuations are more rational, expectations are grounded, and capital is being deployed with greater clarity and purpose. With late-stage funding becoming more selective, early-stage investors have a window to build lasting ownership at realistic prices.
The Bottom Line
All in all, the exit landscape is maturing. Public markets are leading the way, secondaries are providing stability, and M&A is rewarding proof over promise. Today’s buyers are pricing on cash generation, not just narratives, which means value will accrue to those willing to play the long game.
While the large-scale exits may take time to return to their former velocity, value is compounding underneath the surface. The current market is for builders and we’re proud to be backing the right ones.