Every year, Carta releases The State of Startups report—one of the most essential references in the startup world. Managing equity for over 40,000 companies and processing billions in transactions, Carta’s data isn’t opinion. It’s the actual record of what’s happening in venture capital.
Analyzing the 2025 report through a Business Engineering lens reveals six interconnected patterns that explain the current state of startups. Each pattern builds on the others. Together, they reveal a structural shift that will persist for years.
The startup world has split into two completely different games. AI captures 70% of Series E+ capital. Non-AI companies face a capital desert at growth stages—even after early success.
Pattern #2: The Recovery Illusion
Capital is up 6% to $110B, but deals dropped 36% in Q4. What looks like recovery is actually concentration. Fewer companies absorbing more capital.
Pattern #3: LP Pressure (The Hidden Driver)
Fund vintages from 2019-2024 have returned essentially zero cash to LPs. AI’s compressed timelines (2-3 years to $1B) offer the only viable path to liquidity within fund lifecycles.
Pattern #4: Time-to-Value Compression
Anthropic hit $1B revenue in 2 years. Cursor in 3. The historical 7-10 year benchmark now looks slow. Investor patience has permanently recalibrated.
Pattern #5: The Track Record Filter
53% of 2025 capital flows to repeat founders—up from 21% in 2019. First-time founders face structural headwinds regardless of idea quality.
Pattern #6: The Barbell Distribution
Only extremes survive: AI premium (speed + scale) or deep tech (physical moats). The middle—generic SaaS, “good but not exceptional”—faces extinction.
How They Connect
These patterns form a reinforcing system: LP pressure forces fund managers to seek compressed timelines. AI delivers those timelines. Capital concentrates in AI. Non-AI faces a desert. Track record becomes the tiebreaker. The middle hollows out.
Understanding this system explains why surface interventions don’t change outcomes. The structure produces the behavior.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
