Key Takeaways
- • J.P. Morgan Private Bank argues venture capital and growth equity are at an inflection point, with value creation migrating into private markets, exit channels reopening, and distributions expected to recover after years of drought.
- • Global M&A volumes are up roughly 45% year-over-year to about $3.5 trillion year-to-date, and IPO issuance is on pace to exceed $200 billion in 2026, approaching 2021 levels.
- • 2025 secondary volumes exceeded $240 billion (up 48% y/y), with the GP-led segment reaching $115 billion and single-asset continuation vehicles growing from $2 billion in 2018 to $31 billion in 2024.
- • Median pre-money valuations over the trailing three years rose roughly 170% at Seed and 197% at Series A, versus 368% at Series C and 564% at Series D+, supporting a case for early-stage exposure.
- • Defense tech VC deal value hit a record of almost $50 billion across roughly 1,000 transactions in 2025, with late-stage and growth VC capturing about 87% of deployed capital.
Summary
J.P. Morgan Private Bank contends that venture capital and growth equity are at an inflection point following a multi-year correction that began after 2021. The bank argues that value creation is moving into private markets during a generational technology shift, capital markets are reopening across M&A, IPO and secondary channels, and distributions are poised to recover. The firm cautions that returns will be uneven and concentrated among a narrow set of winners and top-tier managers, making portfolio construction and manager selection the decisive levers.
The bank distinguishes venture capital, which targets early-stage companies with unproven models and the highest risk, from growth equity, which focuses on mid- to late-stage companies with established product-market fit and revenue traction. It frames both strategies as access points to innovation that public-only portfolios structurally miss, as companies remain private longer. The bank attributes this trend mainly to abundant private capital, a desire to avoid public-market reporting and disclosure burdens, and the growing viability of secondaries, continuation vehicles and strategic M&A as alternatives to IPOs. It notes that IPOs still accounted for only about 40% of total exit value for U.S. VC in 2025.
On opportunity sets, the bank highlights AI as a broad force for innovation, describing a shift from "software as a service" to "services as software" that it sees as a potential ~$6 trillion opportunity by decade-end. Sub-sectors cited include agentic AI, horizontal and vertical AI software, and industrial automation, with industrial companies expected to allocate 25–30% of capex to automation over five years versus 15% on average previously. The bank also points to healthcare, particularly AI-enabled drug development, and to security, including defense tech, autonomous systems, cybersecurity and space. It cites a space economy of roughly $613 billion today, with McKinsey projecting about $1.8 trillion by 2035.
On valuation risk, the bank acknowledges investor concern that late-stage venture has run up, and argues a balance between early- and late-stage exposure may be warranted, with early-stage offering a more attractive risk/reward profile. It attributes late-stage gains largely to LLM leaders and suggests tilting toward smaller, early-stage managers may enhance return potential without fully concentrating late-stage valuation risk. On exits, the bank describes a reawakening in capital markets, with mega-IPOs serving as a catalyst but unlikely to open the floodgates, as smaller or less profitable companies will continue to use secondaries, sponsor-to-sponsor deals and strategic M&A.
The bank distinguishes venture capital, which targets early-stage companies with unproven models and the highest risk, from growth equity, which focuses on mid- to late-stage companies with established product-market fit and revenue traction. It frames both strategies as access points to innovation that public-only portfolios structurally miss, as companies remain private longer. The bank attributes this trend mainly to abundant private capital, a desire to avoid public-market reporting and disclosure burdens, and the growing viability of secondaries, continuation vehicles and strategic M&A as alternatives to IPOs. It notes that IPOs still accounted for only about 40% of total exit value for U.S. VC in 2025.
On opportunity sets, the bank highlights AI as a broad force for innovation, describing a shift from "software as a service" to "services as software" that it sees as a potential ~$6 trillion opportunity by decade-end. Sub-sectors cited include agentic AI, horizontal and vertical AI software, and industrial automation, with industrial companies expected to allocate 25–30% of capex to automation over five years versus 15% on average previously. The bank also points to healthcare, particularly AI-enabled drug development, and to security, including defense tech, autonomous systems, cybersecurity and space. It cites a space economy of roughly $613 billion today, with McKinsey projecting about $1.8 trillion by 2035.
On valuation risk, the bank acknowledges investor concern that late-stage venture has run up, and argues a balance between early- and late-stage exposure may be warranted, with early-stage offering a more attractive risk/reward profile. It attributes late-stage gains largely to LLM leaders and suggests tilting toward smaller, early-stage managers may enhance return potential without fully concentrating late-stage valuation risk. On exits, the bank describes a reawakening in capital markets, with mega-IPOs serving as a catalyst but unlikely to open the floodgates, as smaller or less profitable companies will continue to use secondaries, sponsor-to-sponsor deals and strategic M&A.
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