The Investment Landscape: 2025 Market Overview & 2026 Outlook

In this piece, we’re sharing insights from January’s Lunch and Learn session “The Investment Landscape: 2025 Market Overview & 2026 Outlook" by Louise Donegan, Director of Strategic Engagement at REACH UK. In the session, she sets out a clear and realistic picture of the investment market as it stood through 2025 and how that landscape is shaping the move into 2026. Her view comes from working closely with founders, investors, and corporates across the REACH ecosystem, and seeing where capital, attention, and adoption have actually been focused. 

Here is a summary of here insights: 

Market conditions in 2025 

The defining feature of 2025 was stabilisation. Investment did not return to the peak conditions of earlier years, but it became steadier and more predictable. Venture activity remained strong by historical standards, with 2025 ranking as the third highest year on record for venture financing, behind only 2021 and 2022. Capital continued to flow at scale, even as the market normalised. 

AI dominated global venture funding for the third year in a row, accounting for roughly half of all investment. This concentration of capital highlighted where investor conviction remained strongest. The year also included record-breaking moments, including the largest private funding round, the highest private company valuation, and the largest venture-backed acquisition to date. 

Early-stage investment remained resilient. While deal volumes stayed relatively consistent, the amount of capital invested increased in the second half of the year. Investors backed fewer companies but committed larger sums where confidence was high. 

Capital became more selective 

Capital did not disappear in 2025, but it was deployed with greater discipline. Investors became more selective about where they placed bets, favouring businesses that could clearly demonstrate what was already working. This selectivity applied across stages but was especially visible at early stage. 

A significant proportion of this capital continued to flow into AI-enabled companies. That concentration shaped both innovation priorities and investor expectations, raising the bar for what was considered compelling. 

Proof replaced promise 

Investor behaviour in 2025 was defined by a clear shift towards proof. Ambition alone carried less weight. Revenue quality, customer adoption, and commercially credible growth mattered more than headline narratives. Founders were expected to show real usage, real customers, and a believable path forward. 

AI remained central to investor interest, but expectations changed. It was no longer enough to position AI as a differentiator on its own. Investors focused on how it was embedded into workflows, which manual processes it replaced, and whether it genuinely saved time or money. 

This deeper scrutiny reflected wider pressures. Economic conditions were more predictable, but interest rates remained elevated. Real estate operators faced ongoing cost and performance pressure, while ESG and energy considerations required immediate responses rather than future plans. 

Market stabilisation changed conversations 

Stabilisation did not mean the market became easier. Funding processes often took longer and involved deeper diligence. Conversations became more focused and deliberate, with clearer expectations on both sides. 

Valuations felt more realistic, and funding followed companies that could clearly articulate where value was being created. For founders, this predictability helped clarify what investors were willing to back and what evidence was required to move discussions forward. 

Corporate engagement returned cautiously 

Corporate interest in innovation re-emerged during 2025, but with much clearer expectations attached. Innovation budgets reopened selectively, and engagement focused on solutions linked to operational efficiency, compliance, cost reduction, and performance improvement. 

Corporates showed greater willingness to explore new technology, including pilots, but decision-making took longer. More stakeholders were involved, and internal sign-off processes became more rigorous. Pilots needed to address specific problems rather than experimentation for its own sake. 

AI featured prominently in these conversations, with emphasis placed on how it was being used rather than whether it was being adopted. 

Areas under pressure 

Certain models faced greater scrutiny. Marketplace businesses struggled unless they could demonstrate liquidity or defensibility. Hardware-heavy solutions came under pressure due to higher upfront costs and longer payback periods. Long sales cycles, particularly in enterprise and public sector contexts, required clearer routes to monetisation. 

Solutions perceived as “nice to have” did not disappear, but they needed a stronger commercial narrative to gain traction. Both investors and buyers focused more sharply on what they genuinely needed. 

Entering 2026 

The move into 2026 is taking place on a steadier footing. Investors are engaging more comfortably while maintaining discipline. Growth is back on the agenda, but selectively, with emphasis on scaling what is already proven. 

Execution is becoming more important than experimentation. In AI, attention is shifting away from pilots and towards tools embedded in day-to-day operations. Operational efficiency remains a central driver for both buyers and investors. 

Across these themes, expectations are clearer, scrutiny remains high, and engagement is more deliberate. This reflects a market that has reset and is now moving forward with greater focus and realism.