By George Pu | Founder Reality Podcast | November 10, 2025
I spent the past week doing something I haven't done in years: analyzing the venture capital funding landscape.
As a bootstrap founder, it's not my world anymore. But I realized something shocking that every founder needs to understand about what's actually happening right now.
VCs are deploying record capital. Meanwhile, 84% of companies that raised seed rounds in early 2022 still haven't raised their Series A. Three years later. Zero additional funding.
How can both things be true? After digging into the data, I discovered the brutal answer:
The VC market has split into two completely different games. And most founders don't realize they're playing the wrong one.
The Paradox That Made Me Investigate
Three years ago, I was raising capital for SimpleDirect. I met incredible founders in San Francisco, Colorado, and New York who successfully raised their seed rounds and Series As. Smart people building real products with real customers.
Last week, I checked in on them. Only a handful of the best performers raised additional rounds. One brilliant founder made it to Series C - great for him. But when I looked up others on Crunchbase and PitchBook? Nothing. No Series A announcements. No Series B. Nothing since their 2021 seed round.
Either they've become wildly profitable and don't need more money (unlikely), or they've devolved into zombie startups - alive but unable to raise another dollar.
Meanwhile, VCs on Twitter are talking about record fundraises. I checked the databases. No one is shutting down. VC funds are raising bigger rounds, expanding, thriving.
Founders struggling. VCs thriving. Both things true simultaneously.
Here's why.
Q3 2025: The Data Nobody Wants To Talk About
In Q3 2025 alone, VCs deployed $97 billion in the US. That's a massive number - record territory. Read the TechCrunch headlines and you'd think we're back to 2021 easy money levels.
But here's what nobody talks about: One-third of that $97 billion went to just 18 companies.
$32 billion out of $97 billion went to 18 companies. Let that sink in.
Anthropic (owner of Claude) raised $13 billion. Elon Musk's xAI raised $5 billion. French AI company Mistral raised $2 billion. These aren't normal rounds - these are massive mega AI rounds.
Do the math: Those 18 companies got an average of $1.8 billion each. The other 7,500 companies that raised VC money? They split the remaining $65 billion - an average of $8.7 million each.
That's a 200x difference.
1.8 billion versus 8.7 million. Two completely different games happening in the same market.
Game A vs Game B: Which One Are You Actually In?
The VC market has split into two distinct games:
Game A: The AI Elite
- AI companies (especially LLM and foundational models)
- Repeat founders with previous exits
- Top-tier accelerator graduates (YC, etc.)
- Companies that fit the current narrative
- Based in San Francisco
AI companies captured 55% of all US funding in Q3 2025. One company - Anthropic - got 35% of all AI funding by itself.
Game B: Everyone Else
- First-time founders
- Non-AI companies
- Companies that raised in 2020-2021
- Anyone outside San Francisco/NYC/Boston
- Anyone without a previous exit
The mistake most founders make? They think they're in Game A when they're actually in Game B.
The Series A Problem Gets Really Dark
Here's a stat that should terrify you: 84.6% of companies that raised seed rounds in early 2022 still haven't raised their Series A. Not struggling to raise. Haven't raised at all. Period.
It's been three years.
Back in 2020-2021, maybe you had a 50-60% chance at Series A. Now it's down to 15%. One in six.
I know talented founders personally stuck in this situation. They have real products, real customers, real revenue. Some hit $1 million ARR - which three years ago was the golden ticket to Series A. Now investors won't even return their emails.
One friend I know raised at pandemic-level valuations. Now he can't get a down round without getting crushed, can't raise at his current valuation, and can't pivot fast enough. He's been stuck for 4-5 years since his last round.
Bridge round with massive dilution, down round that kills you, or shut down. Those are the only options.
The Conversation That Explained Everything
Two weeks ago at a pitch competition, I spoke with a top-50 Silicon Valley VC. I asked how they're doing post-2022 tech winter.
His answer: "Honestly George, I'm just investing in AI. Our firm's thesis has turned to AI. Everything we're looking at is AI infrastructure, AI applications, AI SaaS, AI tooling. If it's not AI, it's really hard to get partnership approval."
I pushed back: "What about great businesses that aren't dependent on AI?"
"We have a mandate from our LPs. They want exposure to AI. They're pushing us very hard on the thesis. We cannot physically invest in anything else right now, even when we want to."
Let that sink in. VCs have bosses too - their limited partners (LPs). Those LPs are pension funds, foreign investors, Middle Eastern sovereign wealth. They want AI returns. Period.
If you're not in that category, it doesn't matter how good you are. You're in the wrong game.
What You Can Actually Do About This
The information above is brutal. But ignoring reality doesn't change it. Here's what you should do based on your situation:
If You're Trying To Raise VC
Be brutally honest about what game you're in:
- Are you building AI?
- Do you have a previous exit?
- Are you at $2M+ ARR with 3x growth?
- Are you in San Francisco?
If you answered yes to most of these, you're in Game A. Keep pushing - you'll probably raise just fine.
If you answered no to most, you're in Game B. You need to either change your strategy completely or accept that traditional VC isn't the right fit right now.
Look At Your Runway Math With Extreme Honesty
How many months of runway do you have left? It takes 6-9 months minimum to raise right now (used to be 3 months for seed).
If you have less than 12 months of runway and you're not already having conversations with interested VCs, you're not going to make it.
You need to pivot to profitability right now. Not next quarter. Not after this feature launch. Right after you finish reading this article.
Open Excel. Calculate exactly how many months you have left. The landscape has changed. This is serious.
If You Raised in 2020-2021 And Haven't Raised Since
This is the hardest advice I'll give: it might be time to consider shutting down.
I know it sounds harsh. I know you've spent years building this. But if it's been three years since your last round and you haven't raised additional funding despite having revenue and customers, the math isn't going to change.
The bar went up 200x. The 15% who make it to Series A now are playing a different game than you were qualified for in 2021.
There's no shame in shutting down. Return money to investors if you can. Be honest with your team. Move on to build something better - maybe in the AI space where you'll have a real shot.
Don't spend another 5 years struggling against a rigged game. Your time is worth more than that.
Why Bootstrap Founders Have The Advantage Right Now
If you're bootstrap or seriously considering it, this is one of the best times in 20 years to be a bootstrap founder.
Those 7,500 companies fighting for $65 billion? They're going to struggle because the funding isn't flowing to them - it's going to Anthropic and OpenAI.
Bootstrap founders aren't competing for VC money. They're competing for customers and revenue. That's the right game to play in this market.
Your customers don't care if you're VC-backed or AI-powered. They care if you solve their problems. That's it.
Even if you want to raise VC in the future, you need to stabilize profit and revenue first. Get to a position of strength before you go back to that market.
The Real Numbers Behind "Record VC Deployment"
When headlines say "VCs deployed record capital," what they mean is:
- 20 companies building AGI got billions each
- 7,500 other companies split what's left
- 84% of seed companies can't raise Series A
- The bar went up 200x for everyone not in Game A
If you're not in the top 5%, you need a completely different strategy.
YC Was Right (And I Didn't Want To Believe It)
In 2022, Y Combinator sent every portfolio company a letter saying they needed to survive until 2026. I thought it was hyperbolic. Ridiculous even.
They were right. They saw something the rest of us didn't.
The only thing they didn't predict was ChatGPT and the AI wave. That changed the math again - but only for AI companies. For everyone else, the tech winter continues.
One Final Truth
I don't talk about VCs much on this podcast. When I do, I sometimes bash them. But VCs aren't bad - they just have different goals than you as a founder.
When I was raising in 2022, money was my North Star. I just wanted $2.5 million to keep running my company. I didn't do due diligence on VCs. I just heard "top-tier name" and assumed that was enough.
I didn't understand that partners matter way more than firm names. I didn't understand I was playing a game I wasn't allowed to play.
Thankfully, I didn't end up raising. Now I'm building profitably with complete control.
For you as a founder right now, this is the most important time to make that decision for yourself. Look at the time you've spent on your product. Look at how much more time you want to keep spending on it.
I have friends who've been working nearly 10 years on startups that clearly aren't working. They won't listen to advice. I'm not saying that's wrong - but I am saying think carefully about your specific situation.
The market is brutal. The economy isn't doing well. Consumer and business purchasing power is declining. But it doesn't have to be dark.
Be agile. Be willing to pivot. Rethink your journey if needed. And most importantly: make sure you're playing the right game.
Need help figuring out your next move? I offer free one-on-one assessments for founders navigating these decisions. No charge, just honest feedback.
Email: george@founderreality.com
Twitter: @TheGeorgePu
Newsletter: newsletter.founderreality.com
George Pu builds AI-powered businesses at SimpleDirect and ANC. Follow along for unfiltered founder insights at @TheGeorgePu.
