But the thing is, capital wasn’t just flowing. There was a concentration, with large checks, especially for artificial intelligence companies. 

About 74% of January funding went to deals of $100 million or more, and 57% went to AI-related startups alone. 

However, if you stood back and looked at markets and capital flows in early 2026, you’d see something quite different, fundamental change. 

Tech isn’t responding to an upswing in funding anymore. It’s adapting to new investor priorities, and market situations that are very different from the era of easy capital that impacted the late 2010s and early 2020s.

So what changed?

For most of the past decade, cheap money allowed tech growth, interest rates in certain economies were at historical lows, investors hungry for yield and growth poured capital into startups before they had profit, let alone profits. 

Risk was quite blurry during that era, valuations were amplified and growth at all costs was made workable, if fragile, a strategy.

Today, it doesn’t work that way anymore.

Interest rates globally are higher than they’ve been for years. Monetary policy became tougher after pandemic stimulus faded, inflation returned in many regions, and central banks moved quickly to raise rates to rein in prices. 

That made capital more expensive and investors much pickier.

Funding isn’t gone, it’s just concentrated

Despite the narrative of a “funding winter,” KPMG’s latest data shows global VC investment hit more than $138 billion in the fourth quarter of 2025, ending the year with one of the strongest totals on record. 

But that masks an important trend where capital isn’t broadly distributed anymore. Investors are placing large investments on a narrow set of opportunities.

Take AI. It wasn’t just one sector among many. In 2025, AI startups drew outsized rounds, dozens of companies raised hundreds of millions, or even billion-dollar-plus investments. 

The funds aren’t trickling down to every idea with a good pitch. They’re clustering around a few big names and high-conviction focus.

That shift is unignorable. It means the cost of money isn’t just higher, the bar for attracting it is, too.

A tale of two tech markets

Investors are talking about discipline, transparency, and profitability. According to a global investor survey, 61% of investors still see technology as the top sector for capital growth over the next few years, but they want transparent disclosures about strategy and returns, especially around AI. 

In the first week of February 2026, global indexes experienced turbulence as software and tech stocks were sold off. Valuations slipped due to investor anxiety over whether heavy AI spending by big tech firms, think multibillion-dollar capex plans, will translate to profit. 

Big names like Alphabet and Microsoft have seen their stock prices fluctuate at times because markets are questioning the returns on massive AI investments outweighing near-term costs.

At the same time, alternative corners of tech are attracting fresh interest. There’s a noticeable shift toward smaller-cap and value-oriented companies as investors rotate out of speculative growth names and into sectors they deem safer or more resilient. 

Layoffs and recalibration

Again, looking at the workforce, 2025 saw a large number of layoffs in the tech industry, from startups to giants. 

Thousands of jobs were cut as companies recalibrated their cost structures and refocused priorities. Those layoffs reveal the stress on growth models that relied on scale and user acquisition over cash flow and efficiency.

For founders, this has been painful and humbling. People who raised capital on promises of growth now find investors demanding sharper unit economics and quicker paths to profit.

That’s not a backlash against innovation but a higher level of financial discipline driven by macro conditions.

Where tech still finds money

Despite all of this, there are good areas.

AI commands attention. There were more than 55 U.S. AI startups raising $100 million or more in 2025 alone, showing that deep technology with good enterprise value still attracts serious capital. 

These are not small checks but major commitments by major investors.

Even beyond AI, the VC world saw robust exit activity, mergers and acquisitions and IPOs contributed to healthy exit values as companies matured and found liquidity. 

And while data from regional ecosystems varies, many markets are resilient. In Africa, for example, funding rebounded strongly in 2025, with total capital rising and diversified instruments, including debt, playing a bigger part. 

The reality for most founders

So what does this all mean for tech founders and executives?

For one, the era of ‘raise more at any cost’ is clearly over. Investors are looking for companies that can articulate solid paths to cash flow and sustainable growth. They care about what you do with capital, not just how fast you can spend it.

Second, capital is still available, but it’s more selective. AI and related infrastructure are prime targets, but other sectors must prove strong business models to win larger commitments.

Third, the shift isn’t a simple downturn but a reset. Tech is learning to grow within macro challenges. That’s a healthier paradigm in the long term, even if it seems harsher in the short term.

Some founders feel blindsided because they raised a comfortable round only to find subsequent meetings turning into critiques of burn rates and go-to-market strategy. That is real, but it’s also a reflection of markets that now price risk differently.

Tech hasn’t lost its spark, far from it. Funding is still high, deals continue to get done, and innovation is very much alive. 

What has changed is the price of patience, clarity and discipline. Cheap money didn’t just drive ideas, it impacted expectations, which should ultimately lead to tech growth.

Now those expectations are adjusting to a world where capital is not easy money. It’s selective, expensive and demanding.

And that is important, because founders today must build fast, and build wisely.

This is a 32-fold increase in the value of African tech and a 17-fold increase in Europe over the last decade.

But despite these gains, the last eighteen months have seen a significant reversal in venture capital (VC) investment, with European investment in business software companies decreasing by 59%, and a 40% overall decline in global tech investment from 2022 to 2023. 

Africa has experienced a similar trend, with a 40% decrease in VC investment during the same period.

This was revealed in the report by Google for Startups in partnership with Notion Capital. The report investigates the intersection of diversity, entrepreneurship, and investment in the European and African tech sector, focusing on the impact of Google for Startups’ Black Founders Fund. 

It reveals both progress made and ongoing challenges faced by Black founders in securing funding and resources.

Challenges Faced by Black Founders

Investment Disparities

Since 2000, Black-led tech businesses in Europe and Africa have received $2.5 billion in investments, which accounts for just 0.51% of the total investment in all tech startups. 

In Europe, Black founders received only 0.43% of all tech investment ($2.09 billion out of $482.5 billion), and in Africa, only 3.11% ($413 million out of $13.3 billion).

Decline in VC Investment

The peak of VC investment was seen in 2021, with global heights reaching $734 billion during the pandemic. However, this figure has since dropped to $317 billion in 2023, nearly half of the amount seen just two years earlier. 

This decline affects all founders, but underrepresented Black and ethnic founders are likely to feel the impact more acutely due to existing funding pressures and systemic biases.

Funding Gaps

There is a huge investment opportunity gap for Black founders. In Europe, if investment were proportional to the Black population, it would have reached $6.3 billion from 2000 to 2023, indicating a $4.21 billion shortfall. 

In the UK alone, Black-led tech businesses should have received $3.11 billion, but they have only garnered $1.38 billion, reflecting a $1.73 billion gap. 

In Africa, the investment opportunity gap is estimated to be nearly $10 billion, considering that around 80% of the continent’s population identifies as Black.

In Europe, women-led startups received only 1.1% of total venture capital funding in 2023 – average funding for women-led startups was €3 million, compared to €6 million for male-led startups.

The situation in Africa is similar, with women-led startups receiving less than 5% of total tech investment.

Despite these challenges, women-led startups have shown resilience and potential for growth. The growth rate for women-led startups in Africa was reported at 20% year-on-year, reiterating their ability to thrive even with limited resources.

Google for Startups’ Recommendations

Policy Advocacy

Google for Startups recommends collaborating with policymakers to advocate for policies that incentivise diversity in tech and address systemic barriers faced by Black founders in accessing capital.

Investor Education

Implementing educational programs for investors is necessary to raise awareness about biases and challenges faced by underrepresented founders. This will facilitate a more inclusive investment sector.

Community Building

Strengthening community-building efforts is essential to create a supportive industry where Black founders can connect, collaborate, and share experiences.

Data Collection and Transparency

Advocating for enhanced data collection on diversity metrics in the tech industry is important to promote transparency and informed decision-making.

Inclusive Investment Strategies

Google for Startups recommends inclusive investment strategies that specifically target women-led startups. In creating funds and initiatives focused on supporting women entrepreneurs, the tech industry can address the gender investment gap more effectively.

Mentorship and Networking

Providing mentorship and networking opportunities for women founders is necessary. Programs that connect women entrepreneurs with experienced mentors and industry leaders can help them navigate challenges, gain insights, and build valuable connections.

Highlighting Success Stories

Celebrating and highlighting the success stories of women-led startups can serve as inspiration and provide role models for aspiring women entrepreneurs. These stories can also ascertain the prospect and impact of investing in diverse leadership.

Training and Development

Offering training and development programs targeted at the needs of women founders can help them with the skills and knowledge required to secure funding, manage growth, and lead successful ventures.

Gender-Sensitive Policies

Advocating for gender-sensitive policies within the investment community and broader tech sector can help create a more supportive environment for women entrepreneurs. This includes policies that address unconscious biases and promote equal opportunities.

The challenges faced by Black founders in the tech industry are multifaceted, encompassing differences in investment, systemic biases, and funding gaps. Addressing these issues requires a collective effort from various stakeholders.