Key Takeaways
- • U.S. private equity fundraising is on track for a fourth consecutive annual decline, with roughly $222 billion raised through September 30, 2026, implying about $296 billion for the year versus roughly $330 billion in 2025 and a 2023 peak near $405 billion, per PitchBook data cited by the WSJ.
- • PE fundraising fell 29% to $385 billion on a trailing 12-month basis in PitchBook's Q1 2026 data, while venture capital fundraising fell only 3.6% to $189 billion.
- • Middle-market PE fundraising fell more than 43% to $94.8 billion in 2025, the weakest year for that segment since 2018, and the number of funds closing dropped 45.1% to 2,613 in Q1 2026.
- • Fewer funds with fresh capital means fewer bidders for B2B companies, particularly those valued at $10M to $75M in ARR, which SaaStr founder Jason Lemkin argues weakens competitive tension and price.
- • Buyers are becoming more selective, underwriting AI risk on B2B software and prioritizing profitability and free cash flow, with PitchBook expecting fundraising to take a few more years to recover.
Summary
U.S. private equity fundraising declined again in 2026, extending a downturn that began after the 2023 peak. According to PitchBook data cited by the Wall Street Journal, U.S. PE firms had raised roughly $222 billion through September 30, 2026. Annualized, that implies about $296 billion for the full year, compared with roughly $330 billion in 2025 and a peak of around $405 billion in 2023, or about 27% below the peak unless the fourth quarter runs well above trend.
The decline is steeper for private equity than for venture capital. In PitchBook's Q1 2026 data, PE had the steepest drop among major fund categories, with trailing 12-month raises of $385 billion, down 29%. Venture capital raised $189 billion, down 3.6%. Jason Lemkin, founder and CEO of SaaStr, attributes the gap to limited partner behavior: LPs continue to commit to venture because of AI exposure, while pulling back from PE because buyout funds have not returned enough cash. Lemkin notes that general partners struggle to raise successor funds while earlier vintages still hold companies acquired at 2021 valuations.
The middle market has been hit hardest. Fundraising by U.S. middle-market PE firms fell more than 43% to $94.8 billion in 2025, the weakest year for the segment since 2018, according to Axios. The number of funds closing fell 45.1% to 2,613 in PitchBook's Q1 2026 report. Lemkin argues that fewer funds with fresh capital mean fewer bidders in sale processes, which reduces the competitive tension that drives price. He cites his experience selling EchoSign to Adobe, where alternative bidders were central to valuation.
Capital remains available, and deal activity has continued. PE deal activity in Q1 2026 reached 5,100 transactions valued at $481.6 billion, and PitchBook analysts expect roughly $2 trillion in dry powder and lower borrowing costs to keep supporting deals. 2025 was the second-best year for exits on record, behind only 2021, with just over 1,600 exits and nearly $730 billion in exit value. However, much of the dry powder sits in older funds that must show returns before sponsors can raise again, which makes buyers more selective, more focused on AI risk in B2B software (particularly seat-based models with flat net revenue retention), and more focused on profitability and free cash flow. PitchBook expects fundraising to recover only once exits stay strong long enough to restore LP liquidity, a process that could take several more years.
The decline is steeper for private equity than for venture capital. In PitchBook's Q1 2026 data, PE had the steepest drop among major fund categories, with trailing 12-month raises of $385 billion, down 29%. Venture capital raised $189 billion, down 3.6%. Jason Lemkin, founder and CEO of SaaStr, attributes the gap to limited partner behavior: LPs continue to commit to venture because of AI exposure, while pulling back from PE because buyout funds have not returned enough cash. Lemkin notes that general partners struggle to raise successor funds while earlier vintages still hold companies acquired at 2021 valuations.
The middle market has been hit hardest. Fundraising by U.S. middle-market PE firms fell more than 43% to $94.8 billion in 2025, the weakest year for the segment since 2018, according to Axios. The number of funds closing fell 45.1% to 2,613 in PitchBook's Q1 2026 report. Lemkin argues that fewer funds with fresh capital mean fewer bidders in sale processes, which reduces the competitive tension that drives price. He cites his experience selling EchoSign to Adobe, where alternative bidders were central to valuation.
Capital remains available, and deal activity has continued. PE deal activity in Q1 2026 reached 5,100 transactions valued at $481.6 billion, and PitchBook analysts expect roughly $2 trillion in dry powder and lower borrowing costs to keep supporting deals. 2025 was the second-best year for exits on record, behind only 2021, with just over 1,600 exits and nearly $730 billion in exit value. However, much of the dry powder sits in older funds that must show returns before sponsors can raise again, which makes buyers more selective, more focused on AI risk in B2B software (particularly seat-based models with flat net revenue retention), and more focused on profitability and free cash flow. PitchBook expects fundraising to recover only once exits stay strong long enough to restore LP liquidity, a process that could take several more years.
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