What to know about DC’s drop to $515M in VC funding for the quarter

Venture capital investment in the DC region slowed in the second quarter of the year, and the White House’s lack of clarity on regulation and policy could be to blame. 

Companies nabbed $514.6 million across 64 deals in the DMV, according to the latest Venture Monitor report released quarterly by PitchBook and the National Venture Capital Association.

That’s a sharp decline from the first quarter of the year, with its reported $1.3 billion across 60 deals — meaning this most recent quarter saw lower deal values. 

The region isn’t alone in venture capitalists writing smaller checks, per the Venture Monitor report. This is part of a broader, “more cautious investment climate” across the nation, said Tahira Dosani, cofounder and managing partner at ResilienceVC. 

“We’re no longer in this ‘growth at all cost’ mentality,” Dosani, who announced a new $56 million fund earlier this year, told Technical.ly. “We’re in an era where there’s a focus on capital efficiency, on sustainable pathways to profitability and the broader tightening of fewer companies successfully raising rounds because investors are being more selective.”

This has been the mindset for the last couple of years, per Dosani. DC has had a handful of blowout quarters, but they’re often led by major raises from established companies. Rockville nuclear power company X Energy nabbed about half of the funds at the beginning of the year, as did the e-cigarette giant Juul to close 2024.  

This is why looking at data quarter-to-quarter can be difficult, explained Les Alexander, a professor at the University of Virginia Darden School of Business. In 2024, companies in the DMV collectively raised $4.3 billion — the highest amount since 2021. 

“I often find that in some markets like the DMV, quarter to quarter activity can be impacted by a few larger deals,” Alexander wrote in a statement to Technical.ly, “so you need to be careful to not draw broad conclusions without longer data trends.” 

Unstable regulations could lead to lower activity 

ResilienceVC’s Dosani noted that uncertainty around policies like tariffs are making investors more cautious. There’s generally a tendency toward deregulation under the Trump administration, which can benefit business, but there needs to be clarity, she said. 

“Regulatory uncertainty always makes it harder to make decisions,” she said. 

Because of this precariousness, it’s more difficult for investors to vet startups adequately, said Elena Loutskina, a professor at the Darden School of Business. 

“The global economic uncertainty, including one about tariffs, hampers VCs’ ability to properly evaluate the prospects of given startups,” Loutskina wrote to Technical.ly in an email. “This makes investments exceptionally risky and unattractive.”

Alexander agrees. Inconsistent trade policy is causing investors to be wary, he said. The economic picture also depends on industry, he noted. He’s already seen climate technology companies nab less funding because of policy changes. 

“On the other hand, defense tech and cybersecurity, which are attractive investment areas for companies and investors in the DMV region, is seeing increased deal activity with the favorable support from policymakers,” he said. 

What startups — and investors — should know 

Securing investments will continue to be challenging for startups, especially for those in early stages, Alexander said. But AI companies will likely continue to see funding, he said. 

Fundraising for the capital to invest is slowing, too, Alexander said. That’s because limited partners aren’t getting liquidity back from prior funds they’ve invested in and a lack of exits, ResilienceVC’s Dosani explained. 

Because of all of this, founders need to be capital-efficient, she said. They also need to demonstrate clear traction to investors and show profitability.

“It’s not necessarily a bad thing,” Dosani said. “It just is the reality of this market, and I think what it will translate into is that … the best founders are the ones getting the cap[ital].”  

This constriction also requires investors to be more supportive of founders outside the money, she said. That means being more hands-on in business strategies, for example. 

“Founders have to think about how they tell their story, how they execute and operate their businesses,” Dosani said, “and I think investors have to do the same.”