The Other 55%: Raising Outside the AI Megadeals

The Other 55%: Raising Outside the AI Megadeals

Every Q3 venture report this month leads with the same story: AI is taking most of the money. That’s true. But it’s only half the picture. Look at deal count instead of dollars and a different market appears, one where most rounds still go to companies outside AI. Here’s what the data says, what the megadeal tier really looks like, and how founders and fund managers outside the headlines can win their rounds.

The Dollars Story

Three major reports landed in the first half of October. They use different data and definitions, so their numbers shouldn’t be compared directly, but they agree on the direction.

  • PitchBook-NVCA Venture Monitor (US data, October 8). AI accounted for 82.7% of total US deal value through September 30, “the highest annual share in our dataset.”
  • Crunchbase (global data, October 5). Global venture funding was $159 billion in Q3, and AI startups raised $102 billion of it. A record 27 companies raised rounds of $1 billion or more, and around a third of Q3 capital went to them.
  • KPMG Venture Pulse (global data, October 14). KPMG counted 14 funding rounds over $1.5 billion in Q3, nine of them in the US. KPMG’s Carolina Oliveira called the market “quite bifurcated,” and KPMG says “startups outside these sectors are facing a more selective funding environment.”

Even seed isn’t immune. Crunchbase found that of $13 billion in global seed funding in Q3, $2.6 billion went to “seed” rounds of $100 million or more. (Crunchbase notes seed data lags and gets revised upward.)

The Deals Story

Now look at the same PitchBook-NVCA report from a different angle. In Q3, AI accounted for 44.9% of US deal count. That means more than half of US venture deals last quarter went to companies outside AI.

PitchBook points out that AI’s share of deal count has been “far more stable” than its share of value. Deal count share went from 46% in Q1 to 44.4% in Q2 to 44.9% in Q3. Over the same period, AI’s share of value fell from 88.4% to 84.1% to 65.9%.

The volume is real, too. PitchBook estimates 5,012 US deals closed in Q3, the second-most of any quarter in its dataset, even as Q3 deal value fell to $98.4 billion, down about 40% from Q2.

Put simply: a small number of enormous rounds set the dollar totals. Most rounds are smaller and spread across every sector. That’s where most founders and emerging managers actually operate.

Case Study: Flapping Airplanes and the Megadeal Tier

Crunchbase’s weekly top 10 for October 23 included Flapping Airplanes, a year-old San Francisco AI lab that closed a $1 billion Series A led by Lux Capital and Index Ventures. That came less than 10 months after a $180 million seed.

This is the tier that drives the headline totals. It’s a different market from the one where a founder raises a $2 million seed or a Fund I GP writes first checks. The lesson isn’t to envy it or copy it. It’s to stop benchmarking against it.

Case Study: Whop, a Non-AI-Category Raise in the Same Week

In that same Crunchbase top-10 week, New York-based Whop raised a $200 million Series D led by Sequoia Capital and Shopify Ventures. Whop is a platform that helps entrepreneurs build and run online businesses; Crunchbase describes it as an online business marketplace.

Two lessons stand out:

  • Capital still finds traction outside the AI category. Whop raised in a week dominated by AI megadeals.
  • Strategic investors close to the market matter. Shopify Ventures, connected to Whop’s market, was part of the lead.

A fair caveat: Whop is a Series D outlier, not a typical seed company, and one round doesn’t prove raising outside AI is easy. KPMG’s “more selective” description still holds. But it shows what investors respond to when a company isn’t riding the AI wave: real traction and backers who understand the market.

Why Relationships Matter More in a Concentrated Market

When money concentrates, attention concentrates too. Investors spend more time on a few large deals, and a cold email from an unfamiliar founder is easier to ignore.

That’s where relationship capital does its work. Most rounds are small and quiet, and they’re closed by people who know each other: founders introduced by founders, GPs introduced to LPs by other LPs, co-investors who’ve done deals together. An introduction from a founder an investor backed in your space, or from a strategic in your market, doesn’t guarantee funding. It gets you read. And for a strong company outside the headlines, being read is often the difference between a pass and a meeting.

What Founders Can Do Now

  1. Benchmark against your lane. The 82.7% figure is driven by a few dozen very large rounds. If you’re raising a seed round in fintech, healthcare or commerce, find who led rounds like yours in the last 6 to 12 months and start there.
  2. Don’t rebrand as AI to look fundable. Investors see an AI slide in nearly every deck and test it in the first meeting. Lead with paying customers, retention and unit economics. Use AI only where customers pay for it.
  3. Look for strategic investors. Whop’s round included Shopify Ventures. Who are the corporate or strategic investors connected to your market?
  4. Map the warm path to each investor. For every name on your list, find someone they trust who knows your work.
  5. Model, test, adjust. Pitch your lane-specific story to two friendly investors first, listen to the questions, and tighten it before your real outreach.

What GPs Can Do Now

  1. Treat non-AI as a strategy. More than half of US deals are outside AI while capital crowds into a few names. A clear thesis outside the crowd can mean less competition for allocation. Tell LPs why your lane is underpriced and what your sourcing edge is.
  2. Be specific with LPs about the headlines. LPs see record totals. Explain that the record is concentrated in late-stage AI megadeals and what that means for pricing and access in your lane.
  3. Build co-investor relationships in your sector. Syndicate partners, strategics and follow-on funds in your sector are the relationships that will carry your companies to their next round.

Win Your Round Through People

The megadeals make headlines. Relationships still close most rounds.

ConnectLab.live maps warm paths alongside your own contacts, so you can see who in your network already sits close to the investors who fit your raise. It won’t do the work of building a company investors want to back, but it helps you find the people who can open the door.

Connection is the currency of the 21st Century.

Which investors led rounds like yours in the last year, and who do you know who knows them?

If you’d like help with that, here’s an open invitation:

Sources

About Ken McArthur

Ken McArthur is the founder of ConnectLab.live, an AI relationship-intelligence and warm-intro platform that helps founders who are raising find the funds that fit and the people who can introduce them, and helps fund managers connect with the founders they back. He was recently accepted into Harvard Business School Foundry. He also writes Raise Smarter, a daily newsletter on what's really moving in early-stage fundraising. Ken challenges us to realize we ALL have an impact, whether we want to or not, on thousands of people we touch in our day-to-day lives, and he shows that simple things make a HUGE difference. ConnectLab.live grew out of that belief. Connection is the currency of the 21st Century, and the right introduction can change a company's future. Long before ConnectLab, Ken was the popular host of live events that brought together top-level marketers, entrepreneurs, business owners, corporations and non-profit organizations to build multi-million dollar joint venture relationships. He has managed product launches ranked in the top 400 sites on the Internet and is regularly asked to speak at leading marketing events. He created AffiliateShowcase.com, a pioneering affiliate program search engine and directory. He also founded the MBS Internet Research Center, which conducted the world's largest survey ever attempted on creating and launching successful information products. Ken was the official mentor for Sterling Valentine as he took his launch from zero to over $100,000 in less than 8 days, a proof of concept documented in Info Product Blueprint. Today he puts that same skill for connecting people and launching ideas to work for founders and the investors who back them.

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