A Market Grows Up The new reality for venture capital as we approach 2026

Venture capital enters 2026 with a new sense of sobriety. The era of free-flowing capital, soft metrics and untested valuations has been replaced by something altogether more selective. Yet while the exuberance of the early 2020s has certainly cooled, the coming year may finally unlock long-awaited movement in the public markets and breathe fresh life into deeptech. For some investors, this is the moment the ecosystem has been bracing for: a year defined not by boom or bust, but by maturity.

The Return of the IPO - But Not as We Knew It
After nearly three years of stalled exits and delayed flotations, the IPO window is quietly reopening. But according to Sanjot Malhi, Partner at Northzone, the market founders are returning to is more demanding than anything they have known. "In 2026, we will see several big listings, including in the UK, many of which are overdue. The IPO window is fully open, but the bar to going public is just higher than it ever used to be. That has created a queue, so we should expect a steady pipeline of listings next year."

Investors have grown more discerning, and the companies now preparing to list reflect that elevated threshold. "Because of the barrier to entry, the crop will be high-quality, and anticipation around several possible blockbuster IPOs means they are likely to perform well. Fintech has a crop of maturing companies, and is a sector ripe for several exits." The UK, which has struggled for years to retain late-stage tech companies long enough to see them go public on home soil, may finally have the opportunity to reverse that narrative.

Deeptech Steps Out of the Shadows
The other bright spot Malhi identifies is deeptech - an area long celebrated in theory, but often underfunded in practice. That may be about to change. "There will be a boom in deeptech innovation coming out of the core UK research hubs, including Oxford and Cambridge. There are early signs that AI will soon become a transformative tool for discovery in sectors like biotech and medicine, where the UK should have a head start because of its strong talent and academic foundations. We must ensure that those companies and ideas are sufficiently funded with scaling capital if the country is to retain them and unlock its full deeptech potential." After years of promises about Britain's scientific advantage, 2026 may be the year when academic excellence finally meets the scale of capital required to commercialise it.

After the AI Frenzy, a Cooling - and a Sorting
If 2023–2025 was defined by unrestrained AI hype, 2026 may prove to be the moment correction gives way to clarity. Abhishek Lahoti, Head of Platform at Highland Europe, believes the sector is entering a new phase - one where cosmetic AI features lose out to genuinely transformative innovation. "The two defining trends we're seeing are peaking of the AI hype curve and a change to the way companies operate. "AI companies right now are focused on fixing and enhancing current workflows and operations, but in that light there are only a few companies that are genuinely creating new use cases and technology innovations that challenge the way we've operated in the past."

Lahoti argues that European AI start-ups, often viewed as cautious, may in fact be positioned advantageously. "Europe has a specific advantage here, as European AI companies are operating with a view of global markets by default and seeing their American counterparts usually take first steps, then innovating past them (much like the Apple model of product release...do not be first mover but instead be the best in the second generation). So if we are operating with an upcoming correction, companies that have sound fundamentals and actually innovative offerings will learn to ride the turbulence."

Lean Teams, Real Revenue
Perhaps the most profound shift Lahoti notes, however, is organisational rather than technological."The second major shift aligns to how companies operate. We see now in the start-up industry that there is a disappearing correlation between headcount and revenue, meaning more companies are making more money with less people than before." This, he suggests, will reshape how investors evaluate early-stage momentum - and how companies approach scaling. "What this means is that we'll see a change in productivity that allows companies to fly under the radar longer while growing their revenue. The real 'rubber meets the road' moment will come when those companies come up to a broader market and require more and larger customers. It remains to be seen if the old model of 'company size' will hold at that point, but I expect enterprise buyers will require more."

A Year of Measured Optimism
The outlook for 2026 is neither euphoric nor bleak. It is something more stable: a market returning to fundamentals. If Malhi is right, long-awaited IPOs will return - albeit only for those that can withstand a higher bar. If Lahoti's predictions play out, AI will finally be judged on merit, and the most efficient startups will rewrite assumptions about scale. Between them emerges a picture of a sector shedding its adolescence. Not a new gold rush, but a new realism - one that may, in time, prove even more transformative.