Growth in 2025: PE & VC Momentum and Emerging Infrastructure

Private capital demand has soared to record levels as private markets have consistently outperformed public markets over the long run. Given strong growth projections, the current market conditions present an opportunity to capitalize on the private markets sector.

What is fueling momentum for private markets?

1. AUM significantly increased and tremendous amounts of capital need to be deployed. Private markets surged to $16.7T AUM in 2023 and Preqin projects that AUM will continue to surpass $29T AUM by 2029. During this period, private equity AUM is projected to more than double from $5.8T to $11.97T, while venture capital is expected to grow from $1.85T to $3.59T.

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2. Companies are remaining private for longer than ever before driven by greater access to private capital and a decline in IPOs. In fact, the median age of companies going public increased from 6.9 years in 2014 to 10.7 years in 2024.

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3. An increasing number of high-net-worth individuals has driven demand for private markets investments, which have become increasingly complex. This demand is expected to rise further with the upcoming generational wealth transfer where over $84T assets will be transferred by 2045.

In this article, I will focus on the 1) dynamic private equity and venture capital market and 2) the opportunities in infrastructure for these asset classes. Illuminate is also actively exploring other areas of private markets including private credit. Check out Illuminate’s recent private credit thesis here .

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1. PE & VC Investment Outlook

Tremendous dry powder will heat up deal activity in 2025.

Private equity and venture capital funds can anticipate a promising year for deal activity. The US PE market peaked in 2023 surpassing a whopping $1T AUM in dry powder. Although AUM declined in 2024, dry powder still sits above $1T. This level of dry powder accumulated due to slower deal activity throughout 2023, driven by rising interest rates, and market uncertainty. Deal activity picked back up in 2024 and 2025 will bring even more deal activity.

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In the early-stage VC market, seed extensions were a growing share of seed raises as companies held off on A rounds. This led to the lowest number of Series A opportunities since 2012 at 1,370 deals. With a backlog of seed stage start-ups, founders will renew their efforts to raise A rounds. In the later stages, we saw valuations rebound primarily driven by high AI valuations. With the AI boom, we will continue to see increases in AI-driven VC deal activity this year.

Investors will emphasize exit opportunities as companies remain private for longer.

As deal activity accelerates in 2025, investors are also under growing pressure to maximize exit opportunities. Private market distribution rates reached their lowest point since the global financial crisis and LPs are eager to see returns materialize.

As mentioned at the beginning of the post, private companies are staying private for longer than ever before. As of September 2024, the number of private venture-backed companies ballooned to its highest point at over 57,000 companies. This growing number of private companies was fueled by a stagnant IPO market and slowed M&A environment. In 2024, the US saw a 38% increase in IPOs YoY, signaling momentum from the stagnation seen in 2023. VC-backed exits will likely see continued slow growth, but improved interest rates may help to open the IPO market. Pitchbook anticipates that roughly 40% of US IPOs, will be PE-backed due to their stable cash flow and predictability, up from 30% in 2024. Investors will be laser-focused on driving value creation and portfolio support for the significant backlog of companies.

As we move further into 2025, the combination of increased deal activity, IPO and M&A market recovery, and the need for distributions will drive deal activity. It’s important to note that inflation and tariffs can change the investment landscape and make deal activity more challenging.

2. Emerging Opportunities in PE & VC Infrastructure

Increasing demand and complexity will drive the push for innovative infrastructure.

With an improved market environment in 2025, private market investors are looking towards data driven solutions to automate all aspects of the fund. AI will be the trending topic for infrastructure players as AI has taken the VC market by storm. US companies spent about $16B on AI products last year and investments in enterprise software increased 47% since 2024. To remain competitive private investors will need to leverage automation. The AI revolution makes it a particularly advantageous time to invest in private market infrastructure start-ups.

There are several key issues plaguing private markets.

1. Investors struggle to obtain accurate and timely information due to restricted and highly fragmented access to data.
2. Data management is highly manual and time consuming leading to lost time and money.
3. Lack of data standardization impacts accuracy and consistent reporting.

With the backlog of private companies, investors are looking for sophisticated platforms to synthesize the growing amount of data. From fundraising to fund administration, automation will rapidly improve all workflows to provide accurate, real-time data and dramatically reduce time spent on tedious tasks. Illuminate is looking at innovative start-ups that are leveraging automation to navigate these challenges across the infrastructure landscape.

What are the most attractive investment opportunities in infrastructure solutions?

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Front office solutions that propel the core revenue generating functions of VC and PE funds are best positioned to provide venture returns. Simply put, if a fund can secure more capital or top tier deals using these infrastructure solutions, funds will pay for these platforms. As funds and investment structures have become increasingly complex, start-ups focused on versatile back-end fund administration and accounting will also be attractive venture opportunities.

1) Relationship Optimization from Fundraising to Investment: Strong relationships are the backbone of venture capital and private equity, driving success across fundraising, investor networks, and industry connections. These industry relationships sustain the fund from fundraising through exit.

• Leveraging Relationship Intelligence: Investors spend countless hours each week meeting with founders, connecting with industry partners, and attending various networking events making it difficult to track and manage connections. CRM platforms with relationship intelligence can be extremely useful to investors looking to best leverage their networks. Companies like Affinity and Attio are leveraging relationship intelligence to aggregate data through integration features that provide real-time relationship insights.

2) Enhanced Deal Sourcing, Due Diligence, and Deal Execution: Significant improvements to deal sourcing and due diligence through automation and data aggregation will spur customer adoption.

• Accelerating Due Diligence through AI: From initial call to investment, a VC deal can be completed within 4–6 weeks — sometimes less. This short timeline can mean investors need to get up to speed extremely quickly and make high quality investment decisions under tight timelines. With new AI features such as Deep Research at Open AI and Perplexity — the speed, ability to aggregate data, and level of comprehensive analysis is unmatched. For PE Funds, AI can speed up the traditionally long diligence timelines. The new era of AI driven due diligence will transform how investors identify, assess, and act on opportunities.
• Increased Access to Fragmented or Limited Data: Access to accurate, real-time data is a critical competitive advantage for funds. One example is pricing data, which is difficult to assess due to limited public data. Companies like Caplight are transforming the secondaries market by leveraging its broker relationships to bring real time valuations and pricing transparency to an otherwise opaque asset class. Harmonic is another company using data to improve deal sourcing by building an expansive start-up database including companies at the earliest stages.
• Configurable Deal Execution & Discovery: Private markets often suffer from illiquidity, fragmentation, and manual processes. The growing demand for tools to handle increasing complexity in private equity and venture capital is driving the need for seamless platforms.Companies like Delio and Alta help to facilitate deal discovery and execution. Unlike the typically manual deal processes, these platforms provide configurable workflows that adapt to the unique needs of funds for their transactions. Their role will become increasingly crucial as funds look for configurable solutions to improve liquidity and automate workflows.

3) Versatile Back Office Tools: Private markets have become increasingly complex and investors are looking for back office solutions to improve their operations.

• Digitization and Automation to handle back office complexity: Funds need to navigate multiple funds, investment vehicles, and reporting requirements while also adhering to compliance measures. LemonEdge is tackling fund accounting by automating multi-entry bookkeeping to dramatically improve an often complex and manual process. Goji is a fund administration platform that supports tasks like KYC/AML, capital calls, and reporting to streamline the connections between private investors and distributors. Increased automation will significantly speed up manual processes and standardize reporting, which will increase transparency and accuracy.

Start-ups that are most likely to deliver venture scale returns are 1) Front-office start-ups that meaningfully improve fundraising, deal sourcing, due diligence, and deal execution and 2) back office start-ups that streamline the complexity of fund operations. Gaining customer trust and adoption will be key for these start-ups to leverage the network effects to achieve rapid growth. These examples highlight a sample of the many opportunities within PE and VC infrastructure. Illuminate is actively seeking scalable infrastructure solutions that will drive long term value for investors.

At Illuminate Financial, we are actively mapping the next generation of private markets infrastructure. If you’re a founder building in this space, we’d love to hear from you. Get in touch with Stephanie Chen at schen26@gsb.columbia.edu and Charlton Hook at ch@illuminatefinancial.com.