Private equity investors are gearing up to spend. Recent market data suggests that half of private equity investors plan to commit more capital in the next 12 months. That’s a big jump from only 28% a year earlier, showing a clear rise in optimism. At the same time, only 8% plan to pull back on private equity, down from 18% previously. In other words, a lot more investors want to buy in than get out. Why? One reason is valuations. Investors think 2025 offers a better entry point for private equity deals – only one-third of investors now feel PE assets are overvalued, down from 45% at the peak of the market. With prices more reasonable, they see room for potential gains as the economy stabilizes.

And here’s a key nugget: small-to-medium buyouts are back in favor as the strategy of choice. That means mid-sized companies (the kind of founder-led or family-owned businesses many of you run) are exactly what many PE firms are looking for. This is a shift from recent years where more complex strategies like secondaries took center stage – now investors want straightforward majority investments in growing companies.

What it means for you: If you’ve ever thought, “Maybe I’ll sell my business, or bring on a private equity partner,” 2025 might be a promising time. The money is out there and looking for solid opportunities. Higher investor appetite could translate into more potential buyers or investors knocking on your door – possibly even leading to competitive bids that drive up value. However, optimism doesn’t mean irrational exuberance. Investors are positive, but they’re also prudent; they favor businesses with strong fundamentals and reasonable pricing. So, make sure your house is in order: have your financials clean, growth story clear, and any red flags addressed. Remember, investors see your segment as offering good value, so position your company to showcase that value. With small/mid-sized buyouts being hot, a founder-led business like yours could attract interest, provided you present it in the best light (something V&R specializes in helping with).

In short, private equity sentiment suggests a seller’s market might be emerging for quality businesses. It’s a great time to evaluate your strategic options: whether that’s a full sale, a recapitalization, or bringing in a minority investor to fuel your next growth phase.

For those of you leading higher-growth or tech-oriented businesses, here’s some good news: venture capital investors are warming back up. The last couple of years (2022–2023) were tough in VC – sky-high valuations came back down to earth and many investors hit pause. Now, the sentiment is improving. According to recent market data, the share of investors looking to increase their VC allocations (31%) now outweighs those looking to cut back (23%). That’s a complete flip from a year or two ago. In fact, it’s the most positive balance we’ve seen in four years.

What’s driving this? In a word, value. During the 2021 boom, a lot of investors felt venture-backed companies were overpriced. But today, that overvaluation concern has eased. The proportion of investors who still think VC valuations are too high has “fallen considerably” since the 2022 peak, and over half of investors now believe valuations are either fair or even undervalued. Essentially, some of the excess has been wrung out of the market. To put numbers to it, 52% of investors see venture asset prices as fair or undervalued now – the largest such share in four years. That shift is likely to be a tailwind for deal-making in 2025, as investors feel they can invest at sensible prices again.

What it means for you: If you’re a founder seeking growth capital (maybe to launch a new product line, expand into a new market, or just accelerate your trajectory), the venture and growth equity folks are coming back to the table. For much of 2023, you might have felt that investors were sitting on their hands or negotiating hard on valuations. Going into 2025, expect a more balanced discussion. Investors are more confident that they won’t be overpaying, which means funding discussions should get a bit easier.

Be aware, though: “more reasonable valuations” cuts both ways. You may not get the sky-high multiples that companies commanded in 2021’s frenzy, but you’re more likely to find investors willing to engage and strike a fair deal now. In practical terms, focus on your fundamentals and growth story. With exits still a concern for VCs (everyone wants to know they can eventually cash out), showing a clear path to profitability or a plan for a liquidity event will make you stand out. And pay attention to what’s hot in the market: our conversations with clients and data hint that certain sectors (for example, AI and tech-enabled services) are getting more attention. If your business taps into one of these areas, emphasize it. If not, don’t worry – just be ready to demonstrate the real, tangible value your company is creating.

The bottom line is that venture capital investors have regained their appetite for risk – in moderation. They’re looking for innovative businesses, but with solid footing. If that sounds like you, 2025 could be a prime time to seek that investment to turbocharge your growth.

Now let’s talk about private debt – that is, non-bank lending and credit funds that provide loans to businesses. If you haven’t considered this as a source of capital, it’s worth understanding. Private debt investors are basically saying, “We’re still in, but let’s not get too carried away.” Unlike the surge in enthusiasm we saw for PE and VC, investor plans for private debt in 2025 are largely unchanged from last year. In a recent survey, a near-majority of investors signaled they intend to increase their private debt allocations in the long run, but in the short term many are content to maintain current levels.

What’s tempering the excitement? It mostly comes down to the interest rate environment and economic uncertainty. 2024 saw high rates and a bit of market volatility, and private debt investors are digesting that. They’re being a bit cautious about committing a lot more capital until they see how things play out. But here’s the important part: They are not pulling back from the asset class in any fundamental way. Far from it – by and large, they’re satisfied with the performance of their private debt investments. A whopping nine out of ten investors say private debt met or exceeded their expectations last year. Only 8% said returns fell short, while 26% happily reported returns above expectations. Investors still believe in the long-term case for private debt, and they’re ready to continue lending. Any concerns seem to be transitory, tied to short-term macro conditions.

What it means for you: If you’re looking for growth capital but maybe aren’t interested in giving up equity, private debt can be an attractive option. Think loans or credit facilities from private lenders or debt funds, which can be used for expansion projects, acquisitions, or recapitalizing your balance sheet. The 2025 outlook suggests these lenders have money to deploy and are pleased with the asset class, so they’ll continue to finance good companies. However, they’ll be selective. With investors a bit cautious about economic conditions, underwriting standards remain high. Unlike a frothy market where money is easy, in this steady market you need to present a strong case to secure financing.

In practice, this means you should prepare like you’re talking to a bank, and then some. Have a clear plan for how you’ll use the funds and repay them. Demonstrate that your revenues and cash flows can support debt service (private lenders will stress test your numbers under higher interest scenarios). The good news is, private debt funds are often more flexible than traditional banks – they can tailor loan terms to fit your situation – and they’re still very much open for business. In fact, with banks in many regions pulling back lending, these funds are eager to step in. So if you need capital but don’t want to dilute ownership, 2025 could be a great time to explore a loan or credit line from a private debt investor. Just go in with eyes open: rates may be a bit higher than you remember from years past, and lenders will expect transparency and quality information.

To sum it up, private debt investors are playing the long game. They’re committed to this space, even if they’re not accelerating wildly. For a business owner, that means this source of capital remains available as a tool in your toolkit – especially for financing growth or shareholder liquidity in a way that keeps you in control of your company.

We’ve covered a lot of ground – private equity, venture capital, private debt – and the common thread is cautious optimism. So, how can you use this information? Here are a few actionable takeaways as you consider selling your business, raising capital, or just planning your strategy for the year ahead:
Strike While the Iron is Warm (but Prepare First): Investor sentiment can change with market winds, but right now it’s favorable. If you’re contemplating a sale or seeking an investor/loan, early to mid-2025 is looking opportune. That said, preparation is key. Take the time to get your financials and story ready. In an upbeat market, the better prepared you are, the more you can maximize value because you may have multiple interested parties.

Match the Right Capital to Your Goals: Different situations call for different capital. Selling a majority stake to a PE firm vs. taking a growth equity check vs. securing a loan are very different paths. Use the intel above: for instance, if you run a steady profitable business and don’t want to give up control, a private debt solution could be ideal since those investors are steady and satisfied. If you have a high-growth tech venture, VCs are regaining confidence – maybe it’s time to re-engage them now that they’re looking for deals again. And if you’re eyeing an exit, know that PE buyers have ample capital and are actively looking for quality acquisitions.

Be Realistic on Valuations and Terms: The market is more favorable than last year, but it’s not 2021. Valuations for private companies have normalized, especially in venture. This is actually healthy – deals are getting done at sensible prices. As a seller or fundraiser, go in with realistic expectations on valuation. Our advice: trust that if you run a strong business, a fair price is achievable in this environment, even if it’s not the sky-high multiple someone got during the boom. Also, be prepared for investors (or lenders) to do their diligence. They’re optimistic but still careful, so expect thorough questions and maybe longer deal timelines as they dot i’s and cross t’s.

Differentiate Your Business: In a market where capital is available, you still need to compete for it. Why should an investor choose you over the next opportunity? Highlight what makes your business special – whether it’s a loyal customer base, a patented technology, a strong brand, or consistent cash flows. Given that investors believe many assets are fairly priced now, they will be looking for quality and upside potential. Show them where the growth or value creation in your company will come from (and if you need help formulating that story, well, that’s exactly what we do at V&R).

At the end of the day, the power has subtly shifted back toward sellers and fundseekers compared to a year ago. There’s more capital chasing deals, especially from PE funds and increasingly from VCs. Use that to your advantage – but approach the market prepared, realistic, and with a clear strategy.