The software sector still dominates funding rounds, but activity for new businesses is cooling as investors shift away from early-stage startups to focus on mature, bankable firms.

Sharetech platform Vestd’s Global Investment Report found that the software industry pulled in the lion’s share of investment across the highest number of rounds last year, continuing a trend that began in 2023.

However, the picture is more complex than that success suggests, with software experiencing a double-digit decline in funding activity year-on-year, with new deal volume falling by -10.7% to 18,282 rounds.

Vestd’s analysis, based on Crunchbase data, shows software wasn’t the only technology-driven sector to experience this decline, with deals across the information tech, internet, and apps sectors all suffering drops, at -13.0%, -15.0%, and -20.8%, respectively.

Compare that to AI, which continues to attract significant investor attention, with it being the only sector among the top five to record a positive year-on-year increase, with global growth of 1.7% from 2024 to 2025, coming in at 9,519 rounds.

Despite that slowdown in tech activity, there was a 41.7% surge in the number of emerging unicorns, an increase Vestd suggests is down to investors prioritising more mature companies and staying clear of early-stage startups.

As more evidence of this shift in behaviour, seed funding faced a steep global decline of -19.6% over the past year, with investors pivoting to later-stage growth businesses. 

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This selective focus is evident in the software sector, where, despite a drop in total funding activity, the number of emerging unicorns saw 8.8% year-on-year growth, raising the total number of unicorns to 271.

But while this trend might support the growth of more mature companies, it raises concerns around the next generation of high-growth businesses.

“The data reflects that investors are primarily prioritising sustainable growth over early-stage expansion, which is resulting in a potential risk for the future pipeline of high-growth companies,” said Ifty Nasir, Vestd founder and CEO.

“What we’re seeing is a clear shift in investor behaviour. Capital hasn’t disappeared, but it’s becoming far more selective.”