Dmitrijs Stals is CEO and Founder of CARROT Capital Management LLC.
If 2025 was a year of recalibration for venture capital, then 2026 will be the year the ground truly moves. Below are the three predictions I believe will define that shift, not because they’re safe or expected but precisely because they’re bold. To understand where the market is heading, you have to be willing to consider possibilities that feel “almost impossible” today.
1. A Sovereign AI Megafund Will Eclipse Silicon Valley
The next great AI race might not be between companies but between countries.
The world has become used to Silicon Valley and China defining the scale of venture capital. But there are countries outside that axis that have the capital and ambition to affect the power map overnight. I’ve seen firsthand the appetite from nations that want a seat at the innovation table, even if they’re still figuring out the mechanics.
My first prediction is that in 2026, a “Tier 2” nation, perhaps Saudi Arabia, India or even Norway, will launch a sovereign AI fund large enough to become the biggest venture player in history. We’re talking about a fund measured potentially in trillions of dollars.
This isn’t entirely theoretical. Some of these countries are already signaling that they want to reshape their global relevance, and they’re willing to do it through capital investment. When a nation with deep reserves commits to innovation and has no legacy constraints, it can leapfrog traditional hubs instantaneously.
A sovereign fund like this wouldn’t behave like a traditional VC. It would deploy globally, chasing frontier technologies. And it would concentrate efforts in areas such as data centers, compute capacity, foundational AI systems and transformative deeptech. If this happens, and I believe the probability is far from zero, the U.S. and China will be forced into an escalation cycle. That liquidity pressure could spark investment behavior reminiscent of the dot-com era.
2. Public Markets Will Overtake Early-Stage Venture Capital
My second “impossible” prediction is that early-stage venture funding will begin to shift away from institutional investors altogether.
Crowdfunding, tokenization, digital securities and real-time capital formation are no longer fringe experiments. The infrastructure is mature enough that I expect a major stock exchange or tokenized-asset platform to pilot a “real-time IPO” mechanism, allowing everyday retail investors to back early-stage startups instantly from their phones.
This transition won’t replace venture capital entirely, but it will reshape the stack. Early-stage investing will become more democratic, with retail investors participating directly. Seed rounds will get smaller and more cautious, causing traditional VCs to hesitate as public-market innovation pulls capital downward. And growth-stage funds will become stronger. With IPO windows reopening and a global pool of pent-up capital searching for scale, the later stages will benefit.
In Europe, this shift could be even more pronounced since crowdfunding regulations are already in place. If retail-accessible early-stage investing becomes standardized, entire categories of small VC funds could find themselves squeezed out.
Instead of founders pitching 40 funds to close a seed round, we may see them listing on a real-time marketplace and raising capital in hours. And while it may feel unconventional, the pressure for faster liquidity and broader access to private markets is pushing us in this direction.
3. A Global Tech War Will Force Governments To Ban Cross-Border VC Investment
My third prediction is the one that will likely shock the industry the most because it’s already underway in slower, quieter forms.
Hardware restrictions were the first wave: chip export bans, supply-chain controls, national-security reviews. But I predict that the next wave will target capital itself.
As geopolitical tensions peak, several governments will introduce broad investment restrictions preventing foreign funds from backing startups in sensitive sectors such as AI, biotech, quantum, fintech and cybersecurity. This isn’t just plausible; it’s the natural progression of the controls we’re already seeing.
Some sectors are already difficult to invest in cross-border. Fintech is a prime example. It’s already complex for American funds to invest in certain European fintech companies due to regulatory resistance. AI will be far more scrutinized.
Add the strategic importance of data centers and compute infrastructure, and you get a world where governments treat venture capital as a lever of national power.
A Grounded Look At What Will Drive VC Behavior In 2026
Bold predictions aside, it’s equally important to ground them in the real dynamics shaping the market next year.
Regulation And Macroeconomics Will Drive Investment Discipline
AI regulation and global data privacy laws will become key components of due diligence. Startups with strong compliance frameworks will stand out.
Meanwhile, if inflation stabilizes and IPO markets improve, large reserves of capital (especially from institutions that have been sitting on the sidelines) will reenter the market, fueling intense competition in growth-stage deals.
Funding Patterns Will Diverge
Early-stage investing will become more selective. Rounds will slow down, and founder quality will matter more than ever.
Growth stage accelerates because institutional investors are more comfortable deploying larger checks when exit windows look healthier. This is where venture funds focused on scaling, pre-IPO readiness and acquisition positioning will thrive.
AI, Deeptech And The Infrastructure Layer Will Dominate Capital Flow
In 2026, AI and climate tech will continue to attract the largest share of venture capital, driven by automation pressure and global energy transitions. But deeptech (e.g., biotech, quantum, cybersecurity) will see major surges as investors chase technologies that address systemic risks. Data centers and compute capacity then become standalone investment categories.
Europe Will Improve, But Structural Constraints Remain
Europe will strengthen its founder networks and cross-border venture activity, but immigration barriers, regulatory caution and political dissolution will keep it from matching the U.S. in talent attraction and scaling speed. Europe grows, but not fast enough to rewrite global power dynamics.
Risks That Could Slow VC Momentum
Interest rate volatility, regulatory unpredictability, data center scarcity and the risk of an AI-driven bubble all pose real threats. Technology can be transformative and still generate bubbles; those two things often go hand in hand.
The Future Of Venture Capital Will Be Defined By Bold Moves
Whether or not all three predictions unfold exactly as described, the direction is unmistakable. The global venture capital market in 2026 will not resemble the one we know today. Sovereign ambition, public-market innovation and geopolitical fragmentation are accelerating forces we can’t ignore.
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