In a quarter marked by AI’s dominance across deal flow and a notable shift away from SAFE notes, DCA identified standout investment opportunities for its clients.

Active Deal Pipeline

Q2’25 Deal Spotlight

In Q2’25, DCA screened 129 deals that met the firm’s initial investment benchmarks, representing a 21% decrease quarter-over-quarter (-34 deals). This refined deal flow reflects the firm’s enhanced scouting and deal sourcing processes, demonstrating DCA’s commitment to maintaining quality standards while operating within an increasingly competitive early-stage venture capital environment.

A High-Level Look at Q2 2025

Of the 430+ deals sourced in Q2’25, the geographical distribution showcased DCA’s geography-agnostic investing strategy and robust co-investor network. California led the way with 19% of screened deals, followed by New York at 12%. Texas and Arizona each contributed 9% of deal flow, while Illinois, Virginia, and Washington accounted for 5%, 4%, and 4% respectively. This broad geographical spread encompassed 19 different states and 8 countries, underscoring the firm’s expansive reach and diverse sourcing capabilities.

Investment Vehicles: SAFE Notes Decline as Market Matures

Q2’25 witnessed a notable shift in investment vehicle preferences, with SAFE notes comprising 58% of screened deals, down significantly from Q1’25’s 70%. This decrease reflects growing investor sophistication and concerns about governance limitations inherent in SAFE structures. The market showed increasing preference for more structured funding vehicles, with Convertible Notes emerging as a viable alternative, representing 12% of Q2 deals screened.

The evolution away from pure SAFE structures addresses key market concerns, including:

• Lack of investor rights protection in future priced rounds
• Absence of formal governance structure
• Cap table complexity arising from multiple SAFE rounds at different valuations

The introduction of side letters with MFN clauses and pro rata rights has helped bridge some gaps; however, the trend toward Convertible Notes suggests a maturing market that demands more structured investment frameworks.

Verticals: AI Dominance Reshapes Investment 

AI dominated Q2’25 deal flow, accounting for 54% of screened deals—a sharp increase that mirrors the broader tech sector’s focus on artificial intelligence. FinTech came in second at 14%, followed by B2B SaaS at 12% and Digital Health at 11%. Despite this AI concentration, DCA screened deals across more than 25 verticals, maintaining its focus on target sectors while staying open to opportunities across the market.

Valuation: AI Premium Drives Market Recovery

The median valuation of screened deals in Q2’25 was $15M, up 18% quarter-over-quarter. The median EV/Revenue multiple increased to 39.7x, up 14% from the previous quarter. This increase was primarily driven by the higher concentration of AI deals, which command premium valuations. The uptick in valuation metrics reflects improved market conditions and growing investor appetite for early-stage opportunities.

Funding Stages: Early-Stage Focus Continues

Q2’25 deal flow remained concentrated in DCA’s target early-stage segments, with Seed and Seed Extension rounds comprising 70% of screened deals. Pre-Seed opportunities represented 20% of deal flow, while Series A+ rounds accounted for the remaining 10%. This distribution reflects DCA’s focus on early-stage investments while keeping the firm flexible to pursue opportunities across different stages.

Data-Driven Deal Analysis

DCA’s Q2 results highlight the firm’s ability to adapt to market shifts while maintaining its investment discipline. The surge in AI deal flow, paired with continued geographic diversity, reflects both market trends and DCA’s broad sourcing network. As funding structures evolve and valuations recover, the firm’s data-driven approach continues to identify quality opportunities across multiple sectors and stages.

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The commentary in this post reflects the personal opinions, viewpoints, and analyses of the DCA employees providing such comments, and should not be regarded as the views of DCA Asset Management or its respective affiliates or as a description of advisory services provided by DCA or performance returns of any DCA clients.

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