Debt Market Update – Q1 2026

Selectivity Defines the Market

With 2026 under way, the venture debt market continues a now familiar trend: rising deal value alongside declining transaction volume. This divergence appears to be reflective of a continued concentration of capital into fewer, larger deals—a trend toward selectivity that emerged in the second half of 2025.

In the technology sector, total deal value increased to approximately $19.3 billion, up nearly 100% quarter-over-quarter, marking a strong rebound from Q4 2025. At the same time, transaction count declined materially to 115 deals, down roughly 51% from Q4 2025, indicating that growth is being driven by larger, more targeted financings rather than broader-based activity. Lenders appear to be increasingly deploying capital to scaled, high-quality borrowers, particularly those positioned to navigate ongoing AI-driven disruption, while remaining cautious on smaller or earlier-stage opportunities.

The healthcare sector, by contrast, experienced a significant pullback. Deal value declined to approximately $0.4 billion, down 80% from Q4, with just 18 transactions completed, a 55% quarter-over-quarter decrease. This slowdown reflects weaker healthcare equity markets. However, early signs of an improving IPO market could, if sustained, support a rebound in equity financing and, in turn, improve conditions for venture debt deployment in coming quarters.

Overall, venture debt volume rose to approximately $19.7 billion in Q1, a 54% increase from Q4, despite deal count declining by over 50%. This continued divergence underscores a market defined by fewer but significantly larger transactions.

At the same time, tightening risk tolerance—driven by geopolitical uncertainty, including the U.S/Israel – Iran conflict, and mounting stress in private credit markets—is reshaping deployment strategies. While capital remains available, lenders are showing signs of being more disciplined, favoring later-stage companies with scale, durability, and clearer paths to profitability.

Against this backdrop, venture debt volume may prove resilient—even as overall deal activity continues to lag below historical levels.

To gain more insights into the venture debt market in Q1 2026, download the full report and read Capital Advisors Group’s Quarterly Debt Market Update.