November 10, 2025 · 6:28 am

Cosmetic Surgery: Cuts Like a Knife…

According to the American Society of Plastic Surgeons (ASPS), there were nearly 1.6 million cosmetic surgeries in the U.S. in 2024. The most popular part of the anatomy to be operated on involved the breast with just over 600k surgeries, although the single most popular procedure, by far, was for liposuction with 350k cases. The least popular procedure – fortunately – was for buttock implants with just over 1,200 cases. Globally, cosmetic surgery is estimated to be more than a $90 billion market, which will more than double over the next several years. The U.S. accounts for approximately 25% of the market with women accounting for 93% of all procedures.

Size of Global Cosmetic Surgery Market

Source: Grand View Research

Adjacent to cosmetic surgery are minimally invasive procedures, of which there were a staggering 28.2 million in 2024 according to ASPS data. The leading procedure was for neuromodulator injections (e.g., Botox, Jeuveau, etc) with 9.9 million followed by 5.3 million hyaluronic acid filler procedures which add volume and fullness, offering “patients the perfect plump and youthful aesthetic” according to ASPS literature. Sometimes mocked are the 1.5 million lip augmentations that will “leave you grinning ear to ear,” again according to ASPS literature.

Interestingly, South Korea is considered the global leader in cosmetic surgeries on a per capita basis with more than 13 procedures per 1,000 people as compared to the U.S. with just under 10 per 1,000. Unlike in the U.S. though, the South Koreans are particularly excited about rhinoplasty (nose jobs), liposuction, and something called blepharoplasty (removing excess eye lid skin) which are the three most popular surgeries there.

Cosmetic Procedures per 1,000 People

Source: International Society of Aesthetic Plastic Surgeons

To support this explosion in surgical procedures, the academic community has raced to train more cosmetic surgeons. The distribution of plastic surgeons in the U.S. is expectedly unbalanced, with a density of providers in some of the more obvious markets such as Florida, New York, and California. According to Salary.com data, the average plastic surgeon will earn $464k this year, with top decile earners reaching $591k. Entry level surgeons will make $379k. One might imagine that plastic surgeons in South Korea are crushing it given the relative shortage of providers as compared to the market demand.

Countries with Most Plastic Surgeons

Source: Statista, American Board of Plastic Surgeons

The prevalence of cosmetic surgeries has spiked over the last several years due to a number of factors, not least of which is the popularity of weight loss drugs (GLP-1s). For some patients this has created the near-gaunt “Ozempic Face.” The Center for Obesity Research and Education estimates that nearly one in eight Americans have now been prescribed GLP-1s. And it is likely to be even more given this past week’s announcements that Medicare will pay a $50 copay starting in April 2026, and that Eli Lilly and Novo Nordisk will significantly reduce drug prices. Furthermore, the ASPS estimates that 20% of people taking GLP-1s will at some point have cosmetic surgery.

Staring at one’s face on zoom has helped drive an extreme level of self-awareness, coupled with the “Kris Kardashian” effect (who looks fabulous, by the way), have given broader permission for people to consider and openly discuss the merits of physical modification  and reinvention. Obviously, the use of Instagram filters has now provided consumers an easy way to envision a “more beautiful you.” All of this is facilitated by the tremendous advances in medical technologies and products.

Given these procedures are for the most part private pay, unless deemed medically necessary in certain reconstruction cases, the recent dramatic concentration of wealth whereby the top 10% of U.S. households now account for almost half of all consumption, has further facilitated the increase in volume. While some may mock the “Mar-a-Lago Face” now so popular with many on the conservative Right (see Kristi Noem, Lara Trump, Kimberly Guilfoyle, the First Lady), that too has ushered in a much greater acceptance of a significant re-architecting of one’s body.

While mortality risks tied to cosmetic surgeries are relatively low, estimated to be approximately one in 50k procedures, many patients are now looking overseas for cosmetic surgery given cost considerations. “Medical tourism” for cosmetic surgery has been shown to be materially less safe, most notably and tragically in the Dominican Republic where nearly 100 Americans have died over the past few years, causing the Centers for Disease Control and Prevention to issue a warning.

Obviously, social media has played an amplifying yet pernicious role in all of this. According to Influencer Hero, Dr. Daniel Kaufman in Miami (@bodybykaufmanmiami) ranked #1 for “Plastic Surgeon Influencers” with an 87% Real Follower Score, tops among all plastic surgeons. Dr. Anthony Yuon (aka “America’s holistic plastic surgeon”) has 8 million followers on TikTok and 1.6 million on Instagram.

Adjacent to the cosmetic surgery phenomenon is the excitement about the longevity movement, which seeks to both extend life and improve the quality of those later years. Cynics have challenged the consumption of precious medical resources for endeavors such as cosmetic surgery, to say nothing of raising unrealistic expectations of newfound and perhaps unattainable beauty for many/most. Notwithstanding the very real and profound emotional and physical benefits for some that come with cosmetic surgery (heightened confidence, improved self-esteem, enhanced weight loss, etc), the debate swirling around the merits and appropriateness of these procedures persist.

While the nearly $20 billion spent on cosmetic surgery is a relatively small component of overall health care costs in the U.S. (see below), there is a legitimate debate about the utilization of finite medical resources on such elective procedures. The more nuanced concerns with increased social stratification and the chase for unrealistic beauty also have merit, particularly given that 40% of those under 45 years old have received some type of cosmetic procedure.

Distribution of Healthcare Expenditures

Source: National Health Expenditure, KFF (2023)

And please join us for our next quarterly Expert Roundtable Series webinar on December 9, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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October 27, 2025 · 6:34 am

This Should Work…

Investments in healthcare technology should work. There can be a legitimate debate about the wisdom of the magnitude of overall AI investment activity, now estimated to be $320 billion just in 2025, but undoubtedly most will see significant healthcare benefits from this infrastructure buildout.  But there may also be merit to the argument that certain knock-on effects of AI will undermine for some improvements in the quality of life. At a minimum, it is not entirely clear that the agentic arms race unfolding between payors and providers will entirely help patients versus improving the economics of the combatants.

Not surprisingly, the geographic diversity of the U.S. between urban / suburban / rural directly influences one’s life expectancy. The Economic Innovation Group has developed a Distressed Communities Index which is a composite of factors including poverty levels, education, housing, median income, and employment status. Just over half of Americans live in suburban zip codes, and nearly two-thirds of suburbanites reside in what are deemed Prosperous and Comfortable areas. Those fortunate residents have life expectancies nearly eight years longer than those living in Distressed areas. Just over 15% of Americans live in Distressed zip codes.

Life Expectancy by Distress Score

Source: Economic Innovation Group

Bank of America estimates that those earning more than $250k represent approximately 10% of all Americans and now account for over 49% of all spending, a significant step-up from 35% just 30 years ago. This will be enormously useful for those more fortunate given healthcare cost inflation has spiked according to recent Consumer Price Inflation data. Annual hospital costs and prescription drug costs are expected to increase 6.8% and 7.0% in 2025, respectively, according to Peterson-KFF forecasts. KFF goes on to project that the cost of an annual family health insurance plan is now nearly $27k, up 6% from 2024 levels.

Next year is likely to be even worse. Large employers are expecting overall health costs to increase 9% in 2026, in large measure due to a 12% jump in drug spending (oncology, GLP-1 being principal contributors). A survey from the Business Group on Health expects employers to meaningfully cut costs (versus passing increases on to employees), perhaps under the aircover of expected AI efficiencies.

Therefore, many Americans are now highly reliant on an array of important social services with nearly 24% on Medicaid or the Children’s Health Insurance Program (CHIP) – that is 85 million people. It is estimated that up to 16 million will lose health insurance coverage by 2034 due to the One Big Beautiful Bill Act. Should the government shutdown continue into November, an estimated 42 million low-income people will not receive food stamp benefits from the Supplemental Nutrition Assistance Program. As many of these programs are now under siege, the expectation (i.e., hope) is that investments in healthcare technology and AI will be able to improve care services for those most disenfranchised, living in Distressed communities to extend or augment the existing healthcare infrastructure.

Percentage of Country Receiving Social Benefits

Source: Census Bureau, USA Facts (2022)

Notwithstanding the significant costs incurred to provide care to Americans, estimated to be over $12k per capita, life expectancies are middling and on parity with many developing countries. This is not something to be particularly proud of in light of how much is spent on healthcare and technology – and points to the profound opportunities to re-architect the healthcare system.

Per Capita Healthcare Expenditures vs. Life Expectancy

Source: Silicon Valley Bank

Perversely, the dramatic investment in AI infrastructure may have significant negative health implications for some due to increased social isolation and loss of many jobs. A recent Financial Times analysis concluded that specifically young men and the unemployed exhibited a significant – and recent – spike in “deaths of despair.”

Percentage of Men Reported Feeling Isolated

Source: Financial Times, BBC Loneliness Experiment

Those who reported being isolated were nearly 3x as likely to die from substance abuse or suicide. The heightened incidences of online porn and gambling addiction have been widely reported. The prospect of widespread job loss due to AI will be devastating to those who are unable to adjust, especially in light of compromised social safety nets. The CEO of Heineken recently argued that his alcoholic products have health benefits given they are “social lubricants” which help people feel less isolated. This has been reflected in the company’s marketing campaigns for generations.

In spite of some of these concerns, the healthcare sector largely has embraced AI and identified bespoke solutions to transform administrative and clinical workflows. Today there is an agentic arms race between providers and payors pointing AI agents at one another to optimize reimbursement payments. A survey by Menlo Ventures concluded that 22% of all healthcare organizations have secured commercial AI licenses (versus 9% overall). Importantly, though, 27% of providers have as opposed to only 14% of payors, highlighting the current imbalance in automation capabilities.

An analysis by Bain highlights the continued priorities around revenue cycle management (e.g., documentation, coding, billing) and clinical workflow optimization, code for improving cash flow and reducing operating costs. Investments that do not directly have immediate ROI (~3-5x in first year) tend to fall lower down the stack of needs. Notably, the urgent requirements at the start of the pandemic to have providers become fully on-demand, always on, and virtual (e.g., telehealth and patient engagement) are meaningfully less critical now.

Survey of Current Provider Budget Priorities

Source: Bain

A similar Bain survey of payors shows a distributed set of priorities focused on product design (network and plan design) and member coordination. Many of the other priorities impact issues involving payment and cash flow and lend themselves nicely to being automated. In the face of increased medical loss ratios, a spike in utilization rates, lower reimbursement, and rapidly shifting member eligibility payors are aggressively considering AI solutions. Better determining provider quality will improve network design such that members will access more appropriate (i.e., likely less expensive) care at the right time and setting, improving member experience and reducing churn. Ironically, member-facing activities tend to be the first use cases to be automated (e.g., call center, member engagement, benefits verification).

Survey of Current Payor Budget Priorities

Source: Bain

After a challenging period post pandemic, this year many of the healthcare public stocks have performed reasonably well and for some sectors such as hospitals and large service providers, they have significantly outperformed year-to-date some of the broader market indices. Of note, the Medicaid sector has struggled as have smaller providers (sub-scale), risk-bearing entities, and tech-enabled virtual care companies, according to an analysis by J.P. Morgan.

Sector Stock Performance (2025 YTD)

Source: J.P. Morgan, Bloomberg

At the end of 3Q25 the Healthcare Technology Public Company Index (46 companies) tracked by MTS Health Partners was trading at an average of 3.0x and 2.8x 2025 and 2026 revenues, respectively, and 17.0x and 15.2x 2025 and 2026 EBITDA, respectively. The Index was forecasting an average 7.1% revenue growth for 2026, a marked slowdown from the 9.3% increase over last year, reflecting many of the industry headwinds. The most highly valued sub-sector was the Pharma-Tech cohort, which is valued at 5.1x and 16.6x 2026 revenues and EBITDA, respectively. Value-Based & Tech-Enabled Primary Care and Tech-Enabled Payers were the two lowest valued sub-sectors at the end of the quarter, likely reflecting the capital intensity of risk-bearing business models.

Investor excitement in healthcare AI is reflected in digital health investment activity, notwithstanding challenges to reconcile the more modest valuation multiples for publicly traded companies with those of lofty private market multiples. According to Rock Health, year-to-date $9.9 billion has been invested in 351 companies. For 3Q25, $3.5 billion was invested in 107 companies putting the sector on pace to have ~$14 billion invested in around 450 companies, which would signify an encouraging recovery closer to 2022 levels.

There continues to be evidence of further capital concentration around emerging winners in the digital health sector. Average investment size increased significantly year-to-date to $28.1 million from $20.4 million last year, driven by the dramatic increase in round size for AI companies. The top three focus areas in 2025 are (i) clinical workflow (ii) non-clinical workflow and (iii) care coordination, according to Rock Health. Silicon Valley Bank estimated that 38% of healthcare technology investments this year were in “mega rounds” of over $100 million, up from 28% in 2024.

Digital Health Investment Activity

Source: Rock Health

Expect further consolidation among the great unwashed masses of sub-scale private healthcare technology start-ups, which will ultimately be healthy for the sector. Going forward fewer companies will likely be started against a backdrop of more capital being invested in the sector. In addition to the resilience in the pharma-tech sub-sector, there is increasing investor chatter around several emerging themes such as the development of proprietary healthcare data sets (versus building on top of general purpose LLMs) and “hardware delivered AI.”  Never a dull moment…

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October 20, 2025 · 7:45 am

This Better Work…

The private credit market shuddered this past week with the disclosure of significant portfolio issues tied to the fraud and bankruptcies at First Brands and Tricolor Auto Group. Fears of further credit concerns saw 74 regional banks lose over $100 billion in market value as chatter of a possible contagion emerged, according to an analysis by Bloomberg.

Given the magnitude of capital required for the announced AI infrastructure buildout, as much as $320 billion in 2025, robust and accessible capital markets will be essential. J.P. Morgan now estimates that there is $1.2 trillion of debt linked to AI issuers, accounting for 14% of the high-grade debt market, making AI the largest sector.

Against the backdrop of the government shutdown, the state of the labor force has several flashing warning signs that provide some cautious insights into where the U.S. economy might be heading. For the first time since the outset of the pandemic, the number of unemployed workers is now greater than the number of open positions (“V/U ratio”). Over the past 25 years, a decline in this ratio has been correlated to a recession.

Number of Unemployed Workers

Source: Bank of America, Haver Analytics

Additionally, declines in temporary service jobs often indicate the onset of a recession. With approximately 2.5 million temporary service workers, these tend to be the first people let go. There are now hints of a significant correction looming as the level of temporary employment has been dropping for over a year, according to an analysis by Charles Schwab. The absence of government labor data further heightens investor anxiety.

Changes in Temporary Services Labor Force

Source: Charles Schwab

With the government shut down, which Bank of America estimates is costing the U.S. economy $15 billion per week, investors have focused greater scrutiny on other economic indicators. Goldman Sachs has developed its index of Current Economic Activity which is a composite of several foundational pillars of the U.S. economy. Notably, this index has declined over the past several months, with particular weakness in the Manufacturing sector. “Liberation Day” this past April was a particularly bad month, which further underscores lingering investor concerns about the haphazard application of the U.S. tariff strategy.

Indicator of Current Economic Activity

Source: Goldman Sachs Research

But valuations of financial assets and commodities have been on a tear. The best performing asset in 3Q25 was Silver, which increased over 29%, followed by Coffee, up a hyper-caffeinated 22.2%. Surprisingly, Cocoa declined 27.9% which industry analysts attributed in large measure to a decline in chocolate consumption (GLP-1 impact?). The NASDAQ Index increased by 11.2% while the S&P 500 Index increased by a more pedestrian 7.8% in the quarter. Globally, equity values are now approximately 120% of worldwide GDP, which is converging on an all-time high.

Global Stock Market Capitalization as Percent of Global GDP

Source: Goldman Sachs

Obviously, the artificial intelligence phenomenon is driving profound investor interest in all-things AI. But that excitement is not just contained to AI. Speculation euphoria is driving other sectors as well, perhaps fueled by the enabling capabilities of AI. The crypto sector is now valued at over $4 trillion. Gold has increased 59% just this year alone. According to the American Gaming Association (“AGA”), there was $150 billion bet on spots in 2024, with the AGA indicating that it will be “significantly higher” in 2025.

Business Insider recently estimated that $320 billion will be spent on AI infrastructure this year, which is an outsized contributor to overall domestic GDP growth. Bridgewater calculated that 35% – 45% of GDP growth year-to-date is just due to the technology sector’s investment in AI infrastructure. Absent this investment, GDP growth would likely be running at less than 1.0% in 2025.

Contribution to U.S. GDP Growth

Source: Bridgewater

A Harvard study paints an even more sober or daunting picture, concluding that through the first six months of 2025, 92% of GDP growth was attributed to AI data center development, highlighting the economy’s reliance, and therefor exposure, to the technology infrastructure build-out today.

Another word of caution: much of this infrastructure may have a relatively short shelf life. ChatGPT is less than three years old and now NVIDIA is releasing its next generation of AI chips (Blackwell Ultra and Vera Rubin platforms) which effectively obsoletes chips from several years ago. Chip depreciation is estimated to be as much as half the cost of running data centers (power is only between 2% – 6%), so the path to value capture may be elusive for some participants.

This investment – so far – appears to be justified. Nearly 18 months ago Google reported that 9.7 trillion tokens (a unit of data processed) per month were processed across its products. This past May that number spiked to 480 trillion, an increase of 50x in just twelve months. This increased to 980 trillion just three months later and is now running at 1.3 quadrillion tokens per month.

An analysis from McKinsey & Co from earlier this year offers an often-cited word of caution though. Notwithstanding that U.S. companies are estimated to spend $62 billion on AI solutions this year, 80% of surveyed companies reported “no significant bottom-line impact” with 42% of respondents terminating their AI initiatives.

The rapidly emerging dilemma is now how best to finance all these AI infrastructure investments. Setting aside the scrutiny on “circular deals” with the leading companies investing in each other to purchase one another’s’ products, which has opened a non-trivial systemic risk debate, investors have piled into various technology sector funds (below) and AI entrepreneurs have been embraced by venture capitalists.

Technology Sector Fund Flows

Source: Bank of America Global Economics

This rising AI tide is most definitely lifting all venture capital boats. According to Pitchbook, there was $80.9 billion invested in 3,175 companies in 3Q25. Year-to-date 64% of all venture capital investments were in AI companies, yet this represented less than 38% of all companies, reflecting the extraordinary round sizes of AI financings. There were nine $1.0+ billion AI rounds in 3Q25 alone. Across every stage the median deal size increased year-to-date over 2024 by more than 10%. Pre-seed, Seed, Series A, Series B, Series C, Series D+ median round sizes year-to-date are $0.5 million, $3.8 million, $14.0 million, $32.4 million, $56.5 million, and $100.0 million, respectively.

Quarterly Venture Capital Investment Activity

Source: Pitchbook

Even more dramatically was the increase in median pre-money valuations year-to-date over 2024 levels. For instance, Series C valuations increased from $225.0 million to $307.0 million, and Series D+ spiked from $630.9 million to $838.8 million. Notably, the average Series D+ valuations skyrocketed from $1.8 billion in 2024 to just over $4.0 billion year-to-date, reflecting a handful of extraordinarily large AI infrastructure investments.

This has led to a crowded pasture of unicorns. According to CB Insights, there are now 498 AI unicorns that are valued collectively at $2.7 trillion, 100 of which were founded just since 2023. It is estimated that there are more than 1,300 AI start-ups valued at more than $100 million each. Across all sectors, Pitchbook estimates that there are 828 unicorns with an average post-money valuation of over $3.7 billion. Year-to-date more than $142 billion was invested in 284 unicorns, representing 57% of capital invested but only 2.7% of companies.

Unicorns Created by Quarter

Source: Pitchbook

The question confronting most venture capital investors turns on when the industry will see predictable liquidity (i.e., exits). There are glimmers of hope here. Already year-to-date exit activity is running more than 33% greater than all of 2024 with $204.9 billion across an estimated 1,135 exit transactions. While the average exit value is of modest utility, it is considerably greater year-to-date at more than $180 million when compared to $121 million for all of 2024. Given the concentration of invested capital in a relatively select few companies, one might also expect that a relatively small number of companies will generate the bulk of the investment returns.

To be more specific, a recent analysis by the Financial Times found that just ten unprofitable AI companies saw an increase of over $1 trillion in aggregate valuation over the past twelve months. Those companies include Anthropic, Anysphere, Databricks, Figure AI, OpenAI, Perplexity, Scale AI, Safe Superintelligence, Thinking Machines Lab, and xAI.

Exits drives fundraising. To refill venture capital coffers, limited partners need to see robust distributions. Year-to-date 376 funds were raised that totaled $45.7 billion (average fund size of $122 million), which candidly is quite anemic when compared to 2024 (832 funds and $85.7 billion raised), although 3Q25 was stronger than 1H25 with $19.1 billion raised over 138 funds (average fund size of $138 million). Of the 376 funds raised this year, only 68 were from new firms (average fund size of $71 million), underscoring the challenges to break into the venture capital industry.

The profile of great venture capital funds tends to have returns generated by a small number of portfolio companies, which is mirrored in the overall venture capital industry with 3,111 firms managing 7,969 funds; that is, top decile fund performance is significantly better than the average fund. Carta, a leading private markets analytics firm, recently published an analysis of 1Q25 venture capital fund performance which highlighted this performance distribution by vintage. Notably, the relatively poor performance of the 2021 vintage reflects the dramatic inflow of venture capital that year. This also underscores growing concern about “capital absorption” when too much is invested, too quickly.

Venture Capital Performance by Vintage Year  

Source: Carta

American “exceptionalism” has been bandied about for generations but has been recently called into question. Over the past 15 years, the S&P 500 Index has performed significantly better than the basket of all other countries, and yet approximately 80% of the performance can be attributed to a strong U.S. dollar and valuation multiple expansion. Business fundamentals are a relatively small contributor to the overall performance, and in fact, analysts at GMO conclude that over the past five years the difference in performance between the U.S. and the rest of the world nearly vanishes.  Notably, the bulk of superior performance is reflected in a small number of companies and was generated prior to 2015.

Performance of S&P 500 vs. MSCI World Index (ex-U.S.)

Source: GMO, Compustat, S&P Global, MSCI

 

Undoubtedly, these new AI capabilities are profoundly exciting and will be unexpectedly disruptive. The question will quickly focus on whether attractive returns can be generated by these investments. Investors will be listening carefully to reports from Corporate America over the next several quarters, given how much capital will be tied up in this infrastructure. We better hope it all works…

And please join us for our next quarterly Expert Roundtable Series webinar on December 9, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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September 29, 2025 · 6:20 am

Wedding Bell Blues…

Even amidst all the chatter about the Taylor/Travis and Bezos weddings, and the global debate raised by a recent Coldplay concert, something profoundly troubling is happening with Americans’ love affair with marriage. Notwithstanding a gradual decline over the past 50 years, the drop in the marriage rate just in the last decade is jarring. Enthusiasm for marital bliss spiked on the heels of World War II and is now trending to be only approximately five marriages per 1,000 Americans annually. This will have profound implications for many industries, particularly healthcare.

Number of Marriages per 1,000

Source: Census Bureau

There were an estimated 2.02 million marriages in the U.S. last year at a total cost of $63.4 billion. Notwithstanding that, only 47.1% of households across the country in 2024 were headed by a married couple, a near historic low. The distribution of marriages is rather uneven across the country with many states now well below five per 1,000. Undoubtedly, it is too convenient to chalk this up to a “Red vs Blue” state phenomenon, but the states with lower marriage rates tend to be on the West Coast, Upper Midwest, and Northeast.

Marriage Rate by State (2020)

Source: National Vital Statistics System

Interestingly, this pattern is echoed when looking at educational attainment levels by state; that is, the states with lower marriage rates tend to have higher levels of educational attainment, suggesting that people are deferring marriage to either continue educational pursuits and/or where they live do not embrace additional schooling before “settling down” to start a career and family.

Educational Ranking by State (2022)

Source: Scholaroo

Notably, though, there are stark differences in marriage rates by education status. Those with a post-high school degree are more likely to be married (and older) at a 65% rate as compared to others with less advanced schooling at approximately 53%. Presumably, the more educated cohort has achieved a level of financial security prior to marriage, further widening the income inequality gap. To underscore this, a recent Cornell University study of 2019 Censure Bureau data determined that 59% of young adults with parents in the top quartile for income were married as compared to only 30% in the bottom quartile.  

Percentage Married by Educational Attainment

Source: Aspen Economic Study Group

While both genders are getting married later, the change in age for women when first married increased more dramatically from just over 20 years old sixty years ago to nearly 29 years old now. Obviously, several important factors account for this: women’s increased representation in the workforce, greater empowerment and independence, and the ability to more reliably delay (or extend) the window to have children. Social scientists have also coined new condition called “heteropessimism” when women are frustrated by men’s approach to marriage.

Age When First Married by Gender

Source: Census Bureau

So, why is this important? If one accepts that marriage is a precursor or a prelude to having children (obviously, that is not the case for many), then the country is staring at a significant demographic issue over the next several decades with our aging population. While this phenomenon has been widely reported, the purging of so many able-body workers (i.e., immigrants) and now with the imposition of the onerous $100k H1-B visa fees, many labor-dependent industries are uniquely exposed. Hospitality, construction, manufacturing, and healthcare are sectors that will need to be transformed with automation.

Sadly, the Department of Agriculture recently announced that 13.8 million children in 2023 lived in household that did not have adequate and consistent access to food, the greatest number in a decade. Perhaps contributing to the delay in marriage and starting a family is a general level of economic anxiety about being able to provide for children.

The distribution of the U.S. population by age below reveals the relative decline of those younger than 25 years old as a percentage of the overall population. Arguably, this correlates directly to the concomitant decline in marriage rates. One might expect the distribution to look more like a pyramid than a cylinder.

U.S. Population Distribution by Age (2020)

Source: Census Bureau

Just over the last decade there has been a significant change in the overall labor force participation rate (men and women combined), most acutely felt at the outset of the pandemic. According to Department of Labor data the participation rate for Americans older than 55 declined from 40% to 38% (blue line, left axis below), suggesting a significant loss of experienced employees who refused to re-enter the workforce after the pandemic. In part to offset that loss, younger Americans (25 – 54 years old) were coaxed to work; their rate increased from 81% to 83.5% over that same timeframe. 

Labor Force Participation Rates

Source: Bureau of Labor Statistics

The story is quite a bit different story for men when studied over a longer time horizon. Interestingly, men between 25 – 54 years old tend to show steep declines in participation rates during a recession. Over the past 50 years this rate has dropped from more than 90% to now 86.5%. The Federal Reserve Bank of St. Louis estimates that there are over 131 million people between 25 – 54 years old, suggesting that a drop of 3.5% could be as many as 4.6 million workers.

Labor Force Participation Rate for Men (1975 – 2025)

Source: Bureau of Labor Statistics, Axios

Exacerbating these demographic changes and the burden being unleashed on the healthcare industry is the aging population. Between 2010 – 2020 the number of centenarians in the U.S. increased by 50% to 80.1k people or nearly 2.4 people for every 10k, according to Census Bureau data. The Pew Research Center projects that globally there will be 40 centenarians for every 10k by 2050.

Aged 100+ Years Old by State (2020)

Source: Census Bureau

The aging population is not just an American phenomenon. As crowded as the world sometimes feels, there is increasing anxiety in many capitals around the world that their countries’ populations may start to decline. Recent United Nation estimates projects that peak global population will occur in 2084 with 10.29 billion people, up from approximately 8.2 billion now. The geographic mix will also change profoundly with sub-Saharan Africa increasing from roughly 10% 75 years ago to nearly one-third by 2100.

Surprisingly, the population in China is already starting to shrink, in part due to the “One Child” policy which was started in 1979 and stopped in 2015. Perhaps anticipating this, the Chinese government has made the development of a robotics industry a critical industrial initiative. According to a report by the International Federation of Robotics, there were more than two million robots operating in Chinese factories last year, with 300k new robots installed just in 2024, more than the rest of the world combined last year. By comparison, the U.S. installed a mere 34k robots. Given the significant healthcare access issues in China, one should expect a significant level of automation throughout the healthcare delivery system this decade.

Not helping matters in the U.S. has been the recent spike in vasectomies (ouch) and tubal ligations, both of which have nearly doubled just in the past three years, according to a University of Pittsburgh study. While coincident with the overturning of Roe vs. Wade, this is just another headwind in adding to our population. 

Rate of Vasectomies and Tubal Ligation

Source: JAMA Health Forum

And please join us for our next quarterly Expert Roundtable Series webinar on October 7, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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September 15, 2025 · 6:19 am

Our Complex Relationship with Animals…

Man has a complicated and ethically challenged relationship with animals. At the same time, they are a source of companionship, nourishment, and used for drug discovery testing. The American Veterinary Medical Association estimates that there are 89.7 million dogs and 73.8 million cats in the U.S., and that more than two-thirds of all households have at least one pet. There was a significant “Covid bounce” for new pet adoptions in 2020, as we sought out the security of man’s best friend, which tailed off in 2023.

U.S. Pet Population

Source: American Veterinary Medical Association

Here’s the other side of the coin. The US Department of Agriculture (USDA) reported that 9.8 billion land animals were slaughtered in 2020, of which nearly 9.4 billion were chickens. As shocking as that is, Faunalytics estimates that globally 85.4 billion animals were consumed in 2023. This equates to 9.4 chickens per capita annually.

Global Number of Animals Slaughtered

Source: Faunalytics

While that juxtaposition is cruelly ironic, the use of animals in the drug discovery process generates arguably more controversy and debate. In 1937 the U.S. government mandated that animals be tested for toxicity before human drug trials could commence. According to Cruelty Free International, citing USDA data, approximately 650k animals were used in clinical experiments in 2023, not counting the 125k lab animals kept in captivity for future studies. Importantly, this also does not include mice, rats, fish, or birds which are not tracked by the USDA. Industry estimates inclusive of those animals put the number at greater than 14 million in clinical studies each year.

Setting aside the legitimate ethical concerns swirling around animal testing and the significant cost considerations, as well as the fact that animal models are often poor proxies for human effectiveness, advances in AI and micro-fabrication are ushering in several novel approaches to replace animals in the drug discovery process.

There is also the practical dilemma that the supply chain for certain lab animals is severely impaired as many of the biomedical-grade research animals are imported from Asia. For instance, estimates are that approximately two-thirds of the 30k imported monkeys (mostly long-tailed macaques) come from China, which has now been dramatically curtailed causing the price to spike to more than $30k per monkey, up from $2.5k just a few years ago.

Lost among a litany of controversial changes at the FDA with the new Administration, this past April a directive was issued to phase out animal testing for monoclonal antibody research. This order also introduced the “New Approach Method,” which is to rely on “AI-based computational models of toxicity and cell lines and organoid toxicity testing in a laboratory setting.” Wrapped in the goal of more effective drugs getting to market faster was also the goal to significantly reduce development costs by limiting the reliance on animal models. In part to acknowledge the protests of PETA, Charles River Laboratories, one of the largest clinical research organizations, announced last year a $300 million initiative to secure alternatives to animal testing.

Forbes recently estimated that the U.S. pharma industry spends $300 billion annually on research and yet, nearly 90% of viable drug programs are unsuccessful. The White Coat Waste Project, which advocates for eliminating animal testing entirely, estimates that the use of animals in the drug discovery process costs the U.S. government $20 billion. Along with the drastic and haphazard DOGE cuts to medical research budgets earlier this year, tragically an untold number of lab animals were euthanized as projects were summarily halted.

On the other hand, the National Association for Biomedical Research, which advocates for the use of animal testing, claims that 60% of animals critical to research are now not accessible, dramatically impacting drug discovery.  Interestingly, researchers at the University of Pennsylvania recently discovered a compound in the DNA of long-extinct wooly mammoths (mammuthusin) which can eradicate “super bugs” which last year killed over five million people. There are fears that without new antibiotics, drug-resistant “super bugs” could kill 39 million people annually by 2050.

One of many biomedical Holy Grails has been the “lab on a chip” platform. Several recent promising initiatives have been announced, two of which are in outer space. NASA, in collaboration with Wake Forest University, is developing a “bioprinter” platform to create human tissues for rapid testing. Not to be outdone, Elon Musk’s SpaceX Falcon 9 rocket is now taking experiments to the International Space Station to grow organs from stem cells.

Of particular interest, driven by the dramatic, head-spinning advances in protein sequencing is the ability to simulate living cells in silico. Large machine learning models have advanced the molecular understanding of biological pathways to enable more precise and accurate predictive models. At a minimum, these developments hold the promise for an acceleration in screening and drug design. Estimates are that development timelines might be cut by 30% – 80%.

Timeline of Major Protein Sequencing Models

Source: Stanford RAISE Health, BOND

There were two recent venture financings, among many similar announcements, which underscore the promise of AI models in drug discovery, and potentially removing or reducing the need for extensive animal testing. Vivodyne marries its robotics human tissue manufacturing platform with an array of AI-generated clinically predictive human datasets for novel molecular insights. Tahoe Therapeutics is building foundational datasets to train its Virtual Cell Model that will map one billion single-cell datapoints with one million drug-patient interactions.

Last year $36.3 billion was invested in 1,825 ventured-backed biotech deals. Nearly lost among all this activity is a small corner of the biotech sector that is focused on animal therapeutics with only $0.2 billion invested in 39 animal biotech deals. Perhaps only coincidentally, this downward trend mirrors the pet adoption trend at the outset of the pandemic. Ironically, lab animals are presumably still used in animal biotech development processes. Along with long development timelines and a series of relatively small market opportunities due to short pet lifespans, the absolute dearth of investor liquidity in the animal health sector has kept a tight leash on investment activity.

Animal Biotech Investment Activity

Source: Pitchbook

Arguably, AI-driven therapeutic advances may occur sooner in animal health given the lack of patient privacy concerns and fewer onerous regulatory hurdles. For example, a company called Loyal has raised $135 million over several years to develop drugs to improve longevity for dogs through more precise targeting of metabolic and hormonal imbalances associated with aging. If the company is successful with canines, the longer-term plan envisions human longevity drugs, thus another possible example of drug success first in animals.

The American Pet Products Association estimates that Americans will spend $157 billion this year on their pets, of which nearly $55 billion will be spent on pet care and other related services (~1.5x more than was invested in the biotech sector). Just before the pandemic in 2019, the total spent on pets was $97 billion. This extraordinary growth contributed to both an increase in the number of veterinarians and vet practices (130.4k and 86.3k, respectively), much of which is in the Southeast and West Coast.

Notwithstanding that growth, there is still thought to be a significant shortage of providers as the industry struggles to keep pace with the number of pets. Ten years ago there were 105.4k veterinarians across 66.8k practices.

Number of Veterinarian Practices (2012-2021)

Source: U.S. Census Bureau

According to the American Association of Veterinarian Medical Colleges, there are only 33 accredited veterinarian colleges to address this shortage. The Bureau of Labor Statistics estimates that veterinarians earn $119k annually. Given that the number of years in school and levels of debt are comparable to physicians, compensation will remain a major impediment to solving this problem.

According to the U.S. Postal Service, there were more than 5,800 dog bites on mail carriers in 2023, with 727 of those encounters occurring in California alone (it is a big state though). Florida registered 193 bites and yet, according to a recent Forbes Advisor survey of 10k dog owners, Florida was declared to have the “Most Spoiled Dog Owners” as 43.5% of respondents reported pushing their dogs in strollers.

And please join us for our next quarterly Expert Roundtable Series webinar on October 7, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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September 2, 2025 · 6:34 am

Another Great Add to the Flare Capital Team…

We could not be more excited to announce that Alyssa Tsenter has joined the firm as a Senior Associate. Venture capital firms add to their investment teams infrequently, so each hire is important and deliberate with an extended interview process to assess capabilities, commitment, and all-around compatibility. While we will make a few hundred investment decisions together over the course of a fund, we might only make a handful of hiring decisions. Notwithstanding that, this one was easy as we continue to build our core investment team.

Alyssa earned her MBA from Harvard Business School this past spring, where she focused her course work on the healthcare industry. Prior to HBS, she spent nearly five years at ZS, a leading life sciences management consulting and technology firm. While there she worked on projects that would shorten R&D development timelines, elevate promising pharma assets, and rearchitect innovation processes. Her understanding and fluency of the life sciences sector underscores our increased focus on partnering with entrepreneurs to increase operating efficiencies across the entirety of the life sciences landscape. Alyssa also received an undergraduate degree in Chemistry with an emphasis in Chemical Biology from the University of Southern California.

After our first meeting with Alyssa, her passion and deep understanding of this sector’s many complexities and nuances were abundantly clear. Additionally, while in business school, Alyssa interned for a few venture capital firms and venture studios which sparked her interest in investing in technologies that will transform the healthcare and life sciences industry.  

And what an endorsement to get an unsolicited note from a senior HBS faculty member when he learned of Alyssa’s joining the firm – “she was an absolutely terrific student…” Further confirmation of what we all thought.

Alyssa also has an adventurous side. Her parents emigrated as teenagers from the Soviet Union, which left an indelible impression on her. She graduated early from USC to travel the world teaching yoga in places like Thailand, Israel, Peru, and Panama.

Please welcome her to the Flare Capital team…

A quick update on our Flare Scholars program and our pre-seed investment activities with Flare Scholar Ventures (FSV). Since inception, we now have 446 current or former Flare Scholars, who are passionate young professionals from many of our strategic limited partners and leading academic centers around the country. At the end of 2019, we announced the formation of FSV, whereby we earmarked up to 1.0% of our funds to support Flare Scholar-sponsored opportunities. To date, we have made 34 FSV investments, which collectively have raised a total of $147.0 million as compared to our initial investment of $3.6 million. Subsequent to our initial pre-seed investment, we have invested an additional $12.1 million in three of the FSV companies (Cascala Health, Ounce, Visana Health) as they continue to quickly scale.

We are excited to have recently co-led Cascala’s $8.6 million Seed round, marking the third time we have partnered with CEO and Co-Founder, Matt Murphy, himself a Flare Scholar from the great Class of 2017.

Importantly, we will kick off our recruiting efforts for the Class of 2026 Flare Scholars on September 8th and remain excited about the FSV program. Capital will always follow great talent and in this market, it will be great talent that wins.

And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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August 4, 2025 · 6:21 am

Healthcare Technology: A Midsummer Night’s Dream…

Wow…that was a poke in the eye. Perhaps not surprisingly, given the new Administration’s dramatic reset of the global economy over the last several months, the impact on employment is just now revealing itself. The revision in preliminary employment data punctured any notion that the extraordinary tariffs would not hit payrolls. Essentially, since Liberation Day in early April job growth has been nominal, bumping up the unemployment rate to 4.2%. Another gem buried in the data: 1.8 million people have now been unemployed for at least six months, the highest since 2017. These headwinds are likely to be made more blustery as automation and AI solutions are broadly deployed.

Nonfarm Payroll Data

Source: Bureau of Labor Statistics; Axios

Notwithstanding the resurgent investment pace in healthcare technology and the focus on automation, the size of the healthcare workforce has been quite resilient. According to the National Center for Health Workforce Analysis report in 2024, there are nearly 18 million healthcare employees in the U.S.; 933k were physicians. Over the course of the year there are an estimated 1.9 million new job openings in the healthcare industry. A recent analysis based on the Bureau of Labor Statistics (BLS) Quarterly Census of Employment and Wages by the New York Times estimated that approximately 13% of the U.S. workforce is in healthcare. Since 1980, average wages in healthcare increased by 60%, meaningfully outstripping the 34% increase in average wages for all other industries.

It is too expedient to simply say that technology will replace labor in healthcare. According to the BLS, the healthcare sector added just under 80k new jobs each month in 2024, which only modestly declined to ~72k new jobs for the last three months as the impact of tariffs started to be felt. Relative to many other industries, particularly the federal government which was adding 4k new jobs monthly in 2024 and is now shedding 16k positions monthly, the healthcare sector continues to be very labor intensive.

Net Monthly Job Creation by Industry (2024 vs. May – July 2025)

Source: Bureau of Labor Statistics; Axios

In addition to being both labor intensive and expensive, the healthcare sector has struggled with improving productivity. Not surprisingly, there is a correlation between the level of education (how facile employees are with AI technologies) and growth in productivity. For the several years between 2019 and 2024, healthcare demonstrated approximately a 20% “AI Use Prevalence” score coupled with an estimated 7% growth in productivity (just over 1% per annum). Surprisingly, this performance lagged several other capital intensive industries.

Industry Productivity as Function of AI Use Prevalence

Source: Federal Reserve Bank of St. Louis, Bureau of Labor Statistics

Given the seductive market opportunity to drive greater operating efficiencies through the broader deployment of automation and AI in healthcare, it is not surprising to see the strength in new investment activity in the healthcare technology sector this past quarter. According to Rock Health,  $3.4 billion was invested in 123 companies in 2Q25, putting the sector on pace for ~$14 billion this year. This would be comfortably greater than the levels seen in 2023 and 2024, and closer to the $15.8 billion of 2022 which was coming off the “Covid high.”

Digital Health Investment Activity

Source: Rock Health

More importantly, nearly 62% of all funding in 1H25 was in AI-enabled companies. The average round size for these companies was $34.4 million as compared to $18.8 million for non-AI companies in the sector. Notably, the three most active areas in 1H25 were non-clinical workflow ($1.9 billion), clinical workflow ($1.9 billion), and data infrastructure ($893 million), underscoring the intense investor focus on automation and AI. Expect to see greater investor attention paid to more effective and earlier interventions as workflows improve, coupled with increased emphasis on better care protocols as AI helps to determine the most appropriate treatment pathways.

Obviously, the volatility (and chaos) in changes to regulatory frameworks is creating significant uncertainty for the path forward (will the government cover GLP-1 drugs for Medicare, Medicaid members; most favored nation pricing; spike in anti-vaccine, anti-science sentiment, etc). Notwithstanding the dramatic cuts to Medicaid and other social safety nets, the enormity of annual healthcare expenditures continues to attract entrepreneurs who seek to drive efficiencies through automation in how care is delivered.

Additionally, the nearly 30% increase in healthcare costs borne by the federal government since the onset of Covid makes the situation simply untenable. Since February 2020, overall federal spending has increased by 25% or $1.4 trillion on a trailing twelve-month basis, one-third of which is the increase in interest expense.

Federal Government Expenditures

Source: U.S. Department of Treasury; Bureau of Labor Statistics

The situation is made even worse when looking at the hostile anti-immigrant stance of the new Administration. According to a recent Kaiser Family Foundation (KFF) analysis, 16% of the hospital workforce is immigrant labor, with California, Florida, New York, and Texas registering greater than 20%. Nearly 70% of immigrant hospital workers are women and 27% of all hospital physicians are immigrants. According to the National Foundation of American Policy, the overall foreign-born workforce in the U.S. has decline by one million since the Inauguration. Conditions coming out of the pandemic are already challenging but the crackdown on immigrant labor coupled with the impact of the One Big Beautiful Bill cuts to Medicaid and other healthcare services will be especially tough.

Share of Hospital Immigrant Labor

Source: KFF, Axios

Through all this turmoil there is one confounding development: the congressional districts most dependent on Medicaid and other social services are predominantly Republican. As of 2023, 56 of the 100 lowest income districts are red. Since 2009 the percentage of voters in the bottom one-third of districts by income that voted Republican has doubled to 37%. Given that many of these budget cuts are not effective until just after the 2026 midterm elections, it is possible that the impact will not be quickly understood. Expect there to be fireworks once that is revealed.

Congressional Districts by Party, by Income

Source: Census Bureau

Speaking of fireworks, there were nearly 15k knuckleheads with fireworks injuries who ended up in emergency rooms across the country this past year, a greater than 50% increase over 2023. Not surprisingly, most of the injuries occur around the July 4th holiday.

Annual Fireworks Injuries

Source: Consumer Product Safety Commission

Be safe out there…

And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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July 14, 2025 · 6:04 am

Flare Capital Continues to Add to the Team…

We could not be more excited to share that Caroline Glen has joined the firm as the Director of Investor Relations to deepen our partnership with our existing investors and engage with new potential investors as we continue to scale  the firm. With Caroline’s addition, Jessica Radford will focus her efforts in her role as Director of Strategic Engagement on our nearly three dozen strategic limited partners that touch nearly one-quarter of all U.S. healthcare spend annually. Importantly, they have generated nearly $1 billion in cumulative revenues for our several dozen portfolio companies and have co-invested nearly $300 million alongside our funds.   

A little bit about Caroline, who is a life-long Bostonian. What is so striking about her background is the depth of experience in fundraising with some of the most consequential investment firms. During an illustrious academic career at the University of Virginia, where she was named to the Dean’s List of Distinguished Students, Caroline had her first brush with fame when she rode an elevator with Warren Buffett. Somewhat tongue-tied, all she was able to ask him was if he was superstitious as there are no 13th floors at Berkshire Hathaway.

After graduating from UVA, Caroline joined Cambridge Associates, where she worked with clients to construct portfolios of alternative assets. She quickly caught the eye of Bain Capital, where she then spent four years working with the firm’s family office, RIA, and foundation limited partners.

While at Bain Capital, Caroline developed a particular interest in healthcare. She was recruited to go “in-house” to help manage investor relations for a public biotech company in Boston. Given her deepening interest in healthcare, the call to join RA Capital’s investor relation team was an easy one to accept. While at RA Capital, where she was most recently, Caroline watched assets under management increase by several billion dollars.

All of that is great, no doubt. Caroline is also just a terrific person and will represent the firm well. Evidently, she is an accomplished equestrian and, in fact, took my last call from her horse. She does fess up to being “terrible at golf” – her words. Caroline’s joining also continues our streak of having important Flare Capital team members with both first and last names that are actually just first names. Shout to Adam Bruce and Jon George…

Other Firm Updates

Quick update on our Flare Scholars program and Flare Scholar Ventures (FSV), which is our commitment to invest a portion of our new fund in the pre-seed rounds of Flare Scholar sponsored projects. With 446 current and former Flare Scholars, who are brilliant passionate emerging healthcare technology entrepreneurs, we now have 34 FSV companies, meaningfully exceeding our initial goal. Fifteen of those companies have already graduated by raising proper Seed or Series A rounds (in total our FSV companies have raised over $129 million).

The progress of the FSV program is inspirational as we continue on-boarding the next generation of great healthcare technology entrepreneurs. Notably, 38 of our Flare Scholars are founders of start-ups, while 27 have joined portfolio companies in important positions. Importantly, five former Flare Scholars are members of our own core investment team.

The great Class of 2025 Flare Scholars has had a terrific 1H25. We could not be more impressed with the quality of all our Flare Scholars, but this class seems quite exceptional. Capital will always follow great talent and in this market, it will be great talent that wins.

Additionally, we continue to pursue our company co-creation model, having now created six portfolio companies in partnership with one or more of our strategic LPs. One of our more notable co-created companies, Cohere Health, recently announced a $90 million Series C. With another five in-process, this approach rapidly accelerates product development and team recruiting given the quality of the contributed assets by the strategic partner. With the current economic environment, one might expect to see more “stranded assets” available as companies look to streamline operations, monetize assets that are under-utilized, or shed internal initiatives that are not fully funded.

And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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July 7, 2025 · 5:55 am

Pins and Needles: Venture Capital Landscape…

The state of the capital markets is baffling with conflicting signals issued every day. The stock market is ripping, but 1Q25 GDP growth was just revised downward from a -0.2% to -0.5%.

At first glance last week’s unemployment data looked quite strong with 147k new jobs added overall, but disturbingly most of that increase was for state and local jobs as the private sector was particularly weak with only half of the number of jobs added in May. The juxtaposition of the passing of the “Big Beautiful Bill” was notable. Perhaps these data are an indication that states will now need to pick up what the federal government is abandoning. Another flashing yellow – 130k people quit the labor force.

The public equity performance for the trailing twelve months has largely been running in place, certainly given the expectations attached to the incoming Administration. Notably, the Russell 2000 Index has significantly underperformed the other popular equity indices since the start of 2025, down 2.5% when the S&P 500 Index has increased 5.7%, arguably reflecting investor concerns about the greater exposure small to mid-size companies have to the Administration’s policies.

Performance of Public Stock Indices

Source: Goldman Sachs

It is estimated that the value of all stocks globally totals $115 trillion. The last two decades has witnessed an extraordinary de-leveraging of Corporate America, goosed along by the surging stock market. Interestingly, the relative level of corporate debt today is at near-historic lows, while the level of federal debt is unprecedented. S&P 500 debt to market capitalization is now near 10%, while federal debt to GDP is converging on 100%, likely made worse by the Big Beautiful Bill. A corner of the market showing explosive growth is private credit worth now over $1.7 trillion and is estimated to grow to be as much as $40 trillion. As a point of comparison, hedge funds currently manage approximately $4.5 trillion, according to a recent survey by Barron’s.

Relative Debt Levels (light blue line => left hand axis)

Source: Federal Reserve Bank of St. Louis

The number of public companies in the U.S. has collapsed to approximately 4,300, down from over 8,000 30 years ago. While the reasons for this are numerous (Sarbanes-Oxley, etc), the net effect is that more capital is increasingly invested in companies that sidestep rigorous SEC scrutiny and oversight. The SEC estimates that there are now over 100k privately managed funds. Into this slipstream has stepped the crypto industry which now totals $3.4 trillion in assets, of which $2.1 trillion is in Bitcoin.

According to the National Venture Capital Association, there are nearly 3,400 venture capital firms managing an estimated $1.2 trillion in assets. Private equity funds now control over 12,400 companies as of 1Q25, according to Pitchbook, and are estimated to have $668 billion invested in “tail-end funds” (i.e., older than ten years), according to Treo Asset Management. Unfortunately, Treo goes on to report that one-third of those long-lived assets are worth less than invested capital.

In an era of unprecedented discovery and innovation across every sector of the economy, the global transformation is head-spinning. To illustrate that, Banc of America recently profiled several phenomena: (i) there are 31 satellites right now tracking your exact location; (ii) the amount of food required over the next 40 years will be more than the last 8,000; (iii) given current wireless network speeds, it would take 300 million years to download the entire internet; (iv) enough plastic has been produced to shrink wrap the entire globe; and, (v) and there have been 108 billion people since the dawn of civilization.

This is just a sampling of the potential opportunities, but also the extraordinary challenges we now face. And the pace of change is accelerating which would ordinarily argue for greater oversight with robust guardrails, and yet we are now moving to further deregulate and, in fact, “de-oversight” important sectors of the economy. And it certainly appears that with innovation, population growth surges. The increased population puts additional pressure on the earth’s resources.

Profound Innovation at an Accelerating Pace

Source: BofA Global Economic Research

An obvious and deeply controversial element to population growth is the concomitant migration that is unleashed. The U.S. has gone rail-to-rail on immigration policy and has struggled mightily to find the appropriate balance. As long-held fundamental rights and traditions are being “redefined” (or ignored all together), there are now real concerns about securing adequate labor across many industries.

The innovation economy (and venture capital industry) is quite dependent on skilled immigrant founders and employees who are both technical (i.e., best and brightest from around the world) and entrepreneurial. Obviously, the fear of arrest, fewer visas being issued, and deportations has generated an outflow of “unauthorized” migrants from the country.

Net Immigration to the U.S.

Source: Oxford Economics, Cato Institute

Perhaps in response to these developments, according to Pitchbook’s “First Look” report the venture capital investment activity in 2Q25 showed a marked slowdown in both dollars invested and number of deals with $69.9 billion and 3,038, respectively, when compared to 1Q25 activity of $92.9 billion and 3,622 deals. The Venture Growth stage had the largest decline from $53.2 billion invested in 1Q25 to $30.7 billion in 2Q25. In general, quarterly deal count has continued its descent since the highwater mark of mid-2021, while the capital invested has continued its climb back to mid-2021 levels, driven in large measure by “mega” AI financings.

Quarterly Venture Capital Investment Activity

Source: NVCA, Pitchbook

The bar to raise successful follow-on rounds appears to have been set higher. A study by Carta of over 11k seeded companies between 2017 – 2023 showed that only 17% of them were able to raise a proper Series A within two years of initial funding. This historically has ranged between 30% – 35%. This may, in part, be explained by the fact that median Seed round sizes have increased from $1.5 million in 2017 to $2.8 million in 2023, and this year is running at $3.6 million. Over that same period, the median size of Series A financings nearly doubled from $5.1 million to $10.0 million.

The increase in round sizes is also reflected in the significant increase in pre-money valuations across every round. A comparison of 2019 and year-to-date 2025 data (pre- versus post-Covid) is quite revealing. Median pre-money valuations for Seed and Series A financings in 2019 were $6.6 million and $15.5 million, and $20.0 million and $45.5 million in 2025, respectively. Valuations for Venture Growth rounds increased from $350. 0 million to $900.0 million over that same period.

A straight line can be drawn from this phenomenon and the explosion of AI deals. Of the $69.9 billion invested in 2Q25, $40.5 billion was invested in AI companies, representing 58% of the amount invested yet only 35% of the deals announced. In 2019, pre-Covid, those amounts were 22% and 19%, respectively. In 2Q25 the average round size for an AI investment was $38 million as compared to $15 million for all other deals.

Should we be concerned? Perhaps. Notwithstanding that capital concentration is rarely a good thing (too much, too fast), according to a recent IBM survey of global CEOs, only 25% determined that recent AI investments (products created by all these start-ups) have hit expected ROI thresholds. And yet, 85% of those same CEOs still expect a positive ROI by 2027 through cost-cutting and something called “AI efficiencies.”

Another disconnect: a late 2024 Gallup poll revealed that only 15% of U.S. employees feel that their employer has stated a clear AI strategy.  Notwithstanding that McKinsey research concluded that 88% of enterprises are “undertaking an AI transformation,” only 5% reported having successfully transformed a single business domain.

Liquidity can cover many mistakes. Exit activity in 2Q25 was an encouraging $67.7 billion across 319 transactions, according to Pitchbook. This compared quite favorably to $52.4 billion and 330 transactions, and $38.6 billion and 301 transactions, in 1Q25 and 2Q24, respectively.

The Achilles’ heel to the venture capital model recently has been the abysmal lack of distributions. According to Carta, only 30% of all 2020 vintage year venture capital funds have ANY distributions (70% have yet to distribute a penny by year five). A measly 54% of 2018 funds, which are now seven plus years old, have made a distribution, while 19% of the 2017 funds have yet to do so. Carta calculates that the 2017 vintage year funds have a median IRR of 11.5% as of 1Q25 with a total TVPI (total value to paid-in capital) of 1.72x, yet a DPI (distributed to paid-in capital) of 0.27x, underscoring the extreme level of unrealized gains sitting at many venture capital funds. 

 Percent of Funds with Any Distributions by Vintage Year

Source: Carta

Venture capital investment certainly is a long game. According to an analysis by Silicon Valley Bank, top quartile funds tend to return total committed capital by Year 10 and will likely require an additional five to ten years for the fund to be fully distributed. Obviously, those timelines can be influenced profoundly by moments of investor euphoria or despair.

Median Distributions and Unrealized Gains for Top Quartile Funds

Source: Silicon Valley Bank

A legitimate concern among limited partners is that after the ten-year mark, remaining assets may be liquidated at significant discounts given pressure to wind up the funds as investment managers look to raise a successor fund. A recent study by Institutional Investor reported that there is now more than $3 trillion of unrealized value tied up in venture-backed “unicorns.”  Several recent venture-backed IPOs were priced below the last private round valuation, suggesting that not all the unrealized gains will be captured at the current carrying values.

There is a glimmer of hope for long-standing employees of some of these mature venture-backed companies. With the increased sophistication of the secondary markets, some of these companies are considering tender offers for employees, acknowledging that the average pre-IPO journey is now 12 years. According to a recent Morgan Stanley survey of 150 companies, nearly 40% expected that the next liquidity event would be a private tender offer versus an IPO.

In 2Q25 there were 151 venture capital funds raised totaling $16.6 billion (average fund size $110 million). This was a notable improvement over 1Q25 when 87 funds totaling $10.0 billion were raised. The highwater mark for fundraising was in 2022 when 1,737 funds raised $198.0 billion. Obviously, raising new funds is largely a function of both relative and absolute performance, but also that limited partners expect predictable liquidity from earlier funds. The “false flag” signal in 2022 when venture capital funds distributed nearly one-third of net asset value clearly spurred on significant new fund formation, cheered on by rabid AI enthusiasts.

Venture Funds Trailing 12-Month Distributions as Percent of Net Asset Value

Source: Pitchbook

There are two other developments worth watching when it comes to fundraising:

  • Private Investments in 401(k)s: BlackRock announced last month that it plans to offer target-date funds for individuals that will have between 5% – 20% allocations to private investments. Opening up the private markets to individual investors should drive dramatic inflows to private equity and venture capital funds.
  • Weakening of the U.S. Dollar: Maybe a non-event but the dollar lost 10% of its value so far this year, the worst performance since 1973, in large measure due to bloviating about tariffs and a weakening U.S. economy. As capital rotates away from the U.S., will large international investors shun the venture capital industry, given the lack of liquidity and the Administration’s frontal assault on innovation.

The 2Q25 best performing asset was platinum, up 32.1%, followed closely by the oxymoronic “lean hogs,” which sprinted ahead 25.5%. Given all that we are living through now, it was surprising to see that the worst performing commodity was coffee, which declined 19.2% in the quarter. Just another reason for insomnia.

And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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June 30, 2025 · 6:15 am

Social (In)security…

As the Congress “sprints” this week towards a possible vote on the budget reconciliation bill (aka the “One Big Beautiful Bill”), it has become rather apparent that there is an aversion to addressing the glaringly obvious (future) issues swirling around social security. This year nearly 69 million Americans will share approximately $1.6 trillion in benefits rendered, making it quite simply one of the largest economic transfers in our country.

And it is a third rail given that it will be insolvent in less than a dozen years, arguably sooner should the current Administration get its way. In fact, behind the Department of Health and Human Services, the Social Security Administration (SSA) was the second most funded federal agency in 2024 with $1.52 trillion spent of the $6.78 trillion total federal spending. The SSA accounts for only 2.5% of the federal workforce but manages 22.4% of all federal expenditures.

Percent of Federal Spending Agency (2024)

Source: Office of Budget and Management, Department of Treasury

Social security is a “pay-as-you-go” model and today sits with $2.7 trillion in assets, all in treasury securities. Importantly, overall social security benefits have increased more than 210% since 1980, outstripping the 190% growth in overall federal spending; the U.S. population grew 48% over that same period. In 1980, social security benefits totaled $487 billion at an average monthly benefit of $340 (inflation adjusted to today’s dollars would be $1,326) as compared to the average benefit payment today of $1,979.

Notwithstanding that it is estimated that there are $43 trillion of retirement assets in the U.S. (as of 3/31/25), which is thought to be 34% of all household assets and relatively concentrated to the upper strata of society, one of the principle concerns is the ageing population, obviously. According to the Census Bureau, those older than 65 grew by 3.1% between 2023 and 2024 while those younger than 18 dropped by 0.2%. The cohort of 65+ now represents 18.0% of the population, up from 12.4% just twenty years ago; those below 18 dropped to 21.5% from 25.0% of the population over that same period. In 2024, 45% of all counties had more people older than 65 than younger than 18.

Change in Population (2020-2024)

Source: Census Bureau

The SSA was established in 1935 to limit the amount of retiree poverty and at a time when it was hard to contemplate a country ageing at such a profound rate. The intention was to provide disability and survivorship benefits for a relatively limited period of time on a graduated scale tied to lifetime earnings. People became eligible for partial benefits at the age of 62, full benefits at 65. The average life expectancy in the U.S. in 1935 was 61.7 years; now it is 77.4 years, putting significant additional strain on the system.

Additionally, this transition to a meaningfully older population has dramatically reduced the relative number of workers contributing to the trust funds. There are approximately 30 beneficiaries for every 100 working age people today. This “dependency ratio” is expected to spike to 55 by the end of the century. Social security taxes will need to increase and/or benefits will need to be reduced or “means tested” otherwise the system likely topples over in the next decade or so.

Working Age vs. Retirement Age Population

Source: Social Security Administration

While social security does not directly cover medical expenses, Medicare and Medicaid payments naturally intersect with social security benefits when there are significant out-of-pocket expenses, deductibles, and co-pays that are not covered. This will likely be made even more burdensome should the “megabill” pass which promises to dramatically reduce healthcare coverage and benefits. While slightly dated, a 2019 study by AARP concluded that social security beneficiaries incurred on average approximately $6,700 in annual out-of-pocket healthcare costs against $17,500 in total benefits.

Related, to underscore the healthcare cost burden, the recent Milliman Medical Index concluded that a family of four on an employer health plan incurs over $35,000 of healthcare costs annually. This was just over $12,000 twenty years ago.

Total Cost of Healthcare for Family of Four

Source: Milliman Medical Index (2025)

Concurrent with the debate on healthcare costs and how they are to be treated in the “megabill” is the ever-present anxiety about medical debt, another significant burden often borne by those least equipped to manage it. A 2024 study by Peterson-KFF determined that there was approximately $220 billion of accumulated medical debt in the U.S.

Over 14 million people are carrying at least $1,000 of medical debt while three million have more than $10,000. Just this month the recently knee-capped Consumer Financial Protection Bureau reversed a policy to exclude medical debt from credit reports. Now it appears that $49 billion of such debt will resurface on millions of credit reports, possibly improving the chance of collection as individuals may be more compelled to settle those obligations, but likely to make accessing more affordable funds more challenging.

All these economic forces (i.e., headwinds) continue to underscore the need for compelling technologies to engage, inform, activate, and manage the older members of society. One of the most effective ways to lower healthcare costs is to invest in maintaining a healthy populace. Longevity Technology tallied $8.5 billion invested in 331 venture capital deals globally in 2024 focused on the longevity sector. According to 4Gen Ventures, a firm focused on “agetech” investing, it is estimated the market opportunity globally to be $2 trillion. Some estimates are that the Boomer generation will have $30 trillion of spending power in 2030.

Fear not, though. Lost amid all the noise and confusion around the “megabill” (oh, and bombing Iran, the wars in Gaza and Ukraine, the Bezos wedding) was the news that Edward “Big Balls” Coristine, once a proud member of DOGE, has joined SSA this week as a special government employee. If anyone can sort out social security, it will be a 19-year-old college student with a limited liability company called TESLA.SEXY. We are all saved…

And please join us for our next quarterly Expert Roundtable Series webinar on September 23, 2025, at noon ET. And subscribe here to follow other news and insights from Flare Capital Partners.

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