3 charts from PitchBook (via FT) showing dire times for US venture capitalists. Should we be worried?
Maybe, but the picture is more nuanced than the sharp declines suggest.
𝗙𝗶𝗿𝘀𝘁 𝗰𝗵𝗮𝗿𝘁 - number of VC firms that made an investment into a US company be year. Down certainly in 2024 but honestly not by that much. Many VC firms have taken a pause in their investment process (is this good for LPs? unclear) but I'd expect a pop in 2025.
𝗦𝗲𝗰𝗼𝗻𝗱 𝗰𝗵𝗮𝗿𝘁 - total dollars raised by VC funds by year. Way down from 2021 and 2022 but those were complete abnormalities in the fist place. The pace of LP investment into the VC asset class reacts more slowly than changes in the underlying portfolio companies. Effectively this is an echo of the challenges faced by startup founders over the past two years.
What this chart doesn't really show is the capital concentration into mega-funds vs smaller players. That dynamic has many people thinking that the term "VC" is overly broad and we need to start segmenting things into early-stage and late-stage (or "venture capital" and "venture banks", to use a phrase from Dan G.)
𝗧𝗵𝗶𝗿𝗱 𝗰𝗵𝗮𝗿𝘁 - total dollars committed to VCs raising their first funds. Lowest in many years (though again the contrast to 2021 is unhelpful given how whacky that time was).
This gives me a little anxiety. Emerging managers fund different startups than multi-stage funds and play different games. We should want as many different strategies being played simultaneously as possible in private markets.
It seems increasingly clear that small emerging managers cannot simply be shrink-wrapped versions of mega-funds. They need to attempt different strategies and win different founders.
The question is: will LPs back those differentiated strategies, even if they've yet to be proven as moneymakers?
#VC #venturecapital
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