Are VC investors recklessly YOLOing money into new startups or soberly diligencing their next investment?
Every day we read about another massive round for an (AI) company, raising a bajillion dollars at a ten bajillion valuation.
So it may seem like venture capitalists are just burning through their dry powder as quickly as possible.
But our data shows something different. Analysis below of 2,000+ US venture funds that use Carta Fund Admin.
We looked at how quickly funds by vintage year deployed capital from LPs into startups.
In normal periods like 2017-2018, the median fund will deploy about 20% of their available capital into companies per year. Maybe a little more, a little less, but that's the benchmark.
In 2020/21, VCs got super hyped up on Mountain Dew and put the pedal down on deployment pace. By the time they were two years into the fund life, they'd already put 60% of the capital to work.
This is not great, btw. It means they are a) likely not doing the diligence they should and b) are super tightly bound to a single years market. In 2021, that was an overheated market with wildly high valuations, which are unlikely to return capital at the same pace as more "normal" years.
But look at the recent vintages. Things really slowed down again in 2022, 2023, and 2024. Even 2025 funds (raised and deploying into the white-hot heat of AI time) are not matching the 2021 pace.
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If you're a founder, don't get caught up headline-watching. Most fundraising is still a grind and does not happen overnight.
If you're a fund manager, don't get caught up in the same. Needing to have your "AI winner" and relaxing your diligence standards to get one is not usually a great approach.
Capital deployment is a major input to how VC funds make money - but it's not the only one! New report out from us today covering deployment, management fees, carried interest rates, so much good stuff. A must-read if you're in VC or PE funds as a GP or LP.
Direct link: https://lnkd.in/g4nmYV_Z π
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