Evening Brief – 02.02.24

VC Fundraising Down Again in Q4

The global venture capital market suffered a significant drop in closed funds in the fourth quarter of 2023, capping off a difficult fundraising year for the asset class, according to new statistics.

Only 174 funds closed in the fourth quarter of last year, a more than 30% decrease from the previous quarter, while total capital raised declined 5.5% to $21.8 billion, according to Preqin.

North America experienced the greatest reduction, according to Preqin’s quarterly VC update, with the number of funds plummeting over 68% to 102 quarter on quarter.

Asia Pacific was worst hit in terms of raw capital closed, with a 75% drop from the third quarter to $2.1 billion. While North American fund closures plummeted, raised cash fell just 9.8% to $14.8 billion.

According to Preqin, the percentage of limited partners looking to invest less than $50 million to venture capital funds climbed from 66% in the fourth quarter of 2022 to 69% in the same quarter of 2023.

VC investors are also shifting their next commitment timeframes further into the future, with 44% of investors asked in November 2023 aiming to make their next investment in the next quarter, down from 55% in November 2022.

This impacts the amount of time funds spend raising cash. According to Preqin, approximately 28% of funds closed in 2022 spent less than a year in the market, but this proportion has dropped to just 17% by 2023.

The number of funds in the market continues at a historic high, with nearly 6,500 seeking $437 billion in capital. That aggregate capital target has decreased from around $450 billion in September 2023, amid a challenging capital raising market.