Venture capital executives are more cautiously optimistic on their fundraising prospects for this year, in contrast with a comparatively “bleak” outlook among private equity peers, according to S&P Global Market Intelligence’s new 2023 Private Equity Outlook Survey.  

The survey examined deal activity expectations, changes in strategy, challenges, preferences in Environmental, Social, Governance (ESG) and technology adoption. 

The report surveyed a total of 511 private equity, venture capital and limited partner respondents between December 2022 and mid-January 2023. 

According to the outlook, 45% of private equity executives expect fundraising conditions in their location to deteriorate this year, while 34% said conditions will remain the same.  

Venture capital professionals were split, however, with 35% forecasting a deteriorating fundraising environment and a similar percentage expecting conditions to remain unchanged. 

“This year’s survey also identified a noticeable divide between PE and VC professionals in expectations for deal activity in 2023, with success dependent on evolving economic conditions and industry trends,” said Ilja Hauerhof, director of new product development and research for private markets at S&P. 

Among its key findings, GPs have more pessimistic expectations for deal activity, with 24% predicting a deterioration this year compared with 7% last year. Meanwhile, 43% of LPs investing in PE will increase their asset allocation in PE in 2023, while VC and private debt are likely to see a decrease in allocation.  

PE and VC investors have differing opinions on the effect of geopolitical factors on their strategies, with 52% of European PE investors believing geopolitics will affect their strategies, whereas only 39% of their VC counterparts share this view.  

A significantly higher proportion of LPs in North America (25%) are considering changing their GPs in 2023 compared with their counterparts in Europe, where only 9% are contemplating a switch. 

“Overall, the survey suggests that fundraising conditions for PEs and VCs are likely to be challenging this year. The cautious outlook of many industry professionals suggests that firms will need to be strategic and adaptable in their fundraising efforts in the year ahead,” the report noted.