In our most recent PE & VC Fundraising Report, several key trends stood out, chief among them continued fundraising success across both asset classes and immense dry powder levels. One would surmise that in the wake of such success, the gentle decline in fundraising volume for PE firms and the equilibrium for venture fundraisers suggest enthusiasm may be tempering. However, on an anecdotal basis, and given the sheer sums still raised across fewer pools of capital, the desire of limited partners to maintain or increase exposure still appears vigorous.
What to make of these confluxing data points? In my view, it's likely that both PE and VC fundraising volume will slide, along with total capital commitments amassed, even if the latter remains relatively robust given how many experienced venture firms are raising even larger, nearly growth-stage vehicles and flagship PE buyout shops keep on keeping on.
Here are the data points I'm scrutinizing most closely (covering North America and Europe):
Starting with VC...
LP appetite for exposure to VC is demonstrated by the relative success even first-time managers are seeing.
Fund sizes signify maturation of younger firms, along with the fact that even if LPs still wish to maintain some exposure to emerging managers, a brand name and flexibility to invest along the capital stack is more alluring.
The uptick in 2016 close times suggests that even if the fundraising process is elongating, many firms that just closed won't be at it again in 2017. A potential counterbalancing factor to that would be VCs perceiving the fundraising window might be closing.
As for private equity...
Starting off with the big one: PE's capital overhang. Much of the hoard of dry powder is in recent vintages, which will fuel continued dealmaking but also lessen the necessity of amassing fresh commitments.
Fundraising cycles appear to be lengthening, only extending the timeline for closing on commitments.
Many of the big PE firms that were looking to close on multibillion-dollar vehicles have already done so.