The fallout from the startup industry’s exit slowdown continued into Q1, and managers attempting to secure capital commitments for new funds are still feeling the burn.
Exits dropped off a cliff in mid-2022 and have failed to pick back up, leaving gobs of LP capital tied up in late-stage unicorns.
US VC firms raised $11.7 billion across 99 funds in Q1, according to a first look at the latest PitchBook-NVCA Venture Monitor. If that fundraising pace were to continue through the rest of the year, it would mean the lowest total capital raised since 2017 and a 73% drop relative to 2022.
“A lot of investors would probably prefer the new Sequoia fund to a new emerging fund manager right now,” said Sanjeev Krishnan, a senior managing director at S2G Ventures. Krishnan predicts that niche and differentiated funds will be one way for VCs to attract LPs from a reduced pool.
First-time fund managers are in for a particularly tough run if they’re hoping to raise this year. Debut VC fund closures plummeted from $21.6 billion in 2021 to $10.3 billion in 2022. They’re on track for an even steeper drop this year.
Just two billion-dollar vehicles managed to close in Q1: B Capital Group raised roughly $2.1 billion and Bain Capital Ventures closed a $1.4 billion fund. Felicis Ventures’ Fund IX, closed in March, and Volition Capital‘s Fund V, closed in January, were both firms’ largest venture funds to date at $825 million and $675 million, respectively.
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