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Limited Partners

VC fundraising is set to surpass 2021 record

Despite the market correction, venture capital is on track to register its largest fundraising year on record.

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Venture capital is on track to register its largest fundraising year on record despite the market correction.

So far this year, VC funds in the US have closed on $137.5 billion, just shy of 2021’s full-year total of $142.1 billion, according to PitchBook data.

Just this month, Lightspeed raised $7.1 billion across four funds, Battery Ventures announced $3.8 billion in funding, and Oak HC/FT closed on a nearly $2 billion fund. In addition to these behemoth pools of capital, 47 other firms have raised their newest and, in most cases, largest-ever funds in July.

“Over three-quarters of our venture managers were back with new fundraises within the last year,” said Miguel Luiña, head of global venture and growth equity for Hamilton Lane, which advises limited partners and backs venture funds.

 

LPs have been overwhelmed by an unprecedented number of VC firms returning to market earlier than expected with larger fundraises. Pension funds, endowments and other mainstream limited partners operate under strict asset-allocation targets that limit how much venture exposure they can maintain. As a result, many LPs don’t have room in their budgets to renew commitments with every one of their VC partners.

A handful of LPs told PitchBook that they had to let go of some venture relationships or resort to writing smaller checks to existing partners. These allocation constraints have disproportionately affected smaller and newer VC firms.

Still, PitchBook data shows that the fundraising environment turned out to be, on the whole, less difficult than predicted at the start of the downturn. However, overall 2022 VC fund activity is unlikely to increase significantly through the rest of the year, according to Luiña.

“There are still a few groups who are raising here and there, but the bulk of fundraising happened in the first half of this year, and so we’re not expecting another big wave until the first quarter of next year.”

Featured image by Nuthawut Somsuk/Getty Images

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    Written by Marina Temkin
    Marina Temkin covered the venture capital ecosystem from 2021 to 2024, based in San Francisco. Previously with Venture Capital Journal, Marina wrote about the VC industry, and she was a reporter with Mergermarket in New York and San Francisco. She also has been a financial analyst and is a CFA charterholder. Marina received an economics degree from the University of California, Davis, and she attended the CUNY Graduate School of Journalism.
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