Last year was the worst year for venture capital funding since 2016.
So far, 2024 doesn’t look much better.
venture company It raised $30.4 billion from foundations, university endowments and other institutional investors in the first quarter of this year, down from 2023, the Financial Times (FT) reported on Wednesday (April 3).
This struggle signals the end of the era.mega fund”, the report says, startup deal closings will slow in the coming years. Investors are becoming more cautious as interest rates rise, listings, sales and so-called startup “exits” slow, and returns from venture fund managers decline.
“Why is the slowdown continuing so long? The core of the problem is exit.” Kaidi GaoVenture Capital Analyst pitch bookhe told FT. “Funding difficulties are expected to persist unless we see meaningful improvement from the exit market, which will put downward pressure on deal completion.”
Funding has slowed since 2021, when venture capital groups raised $555 billion, the report said. Last year, they raised a third of that amount. In the first three months of this year, $9.3 billion was raised in the U.S., about one-tenth of the total raised in 2023.
“We want to be there for our partners, but we don’t want to put ourselves in a hole,” said the chief investment officer of a major U.S. foundation, according to the report. “For many investors, this is a difficult calculation.”
Last month, there were reports that European startups are becoming dependent on: convertible bond As funding dries up.
Convertible bonds, which become equity over time, can help founders raise money quickly without announcing a new valuation. The amount of convertible debt issued by European VC-backed companies reached a record $2.5 billion last year, rising by $1.7 billion in 2022.
On the question of “exit,” PYMNTS wrote last month about the difficult path companies face as economic growth accelerates. initial public offering (IPO) activity.
“There is an emerging demand for deal-making, for startups to participate in acquisitions rather than building businesses, and for fintech companies in particular to go public when raising capital,” the report said. ing.
“However, as March began, only five of the approximately 40 fintech companies tracked by PYMNTS Intelligence were trading above their asking price,” the report added. Ta. “Despite the 55% gain in the FinTech IPO index recorded in 2023, absolute returns to date have been mixed at best.”
