VC Fund Performance: Q1 2024
Carta VC Fund Performance Q1 2024.pdf
Key takeaway
- For entrepreneurs: The current venture capital landscape is challenging, with longer fundraising cycles and a higher prevalence of down rounds, making strategic financial planning and adaptability crucial.
- For investors: The performance of recent VC fund vintages is underwhelming, with many funds showing negative IRR and low DPI, suggesting a cautious approach to new investments.
Summary
The "VC Fund Performance: Q1 2024" report by Carta highlights the ongoing challenges in the venture capital market. Rising interest rates since 2022 have led to slower fundraising and reduced liquidity, impacting fund performance. The report analyzes data from 1,803 U.S. venture funds, revealing trends such as decreased capital deployment and lower graduation rates from seed to Series A. Recent fund vintages (2021 and 2022) show negative median IRR and TVPI, reflecting the tough market conditions.
Insights
- Capital Deployment: Funds from the 2022 vintage have deployed only 43% of their committed capital after 24 months, indicating a slower pace compared to previous years.
- Graduation Rates: The percentage of seed-stage companies advancing to Series A has significantly dropped, highlighting tougher conditions for startups.
- Fund Performance: Median IRR for 2021 and 2022 vintages remains below zero, with a narrow performance gap between the 25th and 75th percentiles.
- TVPI and DPI Metrics: Recent vintages show median TVPI below 1x and low DPI, indicating limited realized returns for investors.
- Market Context: The overall venture capital market has contracted, with fewer IPOs and M&A activities, leading to longer fundraising cycles and more down rounds.
Implications
- For Entrepreneurs: The challenging fundraising environment necessitates innovative financing strategies, such as bridge rounds, and a focus on extending runway.
- For Investors: The underperformance of recent fund vintages suggests a need for careful due diligence and possibly a focus on more established funds or alternative investment strategies.
- Market Adaptation: Both startups and investors must adapt to the new normal of higher interest rates and reduced venture activity, potentially reshaping the venture ecosystem.