A muted exit market, volatility within the tech sector and geopolitical uncertainty are weighing heavily on venture capital fundraising, with annual capital raised and closure rates continuing their decline from 2021’s high, new data from PitchBook shows.
VC firms raised $84.4bn across 653 funds in H1 this year according to the data provider’s latest Private Market Fundraising Report, putting the sector well off the pace to reach last year’s already muted $198bn – and heavily behind the $369bn and $334bn collected in 2021 and 2022.
Close times for VC funds are lengthening too, the report said – the median was tracking at 17.3 months through H1, a stark increase compared to 9.6 months across 2022 and 12.8 months in 2023.
PitchBook said, “With LP capital not as freely available, many fewer VC funds are getting to their desired closing amount in a timely fashion.
“In 2022, over 3,300 VC funds closed, whereas in the 12 months through Q2 2024, only 1,670 had done so.
“Scarcity has driven up competition for commitments, largely benefiting GPs with established track records over those without.
“Experienced GPs raised 69.8% of capital in H1 2024, tracking above the proportion from each year in the past decade.”
Andreessen Horowitz’s $3.8bn a16z Growth Fund was the largest close in H1 2024, with Norwest Venture Partners XVII and Technology Crossover Ventures XII both reaching $3bn.
But TCV’s closed was down on the $4bn it collected for Fund XI in 2021, and other firms such as Tiger Global have seen even more dramatic drops between fund vintages.
Private equity fundraising has had a much rosier first half, however, with nearly $300m raised – putting it on track to outdo the $572.5bn of capital collected by buyouts firms in 2023, and raising the potential of this year beating the record $618.9bn figure from 2021.
PitchBook said the bulk of fundraising continues to be driven by experienced managers seeking to raise bigger megafunds to add to their fund families, with more than half of the capital raised globally in H1 2024 coming from just 12 new megafunds of over $5bn.
It added that buyout funds continue to be the leading PE strategy, representing 86.7% of new capital raised so far in 2024 – taking further share away from growth funds, a substrategy that had its best year in 2021.
PE has not completely escaped the choppy macroeconomic environment, however, with the median time to close a buyout fund in the US rising from 14.7 months in 2023 to 18.1 months so far this year.
PitchBook said, “Although a shift in monetary policy should free up capital available for fundraising in H2, we remain wary that H1 2024 was strong for PE fundraising and some of the largest funds closed during this period, so H2 may prove to be weaker than H1.”
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