VC fundraising screeches to a halt in Q1 2023
In Q1 2023, US venture capital fundraising plummeted to $11.7 billion across 99 funds—on pace for the lowest total since 2017 and a 73% decline from 2022—due to a sustained exit slowdown that has tied up LP capital in late-stage unicorns, making it especially difficult for first-time fund managers to raise capital amid investor preference for established funds and a scarcity of large fund closures.
VC fundraising screeches to a halt in Q1
US VC firms are on track for the lowest total capital raised since 2017 and a 73% drop in fundraising relative to 2022.
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.
Off to a slow start
US VCs are on track to close 2023 with 73% less capital committed than 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.