The poor showing for fundraising in 2024 was to be expected. The numbers didn’t look promising starting with Q1 and only grew more worrying as the year progressed.
The final tally of $104.7 billion raised by 865 VC funds was the lowest total in six years, according to exclusive research by Venture Capital Journal. The dollar amount was down 18 percent from 2023, while the number of funds declined by 16 percent.
Will 2025 see a rebound? It is too early to predict with any authority, but there are several reasons to be optimistic.
Most notably, investors are more bullish than they have been in a while. Our annual survey of institutional investors found that 33 percent plan to invest “more” in venture funds in 2025, a significant increase from just 20 percent who said that in the prior year’s survey. Also, just 12 percent of investors plan to invest “less” in VC in 2025, a major improvement from the 33 percent who gave that response the previous year. The largest share of the 107 respondents (55 percent) plan to invest the “same” amount in VC this year, which was up from 48 percent who gave that response a year ago.
Another sign that suggests a fundraising bounce is that more LPs are looking to boost their allocations to venture funds. In our survey, 33 percent said they were “under allocated” to VC, more than double the response from a year ago. Just 18 percent said they were “over allocated,” an improvement from 23 percent a year ago, which was the largest percentage in the past six years of the survey. A little less than half (49 percent) of respondents said they were on target for their allocation, an improvement from 63 percent a year earlier.
At least one large LP announce is mulling a plan to put more into venture. In November, the $58 billion New Mexico State Investment Council discussed the possibility of increasing its target allocation to venture capital strategies from a range of 0-5 percent to 10-25 percent. (Its actual allocation is currently at 8 percent.) The council tabled the proposal pending an update of its PE investment policy, which the council is expected to discuss in February or March, a spokesperson for NMSIC tells VCJ.
Just two months earlier, the $43 billion Texas Municipal Retirement System voted to boost its target private equity allocation to 20 percent from its current target of 13 percent. While the pension didn’t specify plans to grow its VC in particular, its newly hired chief investment officer, Yup Kim, was instrumental in convincing the California Public Employees’ Retirement System to get back into VC after it abandoned the asset class for eight years, VCJ previously reported. (Kim was previously head of investments, private equity, for CalPERS.)
Even small LPs are looking for more private equity exposure, which would could benefit VC fund managers. The $16 billion San Bernardino County Employees’ Retirement Association last week voted to increase its 2025 PE allocation by 13 percent over last year, as we reported here.
The exit question
The most significant factor in whether we see a fundraising renaissance is whether or not we see a meaningful number of exits. The simple fact is LPs need distributions to recycle into new venture fund investments.
As part of its October survey of 71 institutional investors worldwide, Kelly DePonte Advisory asked about their “biggest fears” for 2025. North American LPs said their second biggest fear of was: “Lack of liquidity is having a negative impact on our ability to make new commitments to specific opportunities we have been pursuing or in the amounts we would like.” (Their biggest fear was: “Increasing competition is decreasing the opportunities for significant returns across all core areas of private equity.”)
Investors cannot help but wonder when all the unicorns in VC portfolios will finally turn into real money. Crunchbase reported this week that the companies on its Unicorn Board for the first time raised $1 trillion in collective funding. The board is made up of 1,565 companies that VCs have valued at $5.4 trillion. Unlocking even 10 percent of that amount would generate twice as much capital as VCs are currently in the market for.
There is growing optimism that the exit markets will spring back to life this year. “With the change of administration, I expect the return of mega M&A deals,” Aaron Jacobson, a partner with New Enterprise Associates, recently told The Wall Street Journal. “We are going to see a $20 billion-plus M&A outcome for a leading AI company. I also expect the IPO market to reopen in 2025, especially for AI companies given public investor interest in broadening exposure to the sector.”
Tom Callahan, CEO of Nasdaq Private Market, is also bullish, telling VCJ in a December interview: “Everything we’re seeing and hearing from the [equity capital markets] desks that we talk to and from the M&A bankers that we talk to suggests that 2025 will be a very, very strong year for both IPOs and M&A.”
LPs are growing more optimistic about exits, too. In our survey, 38 percent of investors said they expect venture funds to “exceed” their benchmarks in 2025, up from just 19 percent in our prior survey. Also, just 19 percent predicted VC funds would “fall below” their benchmarks in 2025, a significant improvement from 31 percent in the prior poll. The largest portion of LPs (44 percent) expect VC funds to “meet” their benchmarks, down from 50 percent previously.
Correction: The six paragraph story has been rewritten. We incorrectly reported that the New Mexico State Investment Council voted to increase its allocation to venture capital. The Council has tabled a vote on the proposal until it reviews its PE investment policy.
The poor showing for fundraising in 2024 was to be expected. The numbers didn’t look promising starting with Q1 and only grew more worrying as the year progressed.
The final tally of $104.7 billion raised by 865 VC funds was the lowest total in six years, according to exclusive research by Venture Capital Journal. The dollar amount was down 18 percent from 2023, while the number of funds declined by 16 percent.
Will 2025 see a rebound? It is too early to predict with any authority, but there are several reasons to be optimistic.
Most notably, investors are more bullish than they have been in a while. Our annual survey of institutional investors found that 33 percent plan to invest “more” in venture funds in 2025, a significant increase from just 20 percent who said that in the prior year’s survey. Also, just 12 percent of investors plan to invest “less” in VC in 2025, a major improvement from the 33 percent who gave that response the previous year. The largest share of the 107 respondents (55 percent) plan to invest the “same” amount in VC this year, which was up from 48 percent who gave that response a year ago.
Another sign that suggests a fundraising bounce is that more LPs are looking to boost their allocations to venture funds. In our survey, 33 percent said they were “under allocated” to VC, more than double the response from a year ago. Just 18 percent said they were “over allocated,” an improvement from 23 percent a year ago, which was the largest percentage in the past six years of the survey. A little less than half (49 percent) of respondents said they were on target for their allocation, an improvement from 63 percent a year earlier.
At least one large LP announce is mulling a plan to put more into venture. In November, the $58 billion New Mexico State Investment Council discussed the possibility of increasing its target allocation to venture capital strategies from a range of 0-5 percent to 10-25 percent. (Its actual allocation is currently at 8 percent.) The council tabled the proposal pending an update of its PE investment policy, which the council is expected to discuss in February or March, a spokesperson for NMSIC tells VCJ.
Just two months earlier, the $43 billion Texas Municipal Retirement System voted to boost its target private equity allocation to 20 percent from its current target of 13 percent. While the pension didn’t specify plans to grow its VC in particular, its newly hired chief investment officer, Yup Kim, was instrumental in convincing the California Public Employees’ Retirement System to get back into VC after it abandoned the asset class for eight years, VCJ previously reported. (Kim was previously head of investments, private equity, for CalPERS.)
Even small LPs are looking for more private equity exposure, which would could benefit VC fund managers. The $16 billion San Bernardino County Employees’ Retirement Association last week voted to increase its 2025 PE allocation by 13 percent over last year, as we reported here.
The exit question
The most significant factor in whether we see a fundraising renaissance is whether or not we see a meaningful number of exits. The simple fact is LPs need distributions to recycle into new venture fund investments.
As part of its October survey of 71 institutional investors worldwide, Kelly DePonte Advisory asked about their “biggest fears” for 2025. North American LPs said their second biggest fear of was: “Lack of liquidity is having a negative impact on our ability to make new commitments to specific opportunities we have been pursuing or in the amounts we would like.” (Their biggest fear was: “Increasing competition is decreasing the opportunities for significant returns across all core areas of private equity.”)
Investors cannot help but wonder when all the unicorns in VC portfolios will finally turn into real money. Crunchbase reported this week that the companies on its Unicorn Board for the first time raised $1 trillion in collective funding. The board is made up of 1,565 companies that VCs have valued at $5.4 trillion. Unlocking even 10 percent of that amount would generate twice as much capital as VCs are currently in the market for.
There is growing optimism that the exit markets will spring back to life this year. “With the change of administration, I expect the return of mega M&A deals,” Aaron Jacobson, a partner with New Enterprise Associates, recently told The Wall Street Journal. “We are going to see a $20 billion-plus M&A outcome for a leading AI company. I also expect the IPO market to reopen in 2025, especially for AI companies given public investor interest in broadening exposure to the sector.”
Tom Callahan, CEO of Nasdaq Private Market, is also bullish, telling VCJ in a December interview: “Everything we’re seeing and hearing from the [equity capital markets] desks that we talk to and from the M&A bankers that we talk to suggests that 2025 will be a very, very strong year for both IPOs and M&A.”
LPs are growing more optimistic about exits, too. In our survey, 38 percent of investors said they expect venture funds to “exceed” their benchmarks in 2025, up from just 19 percent in our prior survey. Also, just 19 percent predicted VC funds would “fall below” their benchmarks in 2025, a significant improvement from 31 percent in the prior poll. The largest portion of LPs (44 percent) expect VC funds to “meet” their benchmarks, down from 50 percent previously.
Correction: The six paragraph story has been rewritten. We incorrectly reported that the New Mexico State Investment Council voted to increase its allocation to venture capital. The Council has tabled a vote on the proposal until it reviews its PE investment policy.
