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Posted May 16, 2023

Venture funds want to raise capital, but will fewer exits trip things up?

State of Venture Capital Survey Blog hero 2

Uncertainty and volatility in the venture capital (VC) space have thrown many portfolios akimbo over the last year. The collapse of Silicon Valley Bank in early March shook the industry and shined a brighter-than-ever light on the space. Though swift intervention by the FDIC meant worst-case scenarios have been avoided, the jarring headlines will likely have an ongoing ripple effect on the VC community for the rest of the year.

Juniper Square ran a survey to go beyond the headlines, collecting responses from nearly 100 venture fund professionals about their concerns, plans, and focus areas for the rest of the year. The rapid growth of the last decade may be over, but as one GP claimed, “Venture is a long game. It's not for financial wizards but for company builders.”

Our survey found that:

63% of VC firms plan to raise capital this year.

But 66% also believe the process will be more difficult than in the past. 66% of respondents said LP sentiment is driving the slowdown in fundraising this year.

45% of respondents reported that their LPs are pressuring them to find exit strategies for the portfolio.

With only $73B in exit value achieved across 2022, LPs are pushing their GPs to turn DPI into TVPI. GPs and CEOs are reluctant to sell companies for the new benchmarks that acquirers want to pay, yet portfolios need some resolution before the funds’ lives end.

53% of respondents said they plan to improve their portfolio monitoring, and 40% wanted to invest in better LP reporting.

LPs often expect timely insights from GPs into how market-moving events impact their investments. It’s not surprising, then, that VC GPs would be looking for better ways to facilitate the flow of information between them and their investors.

Despite the many headwinds they face, respondents seemed relatively optimistic about their ability to raise capital this year. Above all else, VCs are focused on doing new deals. As one said, “As soon as there's clarity on rates and inflation, expect rapid rebounding and dry powder to be shot out at a rapid pace.”