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Posted Apr 10, 2024

The state of venture capital: A look back at Q1 2024

Eugene Tetlow

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Hope springs eternal among venture professionals, but with the latest data from Pitchbook showing “there’s plenty of unease in the air” (even with recent IPOs buoying the industry), many are left feeling like Q1 2024 was another quarter of one step forward, two steps back.

Here’s where the venture industry finds itself as we look back on the first three months of 2024:

IPO activity

In Q1 2024, the venture capital landscape witnessed a resurgence in successful IPO activity after a period of stagnation. Notably, Astera Labs and Reddit achieved successful IPOs, with Reddit pricing at the top of its target range and Astera Labs exceeding its target range. The market is now eagerly anticipating the post-IPO performance of these companies, particularly in light of the lackluster performance of previous IPOs, such as Instacart and Klaviyo, in September 2023. Rubrik is next in line.

Exit value & trends

Q1 VC Exits

On the back of the Reddit and Astera Labs IPOs, Q1 saw a 77% increase in exit value compared to Q4 2023, marking a positive shift. However, it’s important to note that the exit value of $18.4B in Q1 was still well below the $269.2B peak in Q2 2021.

Fundraising landscape

Q1 New Funds State of VC REVISED

Despite the uptick in exit value, the fundraising landscape remains challenging. Q1 saw the establishment of only 100 new venture capital funds, barely above the decade-low figure of 99 from Q1 of 2023. This number is also less than half the record high set in Q2 2022, suggesting ongoing difficulties in attracting capital into the VC space.

Capital raised

Q1 VC Capital Raised

The amount of capital raised by these 100 funds was a decade low at $9.3B. To put this in perspective, the number reported in the first quarter of 2022 was $77.8B. If (and we expect this to be the case) we see more IPOs and successful exits in the coming quarters, capital should be freed up and available to reinvest, hopefully seeing this number creep back up. However, as discussed in previous quarterly updates, venture capital funds are facing much stiffer competition from other asset classes, so it will be interesting to see how much of the capital is actually reinvested into the venture space.

In conclusion

All eyes are on the IPO market in 2024. As the total number of funds and the amount raised by these funds remains at recent lows, the industry hopes that distributions back to LPs will see fresh investment in new managers. If this proves to be true, 2024 could be a bounce-back year. On the other hand, if 2024 follows the trends set in Q1 we will be facing another year of contraction in the venture capital fund space.

Go beyond the numbers with a more nuanced look at the state of venture capital. Our most recent webinar brings Juniper Square’s Eugene Tetlow together with Jeff Bloom, Counsel & Operating Advisor at Gunderson Dettmer; Kelli Fontaine, Partner at Cendana Capital; and Sean Park, Managing Director at Citizens Private Bank, for a discussion about the state of VC in 2024. Watch now→