As the value of startup exits craters, poor liquidity may be harming VCs’ ability to raise capital
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Is the liquidity crunch caused by the slow pace of startup exits hurting fundraising for venture capitalists?
Recent data on the second quarter makes that a somewhat easy theory to support, given that fewer startups are being bought out or going public, and VCs are raising new capital at a slower pace than in the past five years or more.
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According to first-look data from PitchBook, venture capitalists in the U.S. raised $33.3 billion through the end of Q2 2023. That figure pales in comparison to records set in 2021 and 2022, when venture investors raised more than $160 billion each year. If the pace set in Q1 2023 persists, the $66.6 billion that VCs would raise this year would be about 60% less than the peak levels we’ve seen in recent years.
At the same time, startup exits in the U.S. have cratered. In 2017, the U.S. had just over $100 billion worth of startup exits, per PitchBook. That number rose by a fourth or so to $128 billion in 2018.
Then things got hot: Startup exits reached nearly $250 billion in 2020 and a staggering $777.2 billion in 2021.
That last figure is such a massive outlier, we may not see it again for some time.
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