TLDR:
- Carta has shared the VC Fund Performance for Q1 2024, analyzing benchmarks for more than 1800 funds across six recent vintages.
- There has been upheaval in venture capital markets since interest rates began to rise in early 2022, leading to slowed fundraising and scarce liquidity.
The venture capital markets have experienced significant upheaval since interest rates began to rise in 2022, according to a report by Carta. The report analyzed benchmarks for more than 1800 funds across six recent vintages, highlighting key trends and challenges in the industry.
One of the major impacts of rising interest rates has been slowed fundraising and scarce liquidity in the market. This has led to a decline in capital deployment, with funds in the 2022 vintage deploying only about 43% of their committed capital at the 24-month mark, the lowest share of any analyzed vintage.
Furthermore, graduation rates for startups have declined, with only 15.4% of seed startups in Q1 2022 making it to Series A within two years, compared to 30.6% in Q1 2018. Distributions back to Limited Partners (LPs) remain elusive, with less than 10% of 2021 funds having any Distributed to Paid-In (DPI) after three years.
The report also highlights the distribution of funds by size, with a majority of funds receiving less than $25 million in capital commitments. The report suggests that better data, especially for small funds, could help fund managers make a case for a greater allotment of LP cash in the current competitive landscape.
Overall, the report provides valuable insights into the performance and challenges facing venture capital markets in the current environment of rising interest rates and increased competition for limited partner dollars.
