Better Days for VC Fundraising Are Likely to Require a Wait

The pension funds, endowments and other financiers that bankroll venture-capital dealmakers are eager to get cash back from their investments. They might need to wait another year.

- YULIYA CHERNOVA

Limited partners are expecting another dry year, despite renewed optimism for a rise in public listings and acquisitions. Less money on hand would also result in less willingness by LPs to commit to new venture funds. In such a scenario, funds would likely continue deploying capital into startups at a sluggish pace.

Global fundraising by venture firms is trending toward about $101 billion in 2024, slightly below last year's totals, and a steep drop from the levels in 2020 and 2021, according to research firm Preqin. Fundraising will likely stay roughly flat in 2025, per Preqin's forecast.

"It may take until the end of 2025-and most likely into 2026-before optimism from investors converts into greater commitments" to venture funds, Preqin analysts wrote in a recent report.

Research-and-investment firm Cambridge Associates echoed the prediction. "We anticipate a more modest fundraising pace, similar to 2023 and 2024" in the coming year, said Theresa Hajer, head of U.S. venture capital research at Cambridge Associates. "It will continue to be very difficult for new managers," she added.

The main reason for such cautious predictions is that LPs have been struggling with a lack of distributions, while managing previous commitments to venture capital made in the peak market years, around 2020 and 2021.