Interesting new data being shared by Carta measuring emerging VC benchmarks (report attached and a video of Sapphire Partners and Carta discussing this data is also available online)…
With the rise in interest rates, funding has slowed, coupled with a slowdown in M&A as well as IPOs. Funds have struggled to attract LP (Limited Partner) investments.
The outcome of the presidential election, as well as the Fed’s rate-cutting policies/timings, is expected to have a positive impact on the funding trends below.
Some key takeaways:
- 2022 funds have only deployed 43% of their capital by the 24-month mark (historical averages are in the range of 47-65%).
- IRR (Internal Rate of Return) has steadily declined when comparing 2021-2022 funds to prior years. The IRR for 2021 and 2022 is currently less than zero, compared to 2017-2020 funds which posted 20% returns for 16-31% of funds.
- With the slowdown in funding, the time between funding rounds has lengthened (Seed to Series A is 2 years, Series A to B is 2.5 years), resulting in more bridge rounds and extensions.
- Down rounds have increased (valuations lower than in the previous round); Q1 2024 shows that 23% of funding was in a down round.
- Progression from Seed to Series A has slowed, with 40% of Q3 2020 funds moving to Series A within 24 months, compared to the Q1 2022 cohort where only 15% moved to Series A within 24 months.