The Future of Fundraising in the VC Market: What Founders Need to Know

Founders all over the world are concerned about the current state of the fundraising market. With funding down and the amount of money raised considerably lower than previous years, there is a sense of uncertainty among startups trying to secure new capital. And while many hope that things will return to normal, the past two years have shown us that normal no longer exists. As such, it is important for founders to understand what the fundraising market may look like in the years ahead and what they can do to prepare.

According to Pitchbook Data, there are a number of factors contributing to the current state of the VC market. One of the main issues is a lack of liquidity in late-stage funding rounds, preventing capital from being recycled back into newer funds. Additionally, there is a growing skepticism among LPs about the prices paid by GPs during the 2020/2021 time period. As a result, many are becoming more hesitant to invest, further exacerbating the fundraising problem.

However, the most concerning aspect of the current state of affairs is what the future holds for the fundraising market. Pitchbook Data indicates that there will likely be a last in, first out (LIFO) mentality with venture capital in the years ahead. This means that investors who came in during the good times will be the first to leave when things get rough. This could have a significant impact on startups seeking new capital, as investors may be less willing to take risks and invest in new ideas.

Another factor to consider is the potential decrease in the number of new funds and emerging managers. As LPs become more skeptical and funding becomes more difficult to secure, there may be fewer new funds entering the market. This could be particularly challenging for startups, as emerging managers often provide unique opportunities for investment.

If we take a closer look at the data, we can see that the amount of capital raised by subscale funds in Q1 of 2023 is considerably lower than previous years. This suggests that the fundraising market may be experiencing a significant downturn, one that could have long-lasting impacts on the VC industry as a whole.

It is important for founders to realize that venture capital is a market. There is a price for anything. A down round is better than no round. If there is 0 interest from your existing or new investors then your business probably just sucks and its time you realized that and you can move on.

In short, the future of the fundraising market is uncertain, and there may be challenges ahead for startups seeking new capital. However, founders should not lose hope. By staying informed about trends in the VC industry and being realistic, startups can continue to grow and thrive in even the most challenging environments. As we look towards the future, it's important to remember that while the fundraising market may change, the opportunities for innovation and growth in the startup world will always be present.