As the value of startup exits craters, poor liquidity may be harming VCs’ ability to raise capital

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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