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Unless you’re among a handful of high-flying AI companies, the startup-funding market remains a difficult place.
PitchBook’s analysts took stock of where some of their already-subdued expectations for 2024 stand halfway through the year in a new report. They found that “sticky” inflation, which led the Federal Reserve to pause interest rate drops, put a damper on exits and fundraising, along with high interest rates and geopolitical tensions.
With $20.4 billion in open funds tracked so far this year and some “lags in data collection,” PitchBook now forecasts a total venture capital haul for 2024 of $79.3 billion—with a downside estimate of $58.8 billion and an upside of $92.1 billion. That middle stat would put 2024 slightly below last year’s total of $84.7 billion, and at less than half of the stratospheric highs of 2021 and 2022 ($175 billion and $191 billion, respectively).
“Expectations for the turnaround in the VC market entering 2024 were not especially high,” analysts wrote in the report. “Through the first six months of 2024, inflation continued to be sticky, interest rates remained at the high level they ended 2023 with, and geopolitical events kept a haze on the horizon.”
IP-no: PitchBook previously predicted a rebound in the IPO market as inflation eased and economic growth strengthened toward the end of 2023. Halfway through the year, that forecast doesn’t appear to have panned out, as inflation remained stubbornly high.
Analysts are walking back expectations for the rest of 2024:
“It would be difficult to say the IPO market has reopened or even to call the activity in H1 a slight opening of a window,” the authors wrote. “The outlook for IPOs over the second half of the year is not sterling. While there should be several more name-brand listings, the likelihood of a surge in listings is low.”
Fundraise malaise: Amid some of the lowest returns for investors since 2009, VC funds are struggling to raise money, PitchBook said. During Q1, the average fund size hit its lowest level since 2017. While that’s changed in Q2 thanks to some high-profile raises from the likes of Andreessen Horowitz and Norwest Venture Partners, the number of funds that have closed—just 181—is on track for its lowest total in a decade.
“The true narrative of the fundraising market is not the average size of funds but the difficulties raising from LPs because of the poor exits and low distributions,” the analysts wrote.
