Pilot‘s CFO Services team recently published their Q1 Market update on the Venture Capital landscape.
Their main takeaways are as follows:
- Deal activity in Q1 remained roughly flat QoQ, but varied by segment: pre-seed and seed-stage saw notable declines while late-stage saw moderate increases, with early-stage somewhere in the middle.
- Down rounds and pay-to-play provisions are becoming increasingly common, while liquidation preferences have not changed.
- Exit activity from M&A is the slowest it has been in a decade and trending downwards, while a handful of successful IPOs trickle out (Reddit / Astera Labs).
- VC fundraising is at its lowest levels since 2014 and continues to decline, while dry powder remains elevated.
As stated in the comprehensive research report from Pilot, venture capital fundraising continues to be very weak “with a total $9.3 billion committed to 100 funds in the Q1. To put that into context, the quarterly average for 2023 was $21 billion, which itself was a 57% discount to 2022’s quarterly average of $47 billion.”
On a run-rate basis, Q1’s fundraising figures are “the lowest since Pitchbook’s data began in 2014.”
Despite lackluster fundraising activity, Pilot’s report pointed out that dry powder “continues to grow to its highest levels on record totaling $311.6 billion.”
The historically low levels of “new fundraising suggests that the existing dry powder may be deployed over a much longer period than in previous years.”
The report from Pilot also mentioned that total exit value “rose nearly 81% to $18.4 billion in Q1, up from $10.4 billion in the prior quarter. While the exit value did represent a marked improvement from the previous quarter, it was heavily skewed by two large IPO exits – Reddit ($6.5bn) and Astera Labs ($5.0bn).”
Exit activity from M&A continues to be very low, “totaling just $6 billion in Q1 2024, lower than the quarterly average for 2023.”
The Pilot update further noted that FTC continues “its aggressive stance on M&A—particularly as it relates to Big Tech—and recently launched an investigation into specific investments by companies such as Alphabet, Amazon, and Microsoft in leading AI startups like OpenAI and Anthropic.”