Carta has shared the VC Fund Performance for Q1 2024.
Carta’s inaugural VC fund performance report analyzes benchmarks for more than 1800 funds across six recent vintages.
There has been tremendous upheaval in the venture capital markets “since interest rates began to rise in early 2022,” Carta noted while adding that fundraising has slowed.
Liquidity has become scarce—due “not only to a dearth of IPOs but lackluster M&A as well.”
Carta added that against that backdrop, fund managers have “found themselves in a heightened competition for limited partner dollars across many asset classes.”
So how can fund managers make the case that they “deserve a greater allotment of LP cash? Better data, especially for small funds, might help.”
Carta are pleased to introduce the first VC Fund Performance report, “based on aggregated and anonymized metrics from 1,803 venture funds currently using Carta Fund Administration.”
Carta serves more than 3,000 venture firms “across many categories, so we’ve narrowed this analysis in a few ways to make it more impactful.”
Only U.S. funds are included, and all included funds “are direct venture investors (as opposed to funds of funds). Funds must have been in vintage years 2017 through 2022.”
More detail on their methodology can be found at the end of the report.
Each vintage year includes “at least 120 underlying funds (and far more in most vintages). As such, they believe this analysis represents a dramatic expansion of the public data available for small VC fund performance.”
Carta pointed out that this report includes data from funds “over $100 million, a traditional delineation point between emerging and established managers.”
Slow capital deployment: Funds in the 2022 vintage have “deployed about 43% of their committed capital at the 24 month mark, the lowest share of any analyzed vintage.”
Prior vintages ranged “from 47%-60% after 24 months.”
Graduation rates declining: 30.6% of companies that raised “a seed round in Q1 2018 made it to Series A within two years. Only 15.4% of Q1 2022 seed startups did so in the same timeframe.”
Distributions back to LPs remain elusive: Less than 10% of 2021 funds “have had any DPI after 3 years.”
This report is based on data “from 1,803 venture funds, ranging in vintage year from 2017 to 2022.”
A majority of these funds—about 60%—received “less than $25 million in capital commitments.”
Another 30% of funds “are between $25 million and $100 million in size, while 10% are $100 million or larger.”
This distribution of funds by size “makes intuitive sense.”
Emerging managers may start by “raising a small fund, while far fewer have the sort of track record, industry connections, and firm infrastructure required to raise a fund of $100 million or more.”
Funds under $25 million have a median of 27 LPs
The larger the venture fund, the more LPs it tends to have. But there’s “considerable variation in the size of the LP base of different funds, even funds that are roughly the same size.”
Among the smallest category of funds—those with “less than $25 million in commitments—the median fund closed between 2017 and 2022 had 27 LPs. A fund at the 25th percentile would have 9 LPs, and one at the 75th percentile would have 51.”
Funds with $100 million or more in commitments typically “have far more LPs, but the gap between the 25th percentile (31 LPs) and the 75th percentile (102 LPs) is similarly wide.”
For a venture firm, managing more than “a hundred different LP relationships can be a much larger lift than managing a few dozen. 2022 vintage has deployed 43 percent of capital after 24 months.”
The velocity with which capital deploys “has steadily decreased after peaking with the 2020 fund vintage.”
Cumulative capital deployment percentage “after 24 months (total dollars deployed / dollars raised at point t) dropped from 60% for the 2020 fund vintage to 43% for the 2022 fund vintage.”
This points to a larger trend in “private capital markets – investors are slowing down the pace of investments as the market reset continues.”
To see Carta’s analysis of fund performance metrics—such as IRR, TVPI, and DPI by fund vintage year—you may review the full Q1 2024 Fund Performance report.