Preqin, the global firm focused on alternative assets data, tools, and insights, released its Preqin 2025 Global Report: Venture Capital.
The research report shows that venture capital assets under management (AUM) reached “$3.1tn by Q1 2024, the latest data available.”
Asia-Pacific (APAC) accounted for “$1.6tn, followed by North America at $1.1tn, and Europe at $0.2tn.”
The higher interest rate environment continued to temper venture capital valuations in 2024, which “impacted exits and overall performance.”
By Q3 2024, venture capital exits totaled 852 with an “aggregate value of $112bn, continuing the downward trend from 2023 when there were 1,969 exits aggregately valued at $270bn.”
The APAC region saw the largest drop, with exit volume down from 389 to 142 and value down from “$38.2bn to $20.6bn, respectively, in 2023 to 2024 by Q3.”
North America recorded a reduction in volume and value of exits in 2024, from “580 to 403, and $78.5bn to $69.8bn, respectively, in 2023 to 2024 by Q3.”
Looking ahead, almost two-thirds (62%) of surveyed venture capital fund managers expect exits to “increase in the next 12 months, up from 40% in the 2023 survey.”
Fewer and less profitable exits resulted in less capital being “distributed to venture capital investors, which negatively impacted fundraising.”
By Q3 2024, 800 funds raised a total of “$84.8bn, compared to 1,645 funds raising $135.9bn in 2023.”
Notably, capital gravitated towards larger funds during 2024.
This was due to the decrease in the number of new managers who “tend to raise smaller funds coming to market.”
First-time managers raised $4.6bn across 106 funds (at final close) by Q3 2024, with their aggregate fundraising “value down 77% year-on-year from $20.1bn in 2023.”
The share of venture capital being raised by first-time managers, as a proportion of the total, stands “at 5% – the lowest since Preqin’s records began in 2001.”
Cameron Joyce, Global Head of Research Insights, at Preqin, says:
“The outlook for venture capital is better going into 2025. Falling rates in the US may prompt an improvement in performance and exits. We expect early-stage venture capital to be better positioned than later stages over the coming year. Nonetheless, venture capital remains the best method for investors looking to gain exposure to innovation and technological disruption.”
Key findings from the Preqin Global Report 2025: Venture Capital include:
- Deal activity: By Q3 2024, 14,056 venture capital deals had an aggregate value of $201bn. This trend suggests 2024 will underperform 2023 in terms of value and volume. Information technology (IT) and healthcare typically account for the majority of venture capital deal flow and the same is true so far this year. IT was at $90.2bn by Q3 2024 compared to $127.3bn for 2023, and healthcare was at $37.8bn by Q3 2024, against $48.8bn in 2023.
- Performance by strategy: Horizon internal rate of returns (IRRs) for late-stage/expansion strategies underperformed early-stage by 3% (12% versus 15%) over the past ten years to Q3 2024. Late-stage strategies faced headwinds recently, including the difficult exit market, leading to a 5% drop in IRR over the 12 months to Q1 2024.
- Management fees continue to rise: Venture capital often had the highest management fees across all alternative asset classes, and fees were at their highest since 2011 in 2024. The median reached 2.05%, up from 2.00% where it had plateaued since 2012. The mean, which had been hovering around 2.00% since 2019, was up to 2.24%.
Preqin updated its AUM methodology in September 2024.
Preqin investor survey conducted in November 2024, with 255 participants.