#42 VC's in 2023: No Rush to Deploy $300B of Dry Powder

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VC’s Moving Slowly in 2023

We’ve spoken with >100 VC’s and fund finance professionals so far in 2023. The big takeaway is that VC’s are moving slow. After the breakneck speed of the last few years, many fund managers are in wait-and-see mode right now.

In his most recent article on , Chris Harvey wrote the following about the industry’s three key players:

  1. Founders are seeking funding before capital dries up

  2. VCs are sitting on a $300B powder keg, hesitant to draw down capital

  3. LPs want to preserve their cash to invest in high-yield assets with less risk

In 2023, with interest rates going up, incentives are diverging, as Maren Bannon notes:

Venture Capital: $300B Raised vs. Non-Existent Exit Environment

Over the last decade, a record amount of venture capital was raised and deployed. Venture capital funds are still sitting on $300b of dry powder but are in no rush to deploy it into companies right now as interest rates have risen.

Ultimately, venture capital funds need their companies to find a path to liquidity for their investors at some point in time (typically 5-10 years after an investment in a company).

Currently, VC’s are moving slowly because exits are just not happening - they dropped of a cliff in 2022 and don’t look like they’re coming back until broader macro calms down, likely in late 2023 or 2024.

We expect the slower pace to continue in 2023. Stay tuned.

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