Venture Capital Q3 2024: Preqin Quarterly Update
by Ollie Keyser, Senior Associate at Preqin. | Originally published on Preqin.
Guest post by Ollie Keyser, Senior Associate at Preqin. | Originally published on Preqin.
Global venture capital fundraising falls to $26bn in third quarter but Fed rate cut to provide tailwind in fourth.
The report highlights that global venture capital fundraising fell from $30bn by 272 funds at final close in Q2 2024, to $26bn by 240 funds at final close in Q3 2024. The pace of exits means less capital is available to be distributed back to investors and redeployed back into the asset class. There were 201 venture capital exits aggregately valued at $19bn in Q3 2024, which is trending at a five-year low. Most exits (102) were in North America, worth $12.9bn.
However, as Michael Patterson, lead author of the report notes, the Federal Reserve’s 50bps interest rate cut in September should be a tailwind for venture capital in Q4 2024.
Key report facts:
Lower exits in tech and healthcare sectors: The fall in venture capital exits in Q3 2024 was driven by lower volumes in the tech and healthcare sectors, falling to 111 and 28 from 126 and 46, respectively, in Q2 2024.
Venture capital deals: Venture capital deal* volume from Q2 2024 to Q3 2024 for North America fell by 25% from 1,456 to 1,097, and aggregate deal value by 27% from $37.7bn to $27.5bn. For Europe, aggregate deal volume in Europe was down by 25% from 907 to 621 and aggregate deal value decreased by 27% from $12.3bn to $8.5bn.
Funds in market and capital targeted maintains growth: As of the end of Q3 2024, there were 7,216 venture capital funds in market, targeting $484bn. This has consistently grown since 2021, where 2,469 funds were targeting $206bn.
Michael Patterson, Senior Associate, Research Insights at Preqin says:
“Performance of the more recent vintages has not changed much since our analysis in the second quarter of 2024; the median net internal rate of return for 2021 remains significantly below target returns, at 2.3%.
Challenges remain for the 2021 vintage as declines in asset valuations in 2021 and 2022 are reflected in its performance. That said, the recent Fed cut, signaling a shift to a downward trend in rates, should be a tailwind to valuations in venture capital.”
