“God, it’s brutal out here,” as Olivia Rodrigo would say.
I’m barely being facetious: Data pretty clearly suggests that, for lots of fundraising VCs right now, it is brutal out here. But there are nuances to this, as illustrated in PitchBook’s just-published mid-year update to its 2024 U.S. Venture Capital Outlook.
The report paints a picture of an industry bifurcated between the haves and the have-nots. If you’re a major, well-established firm, there’s a good chance you can fundraise pretty successfully right now. But if you’re a newer, smaller firm, odds are that it’s a struggle.
Average fund size this year is already bigger than last, hitting $153.5 million, as compared to $149.4 million in 2023. That’s because a number of major firms have closed funds well into the billions, from Andreessen Horowitz to Norwest Venture Partners. (Of the total VC dollars raised in Q1, a16z’s $7.2 billion raise accounted for a remarkable 80% of the total raised in Q1.)
But these well-established names aren’t necessarily representative of the overall sector, in which smaller, newer VCs are struggling to close funds. At the time PitchBook pulled this data, 181 funds had been closed in 2024, putting this year on pace for the lowest total in a decade, PitchBook says.
One more stat to drive home this bifurcation: General Catalyst is reportedly set to close a $6 billion fund, and if they close in time for the end of Q2, “established managers will have raised more in the first six months of this slow fundraising year than emerging managers have in total over the past 18 months,” PitchBook says.
That’s not to say everything is peachy, even if you’re at a well-established firm. Exits remain a touchy subject, and it’s hard to blame LPs for getting antsy: According to PitchBook’s report, the rate of distributions returned to LPs hasn’t been this low since 2009.
And valuations are tricky right now: AI valuations are high while ZIRP-era valuations aren’t necessarily holding. Down rounds, for example, in Q1 2024 reached their highest level since 2014, representing 17% of VC deals in that quarter. And then there’s this reality check: In Q1 of this year, flat and down rounds as a portion of VC deals hit 27.4%—a sobering decade-high.
Nevertheless, time marches on, and even sectors that have fallen out of favor are still growing. Within fintech, for instance, embedded finance is barrelling forward and by 2030 is set to become a $320 billion market.
Alright, now that I’ve laid out the data, it’s time to come clean: Olivia Rodrigo’s 2021 hit “Brutal” isn’t about VC and startups. A shock, I know—the song’s about the agonizing in-betweenness of adolescence: “Ego crush is so severe/God, it’s brutal out here.”
A piece of searing songwriting can apply to all sorts of things. So, okay, Rodrigo did make me think about VCs who aren’t at the top of the long-established, name-brand heap right now. Many are probably going through a business adolescence, complete with existential growing pains. Because, gosh, if you started a fund in the midst of the 2021 boom, the ego crush has got to be severe.
And much like adolescence, the only way out is through.
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Etched, a San Francisco-based AI chipmaker, raised $120 million in funding. Primary Venture Partners and Positive Sum Ventures led the round and were joined by Hummingbird, Fundomo, Fontinalis, Lightscape, Earthshot, and others.
- Fetcherr, a Tel Aviv, Israel-based generative AI pricing, inventory, and publishing engine, raised $90 million in Series B funding. Battery Ventures led the round and was joined by existing investors.
- Exsilio Therapeutics, a Boston, Mass.-based developer of genomic medicines, raised $82 million in Series A funding. Novartis Venture Fund and Delos Capital led the round and were joined by OrbiMed, Insight Partners, J.P. Morgan Life Sciences Private Capital, CRISPR Therapeutics, and others.
- Prewave, a Vienna, Austria-based sustainability, risk, and compliance platform for supply chains, raised $67 million in Series B funding. Hedosophia led the round and was joined by existing investors Creandum, Ventech, Kompas, Speedinvest, and Working Capital Fund.
- k-ID, a Singapore-based youth compliance platform for online games, raised $45 million in Series A funding. a16z led the round and was joined by Lightspeed Venture Partners, Konvoy, and others.
- TechWolf, a Ghent, Belgium-based generator of enterprise skill data, raised $43 million in Series B funding. Felix Capital led the round and was joined by SAP, ServiceNow Ventures, Workday Ventures, and others.
- Conduit, a San Francisco-based blockchain application launch platform, raised $37 million in Series A funding. Paradigm and Huan Ventures led the round and were joined by Robot Ventures, Credibly Neutral, Coinbase Ventures, and Bankless Ventures.
- Formic Technologies, a Woodridge, Ill.-based supplier of manufacturing robots, raised $27.4 million in Series A funding. Blackhorn Ventures led the round and was joined by Mitsubishi HC Capital America, NEC and Translink Orchestrating Future Fund, Alumni Ventures, FJ Labs, and others.
- Norm Ai, a New York City-based regulatory AI platform, raised $27 million in Series A funding. Coatue led the round and was joined by Bain Capital Ventures, Blackstone, New York Life Ventures, Citi Ventures, and others.
- LiveEO, a Berlin, Germany-based company that uses satellite and AI data to detect climate risks to critical infrastructure, raised €25 million ($26.8 million) in Series B funding. NordicNinja and German DeepTech & Climate Fonds led the round and were joined by others.
- Deskpro, an Austin, Texas-based developer of help desk software, raised $25 million in Series A funding from Elsewhere Partners.
- Hero Bread, a San Francisco-based healthy baked goods company, raised $21 million in funding. Cleveland Avenue, DNS Capital, and Composite Ventures led the round and were joined by Greatpoint Ventures.
- Payabli, a Miami, Fla.-based platform designed to help developers integrate payments infrastructure into their software, raised $20 million in Series A funding. QED Investors led the round and was joined by existing investors TTV Capital, Fika Ventures, and Bling Capital.
- Climate X, a London, U.K.-based platform designed to analyze climate risks to the value of physical assets, raised $18 million in Series A funding. GV (Google Ventures) led the round and was joined by Pale blue dot, CommerzVentures, A/O, Blue Wire Capital, PT1, and others.
- COMPREDICT, a Darmstadt, Germany-based developer of virtual sensors designed to collect car mobility data, raised $15 million in Series B funding. Woven Capital led the round and was joined by Shift4Good.
- Travertine Technologies, a Boulder, Colo.-based company designed to help critical element producers remove environmental waste and carbon emissions from their processes, raised $8.5 million in funding from Holcim MAQER Ventures, the Grantham Foundation for the Protection of the Environment, Clean Energy Ventures, and Bidra Innovation Ventures.
- Daytona, a New York City-based open-source development environment manager, raised $5 million in seed funding. Upfront Ventures led the round and was joined by 500 EE.
PRIVATE EQUITY
- Flexpoint Ford led a $165 million investment in Create Music Group, a Hollywood, Calif.-based music and entertainment company.
- Engelman’s Bakery, a portfolio company of Shoreline Equity Partners, acquired St. Armands Baking Company, a Bradenton, Fla.-based bakery company. Financial terms were not disclosed.
- ToxStrategies, a portfolio company of Renovus Capital Partners, acquired Clintrex Research Corporation, a Sarasota, Fla.-based clinical research company. Financial terms were not disclosed.
EXITS
- eHouse, backed by Periscope Equity, acquired VL OMNI, an Ontario, Canada-based e-commerce integration platform. Financial terms were not disclosed.
- Precision Pulley & Idler acquired Continental Global Material Handling, a Winfield, Ala.-based manufacturer of conveyor equipment, from Stellex Capital Management. Financial terms were not disclosed.
- Rivean Capital agreed to acquire Intero Integrity Services, a Tricht, Netherlands-based critical infrastructure inspector, from First Reserve. Financial terms were not disclosed.
- SCI Flooring, a portfolio company of Rainier Partners, acquired Carpetbaggers, an Indianapolis, Ind.-based provider of flooring installation services. Financial terms were not disclosed.
OTHER
- JFrog (NASDAQ: FROG) agreed to acquire Qwak AI, a New York City-based platform designed for building and managing AI workflows. Financial terms were not disclosed.
IPOS
- TWFG, a The Woodlands, Texas-based personal and commercial insurance company, filed to go public on the Nasdaq. The company posted $179 million in revenue for the year ending March 31, 2024. Bunch Family Holdings and RenaissanceRE Ventures back the company.
FUNDS + FUNDS OF FUNDS
- Elsewhere Partners, an Austin, Texas-based private equity firm, raised $285 million for their third fund focused on B2B software companies.
- MiddleGame Ventures, a Luxembourg-based venture capital firm, raised €150 million ($160.4 million) for their third fund focused on fintech companies.
PEOPLE
- Cohen Circle, a New York City-based venture capital firm, hired Katelyn Johnson as a managing partner. Formerly, she was with American Family Ventures.
