#213 State of VC & Impact on DPI / Fund Models

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Key Takeaways from The State of Venture 2024

AngelList recently released its “The State of Venture 2024” report - it’s a must read! It provides a detailed look into venture performance throughout 2024, providing actionable data and analysis for VC GPs, LPs, and founders.

Our friend Chris Harvey shared his five key takeaways from this report in this LinkedIn post, which are summarized below:

1.The Vintage DPI Crisis

• 2017 vintage: 3.57x TVPI but only a 0.29x DPI (median)

• 2021-2023 vintages: zero distributions (0.02x DPI, 75th percentile)

• LPs are stuck in a liquidity crunch with no recycled capital for reinvestment

Takeaway: Early AngelList vintages (pre-2020) massively outperformed—2017's 75th percentile TVPI hit 6.35x! But more recent vintages are not…

2.Cash Distribution Drought Hits LP Pockets

• LP cash-to-total value ratio dropped from 16% in 2019 to 11% in 2025—paper-rich, cash-poor.

• 89% of fund value is unrealized gains, liquidity is locked up

• $124B is platform assets are fueling a growing secondary market.

Takeaway: LPs are hungry for exits—emerging managers could explore secondary opportunities or structured liquidity solutions to take money off the table.

3.AI Dominates 32% of Seed Deals

• 32% of all seed-stage investments in 2024 carried an "AI" label

• AI startup seed valuations: $22M (+20%) vs. $18M for non-AI startups

• $22M—The Median AI Startup Seed Valuation (+20%)

Takeaway: AI is hot, but hype ≠ quality. Smart GPs are differentiating real innovation from opportunistic labeling; many startups rebranded as AI for existing models—due diligence & tech awareness are keys to avoid pitfalls

4.Seed Valuations Hit $20M Pre-Money

2024 Medians:

• Pre-seed: $5-10M

• Seed: $20M (+17% YoY)

• Series A: $62.5M (+27%)

• Series B: $170M (+51%)

Takeaway: Because valuations are sticky in early-stages and jumping in Series A and B, we're seeing a lot more venture studios, incubator programs. Also, we're seeing more targeted micro funds going after inception capital investments (the big VC firms/GPs who are backing these funds are playing along).

5.What to Watch for 2025

The combination of $124 billion in platform assets and a potentially open IPO market could reshape liquidity dynamics.

𝗕𝗼𝘁𝘁𝗼𝗺 𝗟𝗶𝗻𝗲: Success in 2025 means balancing LP liquidity needs (distributions to LPs) with long-term value creation.

Here is the link to The State of Venture 2024 PDF. Final thoughts:

• Liquidity bottlenecks are creating pressure, with LPs increasingly seeking cash distributions.

• Valuation overhangs are evident, as rising valuations from pre-seed to Series B reshape market dynamics.

• Secondary market exploration is on the rise as LPs search for liquidity solutions.

• AI investments continue to dominate the early-stage scene, despite concerns about overhyped innovation.

• Looking ahead, balancing LP liquidity demands with sustainable value creation will be crucial for long-term success.

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Understanding DPI & What It Means for Investors

Understanding DPI is essential venture capital funds. DPI measures how much capital has been returned to investors relative to the amount they contributed. Accurate modeling of DPI helps fund managers set realistic expectations and build stronger relationships with their LPs. Our friends at Sydecar recently released the following chart and detail:

A DPI greater than 1 indicates that the fund has returned more to LPs than was invested, showcasing positive returns. For example, a DPI of 1.4 means LPs have received $1.40 for every dollar they invested. Conversely, a DPI below 1 suggests that the fund has yet to distribute all the capital invested, often due to unrealized gains or the fund being in its earlier stages.

Why DPI Matters to LPs (Sydecar’s Full Post)

For LPs, DPI is a reliable measure of:

• Liquidity: It indicates how effectively a fund is generating cash returns.

• Performance: As a cash-based metric, DPI accounts for actual distributions, providing a clear picture of realized returns.

Related to DPI, here are a few links to prior posts we’ve written on fund modeling and specifically DPI:

• Venture Capital DPI: When Does It Really Matter?

• #189 VC Monitor Report Deep Dive (Q3'24) & Exit Predictions (DPI)

• #181 My VC "Rule of 50", Ownership, Fund Model Impacts

• #175 VC DPI in Yr 5 - What Does It Mean?

• #93 VC DPI & Power Laws - What They Mean Today

• #2 VC Fund Model (Back to Basics)

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Dive Deeper: Link to Top Premium Content on DPI

Here’s a link to some of our top premium content related to DPI. If you want to dive deeper into fund modeling, DPI strategies, and other premium content tailored to venture capital and finance professionals, feel free to message me!