#42 VC's in 2023: No Rush to Deploy $300B of Dry Powder
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VCâs Moving Slowly in 2023
Weâve spoken with >100 VCâs and fund finance professionals so far in 2023. The big takeaway is that VCâs 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 industryâs three key players:Founders are seeking funding before capital dries up
VCs are sitting on a $300B powder keg, hesitant to draw down capital
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, VCâs are moving slowly because exits are just not happening - they dropped of a cliff in 2022 and donât look like theyâre coming back until broader macro calms down, likely in late 2023 or 2024.
We expect the slower pace to continue in 2023. Stay tuned.
Additional Resources
#26 Episode - The Three-Body Problem in VC by Chris Harvey
#34 CFO Monthly Monday - January 2023
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