The rise and fall of venture finance

The rise and fall of venture finance

While venture capitalists may be pulling back on startup funding, many seem to be redoubling their efforts when it comes to raising more dry powder — at least for now.

In fact, even as venture funding for startups slows, companies that raise investment funds are doing better than ever. Already this year, companies have publicly announced nearly $144 billion in funds raised, according to Crunchbase data. That almost matches the nearly $149 billion announced for the entirety of last year.

Those in the alternative asset advice business say the numbers show a few different things. Fundraising can be a lagging indicator of the market, as well as the fact that the enterprise has proved to be a strong driver of return in recent decades.

Financing up, financing down

However, these high numbers and the many funds raised seem to be in direct contrast to a startup ecosystem where valuations continue to drop, funding is difficult to obtain and layoffs are occurring daily.

Some of the announced fundraising has now started in 2021 – before the market started to drop late last year and well before Russia’s invasion of Ukraine brought it down even further.

The heat of the market in recent years has made VCs very eager to raise funds, with some starting new raises just 18 months after a previous fund closed. This has led to some of the big fund announcements currently in the headlines – which can dry up.

We already see reports from analysts saying that the market has worsened in the last two or three months and that they already consider the year “over” in terms of contribution to funds.

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