Fundraising activity across the venture ecosystem started to slow meaningfully in the second half of 2022, setting the stage for 2023 to be one of the slowest fundraising years of the past decade by the number of funds raised. Nearly $70 billion was raised by venture funds, a decline of 61% compared to 2022 and the lowest amount raised since 2017. Several factors contributed to the sobering fundraising environment, the most notable of which were allocation constraints for limited partners following record fundraising years in 2021 and 2022 and limited liquidity in 2022 and 2023. 

This tough fundraising climate for venture firms resulted in the time to close increasing from an average of 12 months in 2022 to nearly 16 months in 2023. At the same time, the dealmaking side of the business slowed such that managers deployed their funds more deliberately and didn’t come back to market with new funds as quickly. 

According to Pitchbook, the average time between funds rose from 1.8 years in 2022 to 2.5 years in 2023. Limited partners today have the benefit of more time for pipeline planning, relationship development, and due diligence, but are also being more deliberate with their venture allocations. There is, generally speaking, a flight to quality as limited partners place more emphasis on the performance and valuations of underlying portfolio companies, the competitive advantages of venture firms, the size of funds relative to strategies, and firms that exercised some degree of discipline during the frenzied market of 2021.