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In Q1 2023, global investors raised $210.8B worth of private capital funds, including PE, VC, real estate, debt, secondaries, and fund of funds. Private capital fundraising had already dipped below 2021's record-setting totals in 2022, ending the year $318.8B lower than the previous year's tally. The trend has continued this year. So far this year, both fund count and value are trailing behind 2022's totals from the same quarter. The data suggests that private capital fundraising will continue to trail behind, considering the global economic conditions, which have not improved significantly since last year. VC fundraising reached record totals in 2022, with the year ending with 52 mega funds worth more than $1B. This year the situation is different, as even VC funds are finding it difficult to raise fresh funds from limited partners. As a result, VC funds share of the total private capital funds slumped to 14% in Q1 2023, down from 22.6% in 2022. VC share of private capital fundraising reached its peak of 25.6% in 2018. PE funds continue to rake in the maximum share of the funding, corresponding to 46.1% of the entire private capital raised in Q1 2023. The 12-month rolling VC fundraising activity shows that fundraising came in nearly closer to 2018 levels in the first quarter of this year. Meanwhile, the 12-month rolling fund count plummeted to levels seen in late-2014. VC fund managers have to contend with a challenging fundraising environment in 2023. Even established fund managers are now having difficulty raising new funds as LPs become more conservative with capital allocation due to the drop in public markets. Fundraising challenges have amplified for emerging fund managers, which already faced significant headwinds last year. The share of funds raised by emerging managers dropped by 12% between 2022 and 2023 compared to 2008 and 2021. LPs have curbed their capital deployment due to a frozen exit environment, making it impossible for them to realize gains on existing investments, which would generate cash for future commitments. Several fund managers have postponed their fundraising to next year, hoping the fundraising landscape would be supportive by then. Due to the combination of factors, including lack of exit opportunities, volatility in public markets, slumping valuations, and economic instability, the quarterly VC fundraising total in the first three months of this year dropped 72% YoY to $29.5B. Asian venture funds raked in nearly half of the global funds raised in Q1. Three of the top 10 largest VC funds closed in the quarter were domiciled in China. North American VCs accounted for 52% of the fund count, indicating their robust fundraising ecosystem. Despite the grim current fundraising climate, global VCs already had $548.4B dry powder available for deployment, which should come in handy when they eventually decide to resume their normal pace of investing.
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