Post Written by Vasily Alekseenko

The venture capital market is facing a significant downturn. Octopus Ventures recently laid off 16% of its investment team after failing to meet its fundraising target, closing at £100m instead of the £300m they aimed for. Similarly, Stride VC announced a few months earlier that they won’t be raising their next fund. These events signal serious challenges not just for European VCs but globally as well.

Limited Partners (LPs), who typically invest about 5% of their assets into the venture sector, are shifting their money into safer investments like bonds and real estate. This shift is a continuation of the VC market downturn that began in 2022, pushing down startup valuations and increasing investor expectations, especially for Series A and later-stage companies. Fundraises are smaller, and the gaps between them are longer.

It's a tough market correction. Last year, high-valuation startups were hit hard; this year, it's affecting VCs. However, early-stage startups (pre-seed/seed), especially those backed by angel investors, seem less impacted. The upcoming elections in the UK and the US might shift dynamics, but the outcomes are yet to be seen.

Despite these challenges, there are positive developments. Launchbay Capital recently announced closing a £100m fund focused on late-stage Series A investments and bridge rounds.

Interestingly, a substantial portion of the raised VC funds in the US came from a single fund. A16z (Andreessen Horowitz) accounted for 80% of all LP funding in Q1 2024, highlighting a significant concentration of investment power in a few hands​.

Additionally, global PE and VC funding slowed in the first half of 2024, with a notable increase in secondary deals. This trend indicates a market adapting to new realities, seeking liquidity, and looking for exits in alternative ways​.

In conclusion, even though the VC market is hitting some tough spots, this shake-up might actually be a good thing in the long run. We're likely to see better quality startups and stronger VCs coming out of this. It's like the market is doing a bit of self-care, which should lead to a healthier and more sustainable investment scene.

So, while things might be rocky now, there's some good stuff on the horizon. Keep your chin up and keep pushing!

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