THE slowdown in exits for venture capital (VC) in 2024 continues to have an impact on the investment life cycle.
VC exits globally have fallen, with Asia-Pacific reporting the largest drop – from 389 for the first three quarters of 2023 to 142 in the same time period in 2024, based on a report by data platform Preqin on Wednesday (Dec 11). Asia-Pacific exit value fell from US$38.2 billion in the first three quarters of 2023 to US$20.6 billion in the corresponding period this year.
The lack of exits means that distributions back to limited partners (LP) have not kept up. There still remains a significant amount of capital in funds older than 2014 that VC general partners need to realise and return to LPs.
Globally, 2024 is shaping up to be the weakest year for exit value since 2017, and the weakest year for exit volumes since 2012.
This has had a domino effect on fundraising, as less capital returning to LPs means less capital ready to be deployed back into VCs via new funds. For the first three quarters of 2024, 800 funds raised US$84.8 billion – a drop from 1,645 funds raising US$135.9 billion in the same period in 2023.
VC assets under management (AUM) for Asia now make up the bulk of the global US$3.1 trillion AUM, accounting for US$1.6 trillion. This is US$500 billion more than the US region’s US$1.1 trillion.
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Exits remain a key concern for both VC fund managers and investors, with 75 per cent of managers and 61 per cent of investors citing it as a concern. Investors still view VC as overvalued, but see it as the least overvalued in the past four years.
Of the VC fund managers polled, 62 per cent expect exits to increase in 2025 – a marked increase from 40 per cent in the 2023 survey. The bulk of VC fund managers polled believe that trade sales will be an exit avenue for 2025, followed by initial public offerings.
Preqin predicts that it could take till 2026 for fundraising to improve, with optimism from investors taking a while to translate to funding commitments. Exits, too, will likely show signs of improvement only from mid-2025, as rate cuts aid higher valuations.
“Falling rates in the US may prompt an improvement in performance and exits. We expect early-stage venture capital to be better positioned than later stages over the coming year,” said Cameron Joyce, global head of research insights at Preqin.
