PRIVATE MARKETS

Venture capital market outlook

Explore our analysis of the venture capital market; a dynamic and rapidly evolving landscape shaped by macroeconomic shifts and technological advancements.

Key takeaways

01

Record high dry powder

Venture capital firms are holding record amounts of dry powder due to prolonged high interest rates, inflation and record fundraising in 2021.

02

Cash conservation

Existing VC-backed companies are conserving cash and preparing long-term exit strategies for when the exit environment improves.

03

Sector focus

There is a notable increase in investment in AI and ML technology across various regions.

Fundraising environment

The Venture Capital (VC) fundraising environment has experienced extreme volatility in recent years; catalyzed by a combination of macroeconomic factors including widespread increased inflation, geopolitical uncertainty and persistently high interest rates. Limited Partners (LPs) who continue to invest in VC are increasingly concentrating their commitments on blue-chip managers with proven, top-quartile track records.

Image of Global annual venture capital raised (USD B)1

Importance of manager selection and diversification when investing in VC

In the ever-competitive venture investing landscape manager selection remains a key component of prudent portfolio construction. As seen in the figure below, the outer bounds of the dispersion of performance indicate outsized potential returns with the 95th percentile returning nearly 5x.

Image of Dispersion of TVPI by strategy2

Authors

Samir Menon
Senior Investor, BlackRock Private Equity Partners
Autumn Learned
Senior Investor, BlackRock Private Equity Partners
Alice Song
Senior Investor, BlackRock Private Equity Partners
Gabriel Kamensky
Senior Investor, BlackRock Private Equity Partners
Jeroen Cornel
Senior Product Strategist, BlackRock Private Equity Partners
Kyle McDermott
Product Strategist, BlackRock Private Equity Partners