2024 VC outlook: insights from 3 top firms

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In 2023, the venture capital market faced significant challenges due to high interest rates, inflation, and recession concerns. According to PitchBook, global VC funding fell by 35% year-over-year to end at $345 billion.

However, as market conditions improve, dealmaker confidence appears to be turning around. Research from our 2024 Private Capital Investment Predictions Report surveying 700+ dealmakers shows that 73% of investors expect to do more deals in 2024, up 42% from the year before.

In a recent panel, Trending up? VC predictions with 3 top firms, we spoke with three leading VCs to discuss their outlook, gauge their sentiment, and learn about strategies for capitalizing on increased deal volume this year.

The panel featured:

Watch the full conversation or keep reading for the highlights, marked with timestamps so you can dive deeper at key moments.

AI will dominate this year’s dealmaking

Starts at 4:34

Bohl, who works with deep tech startups specializing in industry-disrupting technologies, anticipates a growing amount of VC investment into AI firms this year. He notes that 90% of the teams he speaks with include AI, machine learning, or computer vision in their value propositions to a significant degree.

Dealmakers aren’t just interested in investing in AI companies, they’re also thinking about how to use AI to improve their own processes. Data from our report shows that 63% of firms are adopting AI to automate daily tasks—including to perform faster due diligence, identify investment opportunities from a larger pool of data, and synthesize meeting notes.

Bohl shares this interest and is specifically focused on integrating AI into the deal sourcing process: “How can we augment our operations and [the] data advantage that we have with AI to see more deals, to see them earlier, and to better understand how big the pond is and the fish we’re looking for?”

Valuation expectations will converge

Starts at 5:25

Last year, US median valuations declined year-over-year for every fundraising stage except for the seed stage, which is more insulated from activity in public markets. However, Winwood, a predominantly early-stage investor, anticipates a valuation level-setting with seed stage companies this year.

 “Hopefully, more founders understand the market, are more aware of what is expected from a valuation [stand]point, and that means that we, as an industry, can reset from this fall from the public markets and start to build again. And hopefully, with more deals comes valuations that make sense for both the founders and investors.”

Liquidity challenges will drive differentiation and consolidation

Starts at 10:50

Our research shows that 56% of dealmakers anticipate their biggest fundraising challenge this year to be Limited Partners (LPs) turning away from the venture capital asset class altogether. 

If this is the case—and as a result there is a smaller number of funds ready to invest with more stringent diligence and investing criteria—our panelists anticipate increased differentiation of funds, more competition for high-quality deals, and a market consolidation. 

Increased differentiation and competition

Bohl believes funds will have to differentiate themselves or risk going out of business: “I think differentiation of funds will become key. So, what is the fund size, what are you really tackling, where do you have expertise and know-how and can bring forward companies?”

He also expects increased competition amongst funds for the highest-quality deals and notes that many of the strongest startups—especially deep tech startups with significant intellectual property— will get preempted rather than start fundraising rounds. Not only will there be more competition for top deals, but VCs will likely face pressure to identify promising companies earlier on.

Market consolidation

Given challenging market and liquidity conditions in 2023, Bloom anticipates numerous startups will go out of business this year—further fueling competition for high-quality deals. However, he believes this is due to a timing lag and carryover from last year: “When things are going well, you find out immediately because companies raise at incredibly high valuations and continue to raise up rounds. But when things are down, it takes a long time for the market to generally figure that out, especially with each individual company.”

Instead, he encourages dealmakers to expect both a market consolidation and a recovery this year.

Build brand trust to drive deals

Starts at 15:11

Given increased competition for high-quality deals, dealmakers are leaning on their networks to secure top opportunities this year. Winwood, who recently left Anthemis to create Foxe Capital—a newly formed fintech fund that invests in early stage founders—notes how building a strong brand reputation as an investor is crucial to garnering success. 

“If you are known from your portfolio companies for being a great investor—being able to support, being able to connect, and then you’re also connected to your co-investors in your broader ecosystem—then that transition away from a very well-known brand into a new brand becomes a lot easier.”

When moving across firms, it was crucial for Winwood to use tools that surfaced and carried over key relationship insights, including:

  • Shared contacts and an understanding of her new firm’s network
  • Relationship strength and coverage across investor type and industry
  • Gaps in coverage that alerted her where to build relationships

She notes, “Tools like Affinity, for example, have been incredibly helpful to enable us to track those relationships, maintain them, and carry them on to a new brand. So I think that the fund brand is very important. What I'm realizing is actually your brand as an investor is very, very, very important as well.”

Centralize data and processes with Affinity

Starts at 21:18

Dealmakers rely on high-quality data to make decisions and track deal flow and performance but Bloom notes that the quantity and quality of private markets data is suboptimal—with data frequently incomplete, missing, or spread across different sources and platforms. “My best practice is, if you can do it in one system, do it in one system. And Affinity is my favorite system right now, to sort of live out of.”

His advice to other firms is to: 

  • Reduce the number of external sources you use in your workflows to yield more consistent, accurate, and cleaner data
  • Store deal data, documents, notes, and meeting agendas in one place
  • Find a way to incorporate project management and portfolio management in one system

By adhering to these best practices, Bloom can use this data to facilitate warm introductions for his portfolio companies, “Previously, or without Affinity, oftentimes you have a rolodex of [cold], dead information of email addresses and notes on what funds do. But with Affinity, it’s pretty easy to coordinate with your team and your external network [to identify] who knows whom best and the most related and relevant funds, and to track those as a project management system as well as a relationship database.”

What will 2024 hold? 

Starts at 35:31

To sum up their expectations for the VC market this year, Bloom, Winwood, and Bohl shared one word or phrase, respectively: resilient, bifurcation, and AI everywhere. To learn more about key predictions for this year and how to prepare, watch the full webinar. You can expect to hear more about:

  • What findings from 700+ dealmakers reveal about how 2024 will shape up
  • Why top dealmakers are prioritizing networks to drive deals
  • How Affinity (and our AI) can help your firm work more efficiently
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