Welcome to 2024, and to a very special edition of Term Sheet.
Investment Capital Markets and Startup Funding: Mass Extinction
A mass extinction event for startups is going to happen, as two-thirds of startups have less than a year of cash runway. This will be a major reset for the industry, leading to a continuous flow of talent available for the next wave of companies to be created. – Jack Abraham, Managing Partner and CEO of Atomic
2024 will be the year when the power balance shifts towards LPs. I expect we will see managers at all stages of venture capital restructuring their fundraising strategies and lowering their expectations by raising funds at the same size or smaller than their predecessors. – Sarah Tomulonius, Partner at M13
More frauds like SBFs and Michael Rothenberg and Charlie Javice will be uncovered, which will ultimately be good for the system. More shoes will drop, including types of CEOs like the WeWork ones who were “legal” but exploited the greed era for personal gain. – Logan Henderson, CEO and Co-founder of Gridline
Venture capital investment in startups will drop below $100 billion for the first time since 2017. – Jeffrey Grabow, U.S. Venture Capital Leader, Ernst & Young
The tech knights who do not adapt their financial models to the new pricing environment will run out of capital and fail; this segment contributes significantly to the U.S. GDP, so failures will create strong ripple effects felt throughout the market. – Raphael Dornano, Founder and Managing Partner of D’Ornano + Co.
The jellyfish-like shifting of leadership within family offices will spur greater interest in venture capital strategies. Millennials who grew up with the rise of technology will diversify investments into long-term private assets in sectors that resonate with their generational experiences (like climate, defense, healthcare, family care, and infrastructure). – Madeline Darcy, Founder and Managing Partner of Kaya Ventures
In 2024, the Series A market will see a significant uptick. – Rex Salisbury, Founder and General Partner of Cambrian Ventures
The venture capital market will be diverse in 2024. Among current investments, we believe there will be an increase in “down rounds,” meaning valuations will be lowered across funding. – Teresa Hager, Head of U.S. Venture Capital Research, Cambridge Associates
I believe 2024 will be one of the best years for deploying venture capital ever, especially in the early stage. – Rob Pederman, Managing Partner at Asymmetric
The difficult fundraising environment for venture capital heads will be felt over the next two years when many of these venture heads need to raise their next generations of funds. If some funds cannot raise a follow-on fund in the coming years, it will open up more discussions around mergers and acquisitions in the industry, and I believe that will happen. We are already hearing about many funds facing difficulties or having completely stopped fundraising. – Oliver Hull, CEO and Managing Partner of Speedinvest
With a large amount of uninvested cash, the best companies will have no problem attracting capital at excellent valuations. Talent will shift from “unicorns” to the next generation of startups. – Merit Hammer, Partner at Bain Capital Ventures
We have reached the bottom on valuation, and we will see a rise now that we’ve hit the end rate. However, the large influx of companies entering the market may make it a buyers’ market. – Brad Bernstein, Managing Partner at FTV Capital
Market
Private Capital: Slowing Fundraising
The 90/10 rule will continue with another tough year for private capital fundraising in 2024, and it will last longer than initially expected. – Fraser van Rensburg, co-founder and managing partner of Asante Capital
Exit multiples will have a dumbbell distribution as they continue to move towards high-quality assets. – James Beach, partner at Morrison & Foerster
There are likely to be two main focus points for private capital managers – capital to support sub-acquisitions as long holding periods continue and a reevaluation of capital structures for portfolio companies based on major challenges and higher debt costs and imminent debt maturities. – Stephen Quinn, managing director of 17Capital
The best private capital managers will implement NAV loans in a more transparent way to create value for investors by funding more add-ons and supporting growth initiatives in core portfolio affiliate companies. – Stephen Swientzel, managing director and co-partner in GP financing solutions, Hunter Point Capital
The need for debt reduction will be the most defining feature of private capital investment in the middle market as we enter this new cycle in 2024. – Erol Ozumeri, co-founder of Searchlight Capital
Direct Public Offering and Private Buyout: Dual Path
Public markets will see more “private buyouts” in 2024 as CEOs begin to make decisions on their stock prices and assess the time needed to create value in public versus private markets. Debt will be cheaper and private markets will become more attractive to a number of CEOs of public companies. – Dan Lynn, partner at Lead Edge Capital
I expect some strong large-cap companies to go public before Memorial Day… perhaps paving the way for slightly smaller offerings to follow as a means to seek liquidity for their employees/investors… especially if the recent slow approval process at the Federal Trade Commission for mergers and acquisitions continues. – Kirsten Morin, partner at HighVista Strategies
2024 will see the emergence of green startups for IPOs backed by venture capital, which will in turn lead to a surge in 2025. With venture capital funding increasing and innovative business models on the rise, the IPO market is expected to see increased activity, leading to a wave of new public offerings in 2025. – Pradeep Tagari, head of investments, National Grid Partners
Companies will operate “dual pathways” during IPOs and show preferences towards the acquisition method while many companies assess exit potential and the instability of the public stock market. – Ambar Bhattacharya, managing director, Maverick Ventures
Mergers and Acquisitions: On the Rise
Disney is selling an 80% controlling stake in ESPN – not to a strategic buyer like Netflix or Amazon, but to a 2007 club deal from large venture capital funds. – Jeff Collins, managing partner at Cloverlay
Mergers and acquisitions will not be a viable exit. With a new wave of right-sizing in the long term for some current companies, the pool of buyers is getting smaller and smaller, making it harder to justify an M&A deal at this point while letting go of great talent. – Simon Wu, partner at Cathay Innovation
The acquisition market may recover before the IPO market, due to buyers’ limited patience relying on innovation in startups. – Tasneem Duhadwala, co-founder of Excelestar Ventures
All the debate surrounding the demise of mergers and acquisitions is overblown. We saw a stable and “steady” year in 2023 and expect to see a steady flow of deals in 2024, perhaps with fewer mega deals and less of the frenzy we saw in 2021. – Scott Miller, co-partner at Sullivan & Cromwell
It will
Unification is a big topic in 2024. There are a number of competitive categories where there are many sellers and many of them will join in 2024 or find strategic homes. Lots of unicorns but not enough homes. – Avery Rosen, Partner at Lead Edge Capital
I expect that under the current conditions, the deal environment will remain depressed until 2024. Despite a great deal of interest in transactions, sponsors and strategists are facing obstacles to closing deals or raising capital. Frankly, I think 2024 will feel a bit of a recovery after the dot-com bubble in 2003-2004. – Jason Greenberg, Venture Capital Partner in Technology, Media, and Telecommunications, Jefferies
Etc: The Return of Cargo Pants
Cargo pants will be making a comeback in the 1990s! – Thomas Tunguz, Founder, Theory Ventures
I look forward to good news outweighing bad news for the first time in a long time. In 2019 and previous years, you had a four-to-one ratio of good news to bad. For most of the past seven months, it has been the opposite, if not worse. – Ryan Hinkle, Managing Director, Insight Partners
See you tomorrow,
Jessica Matthews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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This story was originally published on Fortune.com
Source: https://www.aol.com/crystal-ball-vcs-private-equity-122310885.html
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