Venture Capital Industry Outlook – 2023 to 2028
Startups suffered in 2022 from ongoing market uncertainty, geopolitical unrest, and approaching recessionary fears. Every quarter saw a drop in global venture capital (VC) investments, which were 36% lower than in 2021, year on year. According to Crunchbase, VC funding was just $81 billion in the third quarter of 2022. More than 50% less than in 2021 and 33% ($40 billion) less than in the prior quarter. From the third quarter to the fourth, funding fell by about 11% to $86 billion. Corporate venture capital-backed projects decreased to 448 in the fourth quarter of 2022 from a peak of 828 at the end of 2021, in line with the general decline in funding.
VC firms are sitting on record cash or cash adjacent securities or in VC talk – dry powder; $586 billion in 2022, up from $396 billion in 2017. The funds are likely to be deployed aggressively from 2024 to 2026.
Uncertainty is reflected in 2023's venture capital patterns. As tech and crypto have fizzled out under slowing demand, Climate Tech will be a safe haven for VCs. The development of robotics, AI (including generative AI), and automation will likely bring back interest in productivity metrics that have stagnated from an aging population and uncertain markets.
Venture Capital Growth Opportunities (2023-2028)
From $233.9B in 2022, IMARC Group projects a CAGR of 21.75% for a 5-year period from 2023, with estimates showing that the VC industry will cross $700B in 2028.
Sustainability and Social Impacts: VC firms are now welcoming young millennials who have a widely different value system from predecessors about social impact and climate change. This new demographic will finally lead the change that balance chasing profitability with sustainability targets.
Data and Analytics: Companies that offered analytics tools with business insights have gained funding. The trend will continue.
Impact of AI and Technology: An integrated B2B financial infrastructure with predictive analytics based on transactional data and an AI-assisted creator economy are two areas where funds will be allocated for 2023-24.
Impact of Seed-stage startups: The downturn will encourage VCs to focus on early-stage startups.
Top VC Firms - 2023
Market participants in the venture capital industry are influenced by a number of variables, including Exits, Illiquid Portfolio Business Valuation, and Recent Performance. The top ten venture capital firms and their asset under management as of 2023 are:
1. Sequoia Capital: $28billion
2. Andreessen Horowitz: $35billion
3. Kleiner Perkins: $6.8billion
4. Khosla Ventures: $ 15 billion
5. Battery Ventures: $13billion
6. New Enterprise Associates (NEA): $20 billion
7. Founders Fund: $11 billion
8. First Round Capital: $3 billion
9. Accel: $50 billion
10. Greylock Partners: $3.5 billion
Trends in the Post-MBA Market (2022-23)
Stanford Graduate School of Business has the highest recruiting rate in Venture Capital Sector, with a 12% recruiting rate for Venture Capital Industry and Function. Stanford Offers courses such as Financing and Decision Making & Private Equity in Frontier Markets to enhance students’ knowledge in VC. Similarly, other top MBAs for VC placements are Harvard (7%), Booth (5%), MIT (4.4%), Wharton (4%), and Columbia (3.3%). For all the Top MBAs for VC, the recruitment rate in VC functions has improved marginally, while Chicago Booth (+3.2%) had a visible increase in recruitment to the industry.
| Business School Name | Venture Capital Function Hiring Percent (2022-23) | Venture Capital Industry Hiring Percent (2022-23) | Venture Capital Function Hiring Percent (2021-22) | Venture Capital Industry Hiring Percent (2021-22) |
|---|---|---|---|---|
| MIT Sloan | 3.90% | 4.40% | 3.60% | 3.60% |
| Stanford | 12% | 12% | 12% | 12% |
| Columbia | 3.20% | 3.30% | 2.50% | 3.10% |
| Chicago Booth | 4.80% | 5.20% | 2.20% | 2.2.% |
| Harvard | NA | 7% | NA | 7% |
| NYU Stern | 1.80% | 1.30% | 0.30% | 0.30% |
| Wharton | 16.1% (including PE) | 4.10% | 12.2% (including PE) | 3.40% |
| Kellogg | 2.10% | 1.79% | NA | NA |
| Duke Fuqua | 8% (including PE) | 6% (including PE) | 10% (including PE) | 9% (including PE) |
| LBS | NA | 3% | NA | NA |
| INSEAD | NA | 5% (including PE) | NA | NA |
| Tuck | 4% (including PE) | 2% (including PE) | 4% (including PE) | 3% (including PE) |
| Yale | NA | 2.30% | NA | 2.50% |
| Ross | 2.3% (including PE) | NA | 5% (including PE ) | NA |
| UCLA Anderson | NA | 1.9% (including PE) | 2.9% (including PE) | 2.5% (including PE) |
*Venture Capital Breakdown for Cornell, Darden, and HAAS MBAs was not available.
References
CrunchBase – VC Funding Q1 2023 Trends
Top Venture Capital Firms
Venture capital in 2022 and What to expect in 2023
From the Messy Middle to a New Dawn: A 2023 Outlook for Private Equity and Venture Capital
Six VC Trends - 2023
12 Predictions For Venture Capital In 2023
What can we expect in venture capital in 2023?
Venture Capital Growth Opportunities
VC 2023 Predictions
IVCA Feature: 2023 Predictions for Venture Capital and Private Equity, by the Online Financial Press
