Kauffman Fellows Sentiment Survey 2024
What You’ll Find Inside
Our survey, comprising insights from 262 emerging and established venture capital fund managers gathered between Q4 ‘23 and Q1 ‘24 delivers promising prospects for founders while also showing a marked improvement in the sentiment analysis comparing 2024 to the previous year, indicating that the VC winter is over. We explore four key topics:
Summary
Better Macro Economic Environment
55% of fund managers believe the macro economic conditions will improve in 2024. 30% believe it will not change from 2023, while the rest believe it will deteriorate.
Challenging Fundraising Prospects, yet Confidence is High
While 97% of fund managers believe that fundraising in this environment will be somewhat to extremely challenging this year, half of them are confident they will reach their fundraising goals this year.
For entrepreneurs at least, winter is over
While in 2023 more than 50% of VCs invested less than the year before, this trend is expected to completely reverse in 2024.
For LPs, still unclear if they will get liquidity this year
30% of VCs believe 2024 will be a very challenging year for exits. Yet 40% of all respondents believe that there is a market for acquisitions.
“The market is currently witnessing a positive trend in terms of both velocity and investor interest. However, this enthusiasm is notably more focused on specific segments and business models. Businesses involved in AI, climate, and generally any software ventures that demonstrate efficient growth are experiencing high demand. Conversely, businesses with lower margins, those requiring substantial capital investment, and consumer companies are navigating a challenging landscape. 2024 is also a year of truth. Over the previous two years, numerous companies have been extending their runway; a significant portion of these will need to approach the market for fundraising within this year. Within AI and while we expect demand and funding tailwinds to continue, we also expect businesses and investors to apply increasing scrutiny on retention and value.”
“Ulu was battle-tested in 2023. Two bank failures at the start of a fundraise and a tough market in Silicon Valley for seed stage investments as revenue expectations shot up and valuations went down will test any organization. With Spring arriving in 2024, however, I have a positive outlook. I admire the strength of Ulu's teamwork and shared vision. Our investing methodology has allowed our portfolio to retain value versus the seed stage market. I am confident we have the skills and experience on our team to support our entrepreneurs. We've aligned interests long-term with our LPs as big investors in our funds. Our leadership is focused on delivering strong results to LPs over and above any individual partner's success. In Spanish, I'd say "Adelante" or "Forward March!”
“Our sentiment at Tribe is cautiously optimistic. After a couple of lean years, companies have had time to acclimate to operating in a capital-scarce environment. A few years ago, we developed a quantitative venture capital "weather gauge" that measures the macro capital flow in and out of the venture ecosystem. That gauge suggests that we are around the bottom of the capital scarcity cycle, so we expect conditions to ease over the next 12-24 months. Regardless of the capital market environment, our focus at Tribe has always been on empirically understanding and appreciating the nuances of fundamental product-market fit. In times of very high capital abundance, such fundamentals-driven investing can be at odds with the ecosystem, but it has always been the core of our investment approach.”
“As a pre-seed fund investing small dollar amounts into early-stage rounds, we maintained a consistent pace of deployment during the tech boom and bust years, as well as today. We don't believe in trying to time the market since the exit opportunities for our portfolio companies are 8-12 years out. Despite fewer dollars going into VC today, valuations have not decreased drastically at the pre-seed stage (10-25%) since the highs of 2021. The categories that we invest in (the future of money, health, and work) are proving resilient, and this applies to the US markets as well as LatAm, Africa, and Europe, where we also invest.”
Distribution of Respondents
by Role & Type
Note: Emerging Manager is defined as survey respondents that currently manage a Fund I, Fund II, or Fund III. Established managers are those managing Fund IV+ firms.
Investment Activity Expectations in 2024 vs 2023
53% of all VC managers surveyed expect to allocate more capital and invest in more startups that last year, with only 6% expecting fewer. The rebound is slightly higher for Silicon Valley and established manager firms.
2024 represents a return to fundamentals. We are seeing more businesses across the entire Southeast Asian region achieve profitability, balancing the need for growth with prudent cost structures. The pressure to drive for market share due to excess capital is gone, and we are seeing more of our portfolio companies consolidating their market positions. Openspace, with our on-ground presence in the 6 major countries in the region, has a unique perspective. We are seeing bright spots in all our markets, and valuations remain reasonable across the board. With the geopolitics not abating up north, we feel the economic growth of the region will continue to play a significant role in the progress of our portfolio companies.
We at VITALIZE Venture Capital are optimistic for a strong 2024. We are seeing high-quality deal flow with exceptional founders who are keenly focused on finding product market fit and growing revenues in a capital-efficient manner. The market reset we experienced over the last two years, coupled with a renewed interest by big companies to leverage revolutionary tech to improve employer and employee outcomes, has yielded an environment that is ripe for the WorkTech industry we are so bullish on. We anticipate funding activity to continue to increase this year, and while M&A will likely remain soft through year-end, we think exit activity will begin to rebound in early 2025.
I’m hopeful that we should see an uptick in deals and better macro conditions compared to last year. Although there will be an increase in deals, the market for fundraising for GPs and Founders remains a challenge, especially for first-time fund managers and underrepresented managers. Last year, Kapor Capital invested in 9 new companies, and we plan to continue to back great founders building gap-closing companies even in this tough market.
At Aligned Partners and Iolar Ventures, we prioritize investing in world-class IT companies. Our experienced entrepreneurs have built companies for less than $6m in total equity, resulting in rapid growth and profitability. In 2024, we see great opportunities as more entrepreneurs better understand the value of capital efficiency in building their companies, thus expanding avenues for more growth and exits.
Press Highlights
Kauffman Fellows is a global network that gathers the best venture capitalists in the world.
Through our two-year education program and our vetted peer-to-peer network, Kauffman Fellows has accelerated the careers and the venture capital firms of hundreds of professionals in the field.
Since 1995, our network has grown to 882 Fellows (86% of them General Partners or Managing Partners/Directors) from 765 VC firms who collectively manage over one trillion dollars. These Fellows and their teams have invested in over 90 thousand entrepreneurs and harvested over 27 thousand exits.
Kauffman Fellows exists to support venture capitalists who invest in the entrepreneurs changing the world. Over the years, Kauffman Fellows have enabled and grown entrepreneurial ecosystems in 58 countries represented in our network.