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The views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only. All investing involves risk. Please refer to risks at the end.
2024 venture capital outlook
Looking ahead to 2024, we see positive signals indicating that the downturn may have hit bottom. Just as privates trailed the public market correction in 2022, we believe they will follow its recovery with a lag. While the valuation reset is painful, it also represents an attractive opportunity for allocators with capital left to deploy. The past couple of years have been like a wildfire that burns broadly but eventually leads to healthier growth and sustainable balance in an ecosystem. Ultimately, we believe that taking capital at more moderate multiples will likely benefit companies, as they will face a lower probability of down rounds, and equity holders, who will have higher chances of successful exits.
We also expect a rebound in IPO activity, as do other private managers: a recent Preqin survey indicates that 40% of VC managers expect activity to improve this year, up from 18% last year, and 30% expect it to worsen, down significantly from 76% in 2023.1
Why it matters
Overall, VC portfolios could produce an exceptionally strong vintage, as less competition means a higher likelihood of investing in top companies at reasonable valuations. Extreme volumes are no longer necessary to execute deals, and we believe 2024 will offer opportunities to invest in great companies at rationalised prices for patient investors. We also think attractive late-stage companies that are ready to go public will be much more likely to do so in 2024.
Read more about what we’re watching for 2024 in our Venture capital outlook: Signals point to a brighter 2024.
Listen to our Technology and Consumer Sector Lead, Matt Witheiler, as he discusses the outlook for private equity, areas of opportunity, investment best practices, and the growing influence of AI in our first WellSaid Podcast interview of the year.
SECTOR TRENDS
Late-stage growth
Rays of light continue to break through in the late-stage venture market amidst what has been an otherwise muted year from a deal volume perspective. Critically, we’re encouraged by the opportunities we’ve participated in year to date and those we think are on the horizon for the year ahead. We are not seeing the frenzied activity of 2021 – 2022 but instead believe that we have returned to the more moderate levels of 2014 – 2019. There are limited players with dry powder to invest in this stage and we believe this could yield favourable valuation dynamics similar to those seen over the past year.
Late-stage biotechnology
We believe immunology and inflammation (I&I) is a compelling area of biomedical innovation as it targets chronic and prevalent diseases affecting patients across all age cohorts. Companies developing the next generation of drugs for these large end markets have been a bright spot in the current biotechnology market with active M&A and public offerings. At the turn of the 21st century, the second wave of drugs in this space delivered life-changing patient benefits. In our view, I&I is at the dawn of the third wave of novel drug modalities and targets, which will build on this progress and offer interesting opportunities for private biotech investors.
Climate growth
2023 was a challenging time for investing in the climate space due to the macro environment with high interest rates, projects being cancelled and founders delaying repricing rounds. However, 2024 is expected to be a critical year in climate tech with reduced interest rates, better clarity on government policies and an increasing adoption of climate solutions that can drive the growth of climate tech companies. Despite a 30% year-over-year decrease in total funding, the long-term outlook remains positive with a robust compound annual growth rate of 23% since 2020.2 Investors and founders are now prioritising smaller fundraises tied to milestones, and profitability has become more important.
Early-stage venture
It has truly been a tale of two markets. In our view, amid the remarkable growth in AI funding, year-to-date early-stage post-money valuation for all startups was significantly lower compared to the median post-money valuation for generative AI startups; overall venture funding was down considerably from 2022. This means the funding environment for many companies remains challenging. We are seeing companies with good metrics (though not "best in class") struggle to raise priced rounds.
Investment-grade private placement
While the bulk of the private placement market continues to be dominated by longer-dated paper, we also continue to see an increase in shorter-term maturities. Additionally, investors have started to demand increasing spread premiums for private placement deals that reflect the higher rate environment and recent demand dynamics. We still believe that historical spread premium expectations will continue to adjust higher to reflect the current market conditions.
Long/short hybrid financial services/fintech
Activity remains low in the fintech space. Mid- to late-stage fintech growth equity financing activity has retreated to 2018 levels. We are happy to see that deals are continuing to get done but are mindful that the muted financing environment may present risks to the fintech private ecosystem. Founders of fintech companies met the demand of venture investors to deploy capital by raising rounds at high prices. Now the demand to deploy is lower and business performance in many cases is underperforming. The result will be companies that have to take very dilutive down rounds to attract capital at prices that are reflective of comparable entities in the public markets. This is exciting for new capital!
1Preqin, 2024 Venture Capital Global Report. | 2Source: CTVC Sightline Climate; Data as of December 31, 2023.
Portfolio company support
- In a recent survey conducted of our portfolio companies, we discovered that the ESG topics they are most interested to learn more about in 2024 are ESG IPO readiness, governance (including board composition, executive compensation and shareholder rights), and responsible AI. We plan to offer additional content and support on these specific topics this year.
- The Impact Measurement & Management (IMM) Team worked with selected portfolio companies to provide feedback and guidance on best practices for impact calculations and sustainability reporting to allow companies to better communicate their value and demonstrate how their product or service is impacting the planet and/or people.
Insights
Showing
of
Insights Posts
Private credit: Key market themes for the year ahead
In our annual private credit outlook, learn about three themes that have dominated headlines recently and may create opportunities for parts of the private credit market going forward.
Article
2024-12-31
Alternative Investment Outlook
This collection provides timely ideas across the spectrum of alternative investments -- including hedge funds, private equity, and private credit.
Article
2025-06-30
Private biotech: Immunology and inflammation’s third wave
Our experts discuss how I&I is building on industry progress to offer new treatment solutions and interesting opportunities for private biotech investors.
5
min
Article
2025-12-01
Five key ESG topics for private companies in 2024
See where our ESG for Private Investments team is focusing to minimize investment risk and maximize company value in 2024 and beyond.
Article
2024-12-31
Decoding impact expectations: best practices for impact investors and companies
We share three recommendations each for impact investors and companies to help them better understand and manage each other's expectations.
6
min
Article
2025-10-31
URL References
Related Insights
Investment risks
Major risks
Market risks
- Directional; not market neutral.
- Primarily invests in equity.
- Will experience equity-like volatility at times.
- At times, markets experience great volatility and unpredictability.
Broad investment flexibility
- No benchmark orientation; few investment restrictions.
- Geographic, sector, market cap and asset class emphasis may shift over time.
Liquidity risk
- Portfolio of illiquid/private companies.
- The return of invested capital to limited partners may be dependent on the success of the companies held in the portfolio, and the timing of such liquidity is uncertain.
Sector risk
- May concentrate by sector; potential for lack of diversification.
Country/currency risk
- May concentrate by country.
Transparency risk
- Holdings, pricing, and other data may be limited and, thus, less transparent than certain other investments.
Regulatory risk
- Not subject to the same regulatory requirements as mutual funds or many other pooled investments.
Early-stage venture risks
Concentration risk
- In general, investing in strategies with concentrated exposures to (i) particular asset class(es), and/or (ii) a particular sector, and/or (iii) one or a select few markets involves greater risk than investing in strategies that have greater diversification.
Risk of underlying assets
- In general, each strategy will be subject to the same risk factors as those relating to the underlying securities or assets held in its portfolio.
Extended term and liquidation
- The total hold period for an investment in the strategy will be much longer as compared to that of other investment products. The strategy’s term may extend for ten (10) years from the final closing date, with the possibility of five (5) or more years of extensions, followed by an indefinite liquidation period. This risk is increased by expected significant follow-on investment activity later in the strategy’s term and investments in underlying funds that will also have indefinite liquidation periods. Costs and expenses incurred by the strategy in connection with an extended term and liquidation period are expected to be significant.
Layered fees
- The strategy has a layered fee and expense structure that makes total costs and expenses higher relative to other investment products.
Loss of key personnel
- The performance of a strategy is largely dependent on the skill and decisions made by its manager and key personnel, and the loss of any such individual could have a material adverse effect on the performance of the strategy.
Change in investment policy
- The manager of a strategy typically has the authority to alter its investment policy within certain parameters (set out in its constitutional document) by amending the prospectus. This could represent a fairly significant change in the nature and risk profile of the strategy from the one in which you originally invested.
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