“It’s time for founders to take out their pitch decks,” said Fernando Fabre, CEO of Kauffman Fellows, as he previewed the results of the almost 30-year-old organization’s first venture sentiment survey.   

Around 53%  of investors surveyed predicted that 2024 will pick up in terms of investment pace compared to 2023, while 6% expect to do fewer deals.  

However, the bar for founders to raise capital is higher. Founders will need to show growth alongside reaching break-even, said Fabre. 

A year of truth

“2024 is also a year of truth,” said Kauffman Fellow Fredrik Cassel, a general partner at Stockholm-based Creandum who anticipates belt-tightening companies to come back to raise funding in 2024, however with “increasing scrutiny on retention and value.”

Kauffman Fellows counts 885 graduates — members for life — the majority of which are general partners at firms. The survey includes around 260 respondents across 200 firms. For these firms, the median assets under management was $130 million. U.S.-based funds totaled two-thirds of respondents.   

We spoke with Fabre, who joined the nonprofit as the CEO in January 2024, bringing together his background in teaching and investing. He co-founded New York-based MatterScale Ventures, a venture firm that invests in Latin founders. He is an adjunct professor at Columbia University teaching a course on scaleups. Previously he spent 14 years at Endeavor, an organization supporting entrepreneurs around the globe. He ran Endeavor Mexico, and then became the global president for seven years. He is a Kauffman Fellow who graduated from the program in 2011 as part of class 14. 

Fundraising

“Everybody agrees that it’s very challenging right now to fundraise,” said Fabre. 

More than 95% of surveyed fellows perceive the climate for venture firms raising funds to range from somewhat to extremely challenging. 

Many expect endowments and foundations to cut back their positions in venture. That gap is going to be filled by sovereign wealth funds investing in larger funds while smaller funds fundraise from family offices. 

It is not all bad. Around 50% of those surveyed think they will be able to raise their next fund, but timelines have expanded from two years to four years to invest a fund, and then six years on divesting or getting returns.  

On exits

Around 30% of investors see 2024 as a challenging year for exits. The leading strategy for exits is M&A. And secondary strategies have become much more prominent, according to the survey. 

Far fewer funds — around 4% — expect IPO activity to be an exit strategy in 2024. 

Fabre sees more activity on the secondary front with venture funds setting up secondary funds to invest — often at prices below the next funding round. And there is an uptick in limited partners including family offices buying directly into secondary investments. 

Silicon Valley vs. rest of the world

With the advent of artificial intelligence, you might expect Silicon Valley to be more optimistic than the rest of the world, said Fabre. 

Based on the survey this is not the case. 

For most of the world, venture is still a growing industry. “The excess of the last few years is not relevant in the international scene outside of the U.S.,” said Fabre. 

For example, Brazil and Indonesia got a ton of money in the past five years, but the total amount is still low compared to what venture should be in those countries, he said. 

Illustration: Dom Guzman