Venture capital investors should feel positive about 2025, buoyed by rising sentiment in the fourth quarter of 2024, according to a new report.
Stats released today (Jan. 31) by industry analysts at Preqin show that dealmaking activity increased to a level not seen since the start of 2022, with almost 4,000 deals and an aggregate total of $87.4 billion (a 62% increase quarter-over-quarter). There were 702 exits with an aggregate exit value of $118 billion.
Fundraising remained constrained though with 207 funds raising $20.6bn in capital compared to $40.3 billion a year earlier and well short of the $60+ billion raised in Q4 2022 (and the pre-pandemic Q4 2019) and the surge to around $100 billion in Q4 2021.
North America contributed to a significant fall in fundraising in absolute terms, down from $21.3bn to $15.7bn year-over-year although proportionally, the decline was smaller than those in Europe and Asia Pacific.
Activity was supported by the Fed’s two interest rate cuts in November and December, 50 basis points in total, but the slower pace indicated for 2025 and the new Trump administration’s policy choices will have an impact.
However, there may also be renewed interest in VC deals in the crypto/blockchain space if anticipated supportive policies for these industries are realized. Added to this is the participation of venture capitalists in the president’s key roles.
Michael Patterson, Senior Associate, Research Insights at Preqin said that the attitudes of venture capital investors shifted in the fourth quarter of 2024.
“Our latest survey of investors from November 2024 shows they have not been this positive about allocating to venture capital since 2021, with almost one-third looking to increase their commitments over the coming year,” he said. “This, alongside venture capital deal activity in Q4 2024 trending up to a level not seen since the start of 2022, is a positive signal for venture in 2025.”
The importance of artificial intelligence as a focus for investments is seen in venture capital investors’ intentions.
The research reveals that the top deals in Q4 2024 were dominated by AI-related companies, with eight in ten deals completed in the quarter focused on North America.
IT was the leader in deals globally over the quarter, up by 118% quarter on quarter to $47bn and reaching a total of 1,883 deals. Industrials were up by 122% to $13.1bn from the third quarter and 475 deals, led by automobiles such as Waymo’s $5.6 billion Series C fundraising for its self-driving vehicles business.
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