The Shifting Sands of Venture
Carta’s 2024 VC Fund Performance Deep Dive
The age of easy money is over. In its place? A leaner, meaner capital market where power has shifted from founders to funders—and survival demands clarity, not charisma.
Carta’s latest report on VC fund performance in 2024 reads like a clear-eyed postmortem of the 2021 high—and a playbook for navigating the new normal. If you’re a founder, investor, or operator, these numbers don’t just tell you where capital is headed—they tell you what to expect when you knock on the door.
🧊 The Venture Chill Is Real
Remember 2021? Free-flowing capital, up rounds as default, and LPs flocking to get in on the action. In 2022, the median $100-250M fund had 83 LPs. By 2024? That number has nearly halved to 47.
The party didn’t just end—it turned into an invite-only gathering. And now, only the most prepared—or best connected—are getting through the door.
LPs are pulling back, but those staying in the game are doubling down. The size of anchor checks—those big foundational commitments—has surged from $23.1M in 2022 to $35M in 2024. That’s not optimism—it’s consolidation. A “flight to quality” where LPs are betting bigger on fewer horses.
📉 Performance Under Pressure
Carta’s dataset—over 2,000 U.S. funds, spanning vintages from 2017 to 2024—reveals a dramatic dip in fund performance metrics like IRR, TVPI, and DPI, especially for newer vintages:
Median IRR for 2021 vintage funds after 3 years: -0.3%
Median TVPI for 2021–2023 vintages: hovering between 0.92x and 0.99x
DPI > 1x (actual distributions back to LPs): <1% across 2018–2023 vintages
Translation: returns are underwhelming, exits are rare, and real cash isn’t flowing back to LPs yet.
🧠 Why It Matters
For founders raising capital, this isn’t just abstract data. Here’s how it’s already shaping the market:
Fewer checks, but bigger ones: LPs are writing larger anchor checks, so expect GPs to be choosier—and fundraising to consolidate among brand-name funds.
Bridge rounds dominate: At the seed stage, 40% of 2024 rounds were bridges. It's a clear sign that many startups are not ready (or able) to raise priced follow-ons.
Graduation is harder: In Q4 2021, 12.8% of seed-stage companies had raised a Series A within a year. By Q4 2024? Just 7.9%.
More down rounds: One in five priced rounds in Q4 2024 came at a lower valuation than the previous one. That’s up from one in fifteen in late 2021. A founder recently told me:
“We raised our seed in 10 days in 2021. This time, it took 6 months, and we had revenue, team, and traction. The rules changed overnight.”
The long and short of it: VCs are nervous, LPs are cautious, and startups need more runway—and more proof points—than ever before.
📈 Bright Spots & Contrarian Signals
It’s not all doom and gloom. The 2023 vintage is quietly showing signs of strength: its 90th percentile IRR after one year is 24.5%, better than 2021 and 2022. And small funds continue to outperform larger ones at the top end:
In the 2018 vintage, the 90th percentile TVPI for funds under $10M was 4.03x, compared to 1.67x for funds over $ 100M.
This suggests an opportunity: emerging managers and microfunds—those closer to founders, earlier in—are still able to find alpha. They’re smaller, scrappier, and often better aligned with the new breed of capital-efficient startups.
🛠 What Founders (and Fund Managers) Should Do Next
1. Prepare for longer cycles
The average time between a seed and Series A round has grown by 5+ months. Runway planning and milestone setting must reflect this reality.
2. Manage expectations on valuation
Flat is the new up. Down is the new flat. Your valuation at the last round may be more of a ceiling than a floor.
3. Prioritize capital efficiency
The DPI drought means LPs are hungry for realized returns. Fund managers will increasingly favor startups that can grow without endless follow-ons.
4. Play to the edges
Small, focused funds—especially those operating in niche sectors or geographies—have an edge in this climate. Founders should consider who their investors are beyond the capital they provide.
5. Build for optionality
With M&A up and public markets slow, secondary exits and strategic acquisitions will likely play a bigger role in the next few years. Founders should keep one eye on acquirers—and structure accordingly.
🧬 The Future of Funding: A Foresight Lens
To truly navigate what’s next, we have to think beyond quarters and vintages. The VC industry is not just reacting to a downcycle—it’s beginning to evolve. Using futures thinking, we can map out potential trajectories for startup funding over the next 5–10 years:
1. From Mega-Funds to Modular Capital
As LPs consolidate their bets today, we may see the rise of capital stacks tailored to specific use cases in the future. Think: modular funding models where startups pull from multiple small, goal-aligned pools—operational capital, R&D capital, community funding—each with different risk-return profiles. It’s VC unbundled.
2. The Rise of AI-Augmented Investing
Fund managers are already using AI for diligence and trend analysis. But the next evolution is deeper: AI as a co-GP. In the future, expect more algorithmic funds to make faster, bias-aware, and data-rich decisions—especially in early-stage deals where pattern recognition still dominates.
3. Reputation & Community as Collateral
As traditional metrics get murky and opaque in long private company timelines, founder reputation, customer love, and community traction could become collateral for capital. Platforms might emerge to quantify this, creating a kind of "credit score" for startups based on ecosystem sentiment.
4. Liquid Private Markets
Secondary markets will likely mature into more structured, transparent systems. The distinction between private and public may blur, as tech-enabled exchanges make it easier for LPs and employees to realize returns, without waiting for IPOs.
5. Funding Ecosystems Go Global
With digital-first diligence and AI-powered market sizing, geography becomes less relevant. We may see entirely new VC hubs emerge in places traditionally underfunded. Founders building in tier-2 or tier-3 markets (especially in Africa, LATAM, and Southeast Asia) could attract global capital earlier.
6. Regenerative Capital Models
The zero-interest era is over. The next decade could spark demand for alternative return models—like revenue-share, community ownership, or milestone-based equity release. Especially in sectors like climate, public health, and education, impact-linked investing may finally get a scalable structure.
🧠 What This Means for You
Founders should begin treating capital as a design choice—not just a resource. And fund managers should look beyond vintage performance to ask: What kind of future are we underwriting? The next wave of winners won’t just build great companies—they’ll reshape how innovation gets funded.
🔮 Final Thought
The party may be over, but the work continues. In a world where capital is no longer cheap and exits no longer certain, founders and funders alike will have to play smarter, not just harder. Carta’s report is more than a snapshot—it’s a sobering forecast, and a call to recalibrate.
If you're raising, advising, or investing—this is your moment to rewire your playbook. In the next issue, we'll break down emerging alternative funding models in detail. Subscribe and stay ahead.
✍️ Have thoughts on how venture is evolving? Reply and share your own fundraising or LP conversations. We might feature it in the next issue of Future Forge.