Predictions for Venture Capital in 2025

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Drawing on current trends, economic data, and market signals, here’s a data-backed look at the key predictions for the coming year inspired by (which I agree with) my friend Erik’s tweet.

1. DPI Uptick Fuels LP Commitments - Recycling

• What’s Happening: Distributions to Paid-In Capital (DPI) ratios are on the rise as VC funds deliver liquidity through exits - organic and manufactured. This trend builds LP confidence and drives reinvestment into new funds.

• Data: According to PitchBook, the average DPI for top-quartile VC funds reached 1.1x in 2024, up from 0.8x in 2022, signaling stronger returns for LPs.

• Impact: More LPs will allocate larger portions of their portfolios to VC, particularly funds with proven DPI performance. Experience and expertise is still crutial

2. IPOs Rebound Slowly Then All At Once

• What’s Happening: After a multi-year slump in public market debuts, IPO activity is expected to pick up—but cautiously. The Window is definitely open.

• Data: Renaissance Capital reports that U.S. IPO activity in 2024 saw a modest 15% growth year-over-year, signaling slow but steady recovery. Reddit, Astera Labs, Klaviyo and last week’s Service Titan are all up.

• Impact: Late-stage startups will still face challenges, but stronger market conditions will ease the pressure on down rounds and create pathways for exit.

3. The Rise of Solo GPs and Emerging Managers Increase - though still a small piece of the pie

• What’s Happening: Solo General Partners (GPs) and emerging managers in general have had a rough few years. With the markets at all time highs, coupled with increased liquidity, many will seek new earlier managers to reinvest with.

• Data: AngelList’s 2024 report showed a 45% increase in solo GP-led funds compared to 2022, with 60% of these funds closing in under six months.

• Impact: LPs increasingly trust these smaller and more nimble investors to be the scouts of the tech world and have a higher return profile.

4. Family Offices take a bigger role in VC/startup funding

• What’s Happening: Family offices are stepping up as major LPs are investing mostly in established and well know VCs. They’re filling the void of the early stage VC/startup financiers.

• Data: Preqin data indicates a 30% rise in family office VC commitments in 2024, with over $100 billion allocated globally.

• Impact: Family offices will become dominant players in early-stage and sector-specific investments. They learned a lot (and got burned in 2021) and we ready to lean in and engage at the earliest stages

5. GP Spin-Outs Continue - So many leaving

• What’s Happening: Experienced investors are leaving established firms to launch their own funds, leveraging their track records to attract LPs.

• Data: According to SVB Capital, 20% of all new VC funds launched in 2024 were spin-outs, up from 15% in 2023.

• Impact: LPs increasingly back these funds, valuing their proven expertise over larger, more bureaucratic firms. Many more to come!

6. Secondaries Remain So Hot Right Now

• What’s Happening: Secondary market activity continues to thrive as startups and VCs seek liquidity in a challenging exit environment. And as late stage privates refuse to go public, extending their liquidity out years.

• Data: Nasdaq Private Market reports a 50% year-over-year increase in secondary transactions in 2024, totaling over $15 billion. Databricks is rumored to be raising $9B right now…

• Impact: Secondaries will remain a vital liquidity tool, providing an essential bridge to traditional exits and just kicks the exit down the road.

7. Private Equity (PE) Continues Entering VC as VCs become more like PE

• What’s Happening: PE firms are making aggressive moves into venture capital, bringing their expertise in scaling businesses. The tourists will come back.

• Data: PitchBook notes that PE investments in VC deals grew by 20% in 2024, with $25 billion deployed across 1,200 deals. Mostly late stage Ai etc as expected.

• Impact: PE-backed startups benefit from operational expertise sometimes, while VC firms face competition in scaling promising companies and keeping them private longer.

8. Deep Tech, Ai etc Tops LP Priority List as Expected

• What’s Happening: LPs are prioritizing funds that invest in transformative technologies, such as quantum computing, AI, and biotech. As expected.

• Data: Cambridge Associates reports that 40% of new VC fund allocations in 2024 were directed toward deep tech-focused funds, a 25% increase from 2023.

• Impact: Deep tech will dominate LP interest, with significant capital flowing to groundbreaking innovations we hope if LPs start investing in emerging managers who can invest in outliers.

9. Institutional LP Exposure to Emerging Managers Upticks A Little

• What’s Happening: Institutional investors are increasing allocations to emerging managers, seeking high-potential returns and diversification.

• Data: A Preqin survey found that 60% of institutional LPs planned to allocate to first- and second-time funds in 2025, compared to 45% in 2023. I’ll believe it when I see it.

• Impact: Emerging managers will gain traction, spurring innovation and competition across the VC ecosystem which will be awesome!

10. New Administration Brings Favorable Tailwinds - Bye Bye Garry and Lina

• What’s Happening: Regulatory and economic policy shifts under the new U.S. administration are creating favorable conditions for VC. Basically Gary and Lina are out though we’ll see what happens in the EU…

• Data: Deloitte predicts a 15% increase in liquidity events in 2025 due to regulatory changes, such as reduced capital gains tax and streamlined IPO processes.

• Impact: Enhanced liquidity and regulatory clarity will boost VC fundraising and deployment activity which will then be reinvested and get the flywheel spinning again.

1. What are your predictions for 2025!?

2. I’m looking to meet some Family Offices and LPs to get their thoughts on the current tech startup world.

3. Vertical Ai to formulate CPG faster www.turingsaas.com

FIND ME: 𝕏 @Trace_Cohen / in LinkedIn

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