In a shocking development, the number of active investors in US VC, defined as making two or more deals, plummeted by 38% in the first three quarters of 2023 compared to the same period last year, according to PitchBook data. That translates to 2,725 fewer firms making deals.
The decline in active investors, exceeding the 28% decrease in deal count, suggests more than a reduction in funding—it signals a thinning investor herd.
“The decline of active investors has been acutely felt at the later stages, where crossover capital is necessary to close the large check sizes needed for growth," said PitchBook lead analyst Kyle Stanford.
The pullback of these large investors caused the ratio of capital demand to supply to jump sharply in 2023. Inactive investors are likely trying to sell their VC assets on the secondary markets, secondary market participants say.
Alternatively, these firms could be collecting management fees and waiting for startup valuations to rebound. Limited partners and other investors have been forecasting that the number of VC funds will decrease. Even though official firm closings are still rare, the data shows that the playing field has thinned out.
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