INTRODUCTION Contributed by: Carsten Berrar, Florian Späth and Heiko Blaut, Sullivan & Cromwell LLP
fragility, may accelerate. The median exit value in Europe in 2024 ended 35.1% higher, driven by increased investor appetite for buyout transac - tions. Fundraising headwinds In 2024, fundraising challenges were still evi - dent across the global marketplace. Globally, USD169.7 billion was raised, less than 80% of the USD213.8 billion provided by limited part - ners (LPs) in the preceding year. In terms of geographical distribution, USD76.1 billion in the US led the way (USD97.5 billion in 2023), fol - lowed by USD66 billion provided to Asian VC funds (USD86.7 billion in 2023) and with Europe continuously lagging behind (USD22.5 billion in 2024, virtually flat from 2023 levels). Besides the reduction in distributions from vin - tage funds, the further decrease can be attrib - uted to several other factors, including LP with - drawals prompted by a perceived shortage of liquidity events, a reallocation of assets to less volatile classes, attractive public market condi - tions and a resurgence of crypto, as well as a general hesitation among VCs to inject addi - tional capital into companies facing declining valuation levels. Fundraising opportunities were increasingly con - centrated among sizeable funds with prominent reputations and typically exceeding USD1 billion in targeted fund size, underscoring pre-existing market inclinations towards a concentration of capital allocation. While the total volume of capital raised in the US in 2024 exceeded pre- pandemic levels, fund counts in the US were at decade lows, at merely 31.3% of the number of funds present in 2022 and progressively con - centrated among a handful of established firms. Against the backdrop of market fundraising highs in 2021 and 2022, however, total available
“dry powder” in the VC industry reached new global record levels standing at USD307.8 billion of deployable capital in 2024. Shifting the focus towards the Asia-Pacific region, China still finds itself navigating through macroeconomic headwinds against a backdrop of economic challenges. Notably, VC transac - tions involving Chinese start-ups witnessed a further decline, plummeting from USD63.7 bil - lion in 2023 to USD38 billion in 2024. Sequoia Capital, which has invested in China since 2005, recently initiated the separation of its Chinese operation. Amid China’s economic downturn, international investors seeking opportunities in Asia have directed their attention to other countries. With USD11 billion deployed in 2024, India contrib - uted a significant 27% of the region’s venture funding representing a 40% growth trajectory YoY. In Japan, overall VC deal value in 2024 exceeded the total for 2023, primarily driven by significant funding rounds. Moreover, the market more broadly seemed to evolve as US-based Andreessen Horowitz announced plans to open an office in Japan. Paradigm shift: growth vs profitability The sustainability of a start-up’s business model, its margins, cash flow conversion, adaptable and recurring revenues as well as a clear-cut pathway to profitability have become a (re-)discovered focus area for venture capitalists and the broad - er community. The intensified pressure recently manifested itself in cost-cutting measures, a sig - nificant wave of tech lay-offs and declarations that the “war for talent” is over. At the same time, premiums on growth (as opposed to efficiency) continue to be particularly pronounced in sec - tors such as next generation software, biotech and AI – indicating a bifurcated market when it
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