The United States is facing a significant challenge in its venture capital market, with a recent data analysis revealing a near $1 trillion liquidity gap for mature startups seeking exits. This underscores the ongoing weakness in the exit climate over the past two years, highlighting the substantial amount of illiquid equity investments in U.S.-based startups.
Key Takeaway
The United States’ venture capital market is grappling with a liquidity gap nearing
trillion for mature startups, reflecting the challenges in the exit climate and the substantial illiquid equity investments in the country’s startup ecosystem.
The Venture Growth Fundraising Bracket
The “venture growth” fundraising bracket, as defined by PitchBook, encompasses financing of Series E or later, or any VC financing of a company that is at least 7 years old and has raised at least six VC rounds. In the U.S. alone, this category represents nearly $1 trillion in unexited startup value, excluding investments in the final quarter of 2023. When considering startups from the rest of the world, this figure would be even larger, indicating the magnitude of the issue at hand.
Considerations and Global Perspective
It’s important to note that not every startup that raised a “venture growth” round may still retain its initial valuation, and there are unicorns that have refrained from formal repricing since 2021. Additionally, as the analysis is focused on the U.S., the global picture may present a different scenario. Nevertheless, the U.S. venture capital market accounts for approximately half of the global market, emphasizing the significance of addressing the liquidity gap within the country’s startup ecosystem.
Exploring Locked Value in Startup Land
This situation prompts a closer examination of where the most locked value in the startup landscape can be found, and the potential timeline for venture-backed tech companies that have concluded their private tenures to go public. The need to address this liquidity gap is evident, and it remains a critical aspect of the ongoing discussions surrounding the U.S. venture capital market.
