Finances & Fundraising
VC Market Update: Q4 2023

VC Market Update: Q4 2023

Written by 
Pilot Team
March 27, 2024
VC Market Update: Q4 2023

Fundraising is the #1 focus for many of our clients. Clients often ask us when to fundraise, how much to fundraise, the pros/cons of raising equity vs debt, etc.

As fractional CFOs, we help clients from pre-seed to Series B+/M&A navigate an incredibly challenging fundraising market. We included our top hits from our latest VC market update below, including analysis on VC activity, valuation and exit trends. 

Want to chat about your own fundraise? Book time with the CFO team here.


  • Deal activity declined significantly in 2023, but has appeared to bottom out in the later stages.
  • Insider-led rounds and round extensions have become more common as many VCs prioritize bolstering their existing portfolios.
  • Down rounds and structured deals are now increasingly prevalent, particularly in the later stages.
  • Despite declining activity, valuations remain elevated as VCs consolidate support around the leading companies in hot sectors like AI.
  • Exit activity continues to be extremely weak, with 2023 having the lowest combined exit value in a decade.
  • VC Fundraising activity for 2023 hit a six-year low in terms of dollars raised.

VC Activity

Overall Activity

Q4 closed 2023 with the lowest quarterly deal volume of the year, and the lowest since 2019. 2023 ended with ~$170 billion of total transaction volume—$72 billion lower than 2022, and an astounding $177 billion lower than 2021. Though while total deal value declined quarter-over-quarter, deal count saw a modest increase, implying smaller average deal sizes and valuations.

As the economy adjusts to a world with higher interest rates, VC activity is resetting to a new baseline.

Source: Pitchbook / NVCA Venture Monitor Q4 2023

Pre-Seed & Seed Activity

The earliest stages of venture capital saw the steepest declines in activity in Q4 of any category, with total deal value declining by 29% quarter-over-quarter. This follows the consistent trend we’ve been seeing since the beginning of the VC downturn in 2022, where the later stages were the first to experience the downturn and have been the first to recover, with the earlier stages lagging by several quarters. 

Despite Q4’s seemingly weak numbers, 2023 ended up being relatively strong compared to prior years, with total deal value greater than 2020’s levels.

Source: Pitchbook / NVCA Venture Monitor Q4 2023

Early Stage Venture Activity

Early-stage venture (Series A and B financings) saw continued declines in total deal value for Q3, with 8% and 24% quarter-over-quarter and year-over-year drops, respectively. Despite lower deal value, estimated deal count was meaningfully higher than the previous quarter, implying lower average deal sizes.

2023 ended up with the lowest total deal value for the early-stage venture category since 2017.

Source: Pitchbook / NVCA Venture Monitor Q4 2023

Late Stage Venture Activity

Late-stage venture (Series C and D financings) saw declining total deal values quarter-over-quarter, but things are still overall up 15% year-over-year. Q4’s quarterly decline in deal value was partially a result of Q3’s numbers being inflated by Amazon’s $4 billion investment in Anthropic. When removing the impact of the Anthropic deal, activity was largely flat for the quarter.

Despite the VC downturn, 2023 ended up being quite strong in historical terms, with total deal value ending up 13% higher than in 2020.

Source: Pitchbook / NVCA Venture Monitor Q4 2023

Venture Capital Demand/Supply Imbalance

The demand-to-supply ratio in venture capital remains high overall, with late-stage ventures feeling the most significant impact.

Late-stage venture capital faces the brunt of the impact as investors retreat due to poor public market performance, liquidity concerns, valuation issues, and nontraditional investors' retrenchment, leading to a widening funding gap and challenges for maturing startups.

Source: Pitchbook / NVCA Venture Monitor Q4 2023
Note: “Early-Stage Venture” as includes Series A and Series B financings, “Late-Stage Venture” includes Series C and D financings, “Venture Growth” includes Series E and later financings


Private Market Valuations

Valuations declined as a whole in 2023, however the impact was felt differently across each stage:

  • Median valuations for Pre-Seed and Seed rounds reached an all-time high
  • Median valuations for early-stage venture declined when compared to 2021 and 2022 but remained above pre-pandemic levels
  • Median valuations for late-stage venture fell to a 6-year low in 2023.

2023 saw a rise in down rounds and deals with structured terms overall, including pay-to-play provisions. Based on Q4 deals done by Cooley, a law firm specializing in venture capital financing, 25% of deals were down rounds, the second time this figure has eclipsed 25% since they started putting out the report in 2012 (the first time being Q3 2023).

Source: Pitchbook / NVCA Venture Monitor Q4 2023; Q4 2023 Venture Financing Report - Cooley LLP

1.   Pay-to-play refers to a provision in a venture capital financing that requires existing investors to participate their pro-rata share in the round or face conversion into common shares at a ratio as much as 10:1, resulting in significant dilution to the non-participating shareholder.

Public Market Valuations

US equities have seen very strong price appreciation year-to-date, with the S&P up over 12% in less than two months.

The strong performance in the stock market can be attributed to investor expectations of declining interest rates, as well as high expectations for AI to drive significant value, particularly within the largest technology companies.

Source: NASDAQ; Renaissance Capital; Federal Reserve Economic Data (FRED) – Federal Reserve Bank of St. Louis
Note: Market data as of 2/12/24


2023 Exit Activity

2023 was the worst year for exits in over a decade, with both the M&A and IPO markets showing serious signs of weakness. M&A accounted for 40% of total exit value in 2023, a much higher share than in recent years.

Though the IPO market in 2023 was weak overall, there were a few notable VC-backed exits towards the end of the year, including Instacart and Klaviyo.

Increased regulatory pressure from the FTC, as well as EU and UK regulatory agencies has put a chilling effect on M&A:

  • The UK’s antitrust authority effectively blocked Adobe’s planned $20 billion acquisition of Figma.
  • The FTC under Lina Khan has been proactive in contesting M&A transactions, particularly those involving large cap technology companies, albeit with limited success.


Venture capital fundraising had a weak year in 2023, reaching a six-year low in total dollars raised. While emerging managers continue to be the most exposed to deteriorating fundraising conditions, even large funds with strong track records are seeing fewer commitments and reducing fund sizes.

Although the massive $289 billion in dry powder as of Q4 2022 initially sparked optimism, a drop in both fundraising and deal activity now raises questions about its accuracy. While the headline dry powder figure is high, a more relevant measure of capital availability is the amount of dry powder that will be deployed in any given year. Given that the pace of new fund raises and investments has slowed substantially, it is possible that the amount of dry powder to be deployed on an annual basis will be significantly less than in prior periods, despite the seemingly large number.

Want help with your next fundraise?

Chat with our fractional CFO team here. The team has extensive experience helping companies fundraise from pre-Seed to Series C/M&A.

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