When it's not primary, is it secondary?

Recent trends in investment activity present a mixed outlook for different types of investments and investors’ risk appetite.

☁️ Primary: global venture funding amounted to $66B in Q1 2024, per Crunchbase. While it increased by 6% from the previous quarter, it is down by 20% from the same quarter in 2023 and marks the second-lowest quarter for global startup funding since early 2018. AI ($11.4B, or 17% of the total global funding) and healthcare & biotech ($15.7B, or 24% of the total) remained prominent. This data also suggests a shift to earlier-stage investments: $7B raised by seed-stage startups (down from 2023 but higher than 2020), and $29.5B by early-stage companies (up 6% YoY). Late-stage experienced the most significant pullback, with ~$29B raised (down 36%).

🌤️ Secondary: the allocation of funds towards secondary strategies reached nearly $118B across all asset classes in 2023, underscoring their growth potential and investor interest. By asset class, PE secondaries represented 85%, at almost $100B. Secondaries allow GPs, LPs and employees to sell their stakes without waiting for traditional exits like IPOs or M&A. This resurgence is influenced by improved valuation spreads, and investors looking for high-quality, proven assets.

In short: venture capital investors remain cautious and selectively optimistic amidst a backdrop of economic adjustments. On the secondary side, there seems to be a growing appetite for alternative liquidity options. Structured growth equity strategies could enable investors to diversify into a less volatile asset class with stronger risk-adjusted profiles. By providing capital and operational assistance, they help recalibrate businesses in a non-ZIRP environment, making them self-sustaining and attractive for future M&A exits.