Skip to Content
Quarter-End Insights

Venture Capital Outlook: Exits Come Into Focus as Valuations Continue to Climb

Availability of funds for VC-backed companies pushes out exit timelines and encourages alternative liquidity.

  • Venture capital deal counts have stabilized in 2017 after experiencing a steady downturn throughout 2016. While fewer deals are being executed, deal sizes have continued trending larger, and 2017 is on pace to experience the second-highest year of capital invested we’ve recorded. With fundraising remaining strong and average funds sizes at decade highs, we expect the shift toward larger deals to persist.
  • The Softbank Vision Fund—a mammoth $93 billion vehicle whose limited partners (LPs) include Middle East sovereign wealth funds—represents a nontraditional investor in VC-backed companies that has a much longer-term approach than the previous generation of “tourist” investors, such as mutual funds and hedge funds. We believe that funds like this, which have patient capital and the ability to write outsized checks, will only continue to fuel higher valuations and push out exit timelines for large late-stage companies.
  • In part due to readily available reserves of VC dollars, we’ve seen sustained increases in the median time to exit for VC-backed companies, which has raised liquidity concerns for employees and long-term investors. In response, new alternative forms of liquidity, such as special purpose acquisition companies (SPACs) and secondary markets, have emerged. Although we don’t anticipate a fundamental change in the exit process for VC-backed companies, we do think that direct secondary markets for venture capital shares will expand and evolve in the coming year.