We will continue to see liquidity issues. This is hardly surprising given that some $4.1 trillion² is still tied up in 55,000 companies in the US startup ecosystem. The new administration could usher in regulatory changes that open the door for a relaxed M&A environment, paving the way for more founders to return cash to investors and starting a flow of capital back into the ecosystem. This could also set the stage for more companies to go public.
Building on the momentum from Q4, we expect the VC market to continue growing into 2025 and potentially surpass $200 billion next year. In a recent EY survey, an overwhelming 91% of entrepreneurs said they are planning to fundraise over the next 18 to 24 months.
In this environment, companies that are leveraging AI in their value proposition will enjoy an inherent advantage. Those that don’t will need to either hunker down or consider alternatives. Founders also need to think carefully as they consider potential options from investors. Not every investor is the right match, and founders should not rush into a situation that doesn’t work. Also, investors will be more likely to reward companies with a more cost-effective business model. This is a good time to be lean.
