I asked around similarly earlier this year. Some money goes somewhere... But likely not as much, and not widely distributed.
In my convs with GPs, most LPs are very happy to avoid capital calls right now, as they went too far in during the heyday. They will remember GPs forced them during a bad year.
When they do go in again, it is at lower valuation multiples, which can easily break cap tables of recently-raising startups. That triggers a downward spiral if they luck into such a fundraise. I bet more likely is what happened ~4 years ago was a lot of the $ went into a smaller # of stronger co's, and I'd expect even more pressure now. Big funds need big winners, and FTX style frauds and less ponzi acquisitions means return of later-stage diligence.
When LP money turns back on, unclear if at rate of last few years, which is largely attributed to dumb outside money enabled by low interest rates and startups being good risk/reward. There was fear due to lack of IPOs & historically weird revenue vs valuation multiples, but the above factors counter-weighed. So with valuation multiples cutting and low interests shrinking.. different world for LPs.
Net:
1. less $, and to fewer co's
2. This is still a historically amazing time for startups & founders, but feels closer to 10 years ago, than the last few years which supported a lot of people who were mostly providing value on paper, not in revenue.
In my convs with GPs, most LPs are very happy to avoid capital calls right now, as they went too far in during the heyday. They will remember GPs forced them during a bad year.
When they do go in again, it is at lower valuation multiples, which can easily break cap tables of recently-raising startups. That triggers a downward spiral if they luck into such a fundraise. I bet more likely is what happened ~4 years ago was a lot of the $ went into a smaller # of stronger co's, and I'd expect even more pressure now. Big funds need big winners, and FTX style frauds and less ponzi acquisitions means return of later-stage diligence.
When LP money turns back on, unclear if at rate of last few years, which is largely attributed to dumb outside money enabled by low interest rates and startups being good risk/reward. There was fear due to lack of IPOs & historically weird revenue vs valuation multiples, but the above factors counter-weighed. So with valuation multiples cutting and low interests shrinking.. different world for LPs.
Net:
1. less $, and to fewer co's
2. This is still a historically amazing time for startups & founders, but feels closer to 10 years ago, than the last few years which supported a lot of people who were mostly providing value on paper, not in revenue.