2024 predictions: How did we do?

At the end of last year, we surveyed more than 700 dealmakers to gauge investor sentiment, understand their outlook for private capital, and uncover how top firms were adapting their dealmaking strategies. 

Our 2024 Private capital investment predictions report consolidated these findings into three key predictions around deal volume, networks, and artificial intelligence (AI). 

With a slower-than-expected exit market and declining distributions, a lot has happened since then. 

Now that we’re more than halfway through 2024, the data’s in and we have a clearer picture of how the year is panning out. Which predictions did we get right? Which ones did we miss and what does the latest data illuminate instead? Keep reading to find out.

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Prediction #1: Investors anticipate more deals

Heading into 2024, investors were cautiously optimistic about deal volume for the year. Research from our predictions report revealed that 89% of investors anticipated closing the same number of deals or more in 2024 compared to the previous year.

Since then, lingering high interest rates and sluggish exits have challenged private capital deal flow. For example, data from our investment benchmark report showed a 39% quarter-over-quarter decrease in deals in Q1 2024 for top firms.

Despite the dealmaking slowdown in many sectors, pockets of opportunities remain in private capital markets, specifically with AI. Reuters reports that AI deals drove a 47% increase in U.S. VC funding in Q2 2024, in contrast to the decade-high number of flat and down rounds for VC-backed companies in the first half of 2024.  

Orla Brown, Head of Insights at Dealroom, affirms this trend, “The big story over the last 18 months to [several] years has been AI, and a large portion of investment is now going to AI-first companies. It’s the largest share on record, with now about 20-25% of global venture capital going to AI-first companies.”

Firms are also focusing heavily on expanding their networks and increasing their engagement with their connections this year, which historically we’ve seen correlate with more deals. 

And to a point made by Adam Shuaib, Partner at Episode 1 Ventures, there’s always an opportunity to win and close deals regardless of market conditions. He says, “The very best funds recognize that good deals will always be able to get done, and if you want to win those deals, you need to stay ahead of the pack—and you need to be working, making introductions, and getting to know those founders when, perhaps, your peers or competition are not so active.”

For now, we’re taking a miss on this prediction, but there’s still time for deal volume to pick up across the board in the second half of the year.

Prediction accuracy? Miss (but could still change)

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Prediction #2: Relationships and brand trust drive deals

Our predictions report found that firms are focusing more on their networks to secure high-quality deals, with 33% of investors citing network building as their top priority for 2024—above deal sourcing and deal management. 

Investors are prioritizing their relationships because they can be key differentiators for dealmaking. As Sophie Winwood, Operating Partner at Foxe Capital and Co-Founder and CEO of WVC:E, puts it, “If we all have the same data and the same tools, then how do you win deals? It’s [with] relationships and brand trust.”

Relationships and brand trust have proven to be crucial for private capital. Beyond deal sourcing, we’ve seen this play out with fundraising, where funding has become increasingly concentrated among a select group of established firms. According to Pitchbook, fund count fell 45.9% year-over-year in Q1 2024, with just two fund managers—General Catalyst and a16z—capturing 44% of U.S. VC funding. 

In tougher markets, founders also tend to gravitate towards firms they trust, which is why it’s crucial to build a strong foundation with your network. Top firms are using this strategy to snatch up more deals—our investment benchmark report showed that top firms are doubling down on their existing networks as opposed to growing them. 

Alexander Ross, General Partner at Illuminate Financial, notes the importance of fostering quality relationships over time:

“If I think about what success looks like in terms of our relationships with large strategics, it’s ten to fifteen very senior change agents within an organization who actually care about innovation and adopting early-stage solutions—versus necessarily a quantum of new contacts.”

Prediction accuracy? Hit

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Prediction #3: AI will overcome deal complexity

Dealmaking is becoming more complex and time-consuming. Our predictions report showed that firms are using more data sources than ever—with around 30% of firms using seven or more sources to research deals, up from 22% the previous year. 

While integrating more data in the investment process can enhance decision-making, there can be diminishing returns beyond a certain point. Adam Shuaib, Partner at Episode 1 Ventures, explains: 

“You very quickly get to a point where additional sources are not adding more value. I think it's about how you use those existing sources in a more clever way. So we went from zero to close to 20,000 lines of code looking at four or five different sources, but they're responsible for probably 35%, maybe 40% of the deals that we've done in this fund.”

To make sense of growing volumes of data and dealmaking complexities, firms are increasingly adopting AI-driven tools and technologies. For example, 35% of data-driven firms report that their data-driven tools are responsible for half of their deals sourced.

Foxe Capital’s Sophie Winwood affirms this: “One of the things we’ve seen is the increase in the amount of data people are using, and the amount of time it takes to research. So having a more valuable tech stack and improving tech stack from an operational standpoint [is key].”

Prediction accuracy? Hit

What’s next?

Taking stock of our private capital predictions for 2024, we hit the mark in two areas: the importance of relationships and brand trust in driving deals and the increasing role of AI in overcoming deal complexity. 

While our prediction for increased deal volume hasn’t fully materialized, there’s still time for this to shift as firms continue building their networks and as exit activity shows signs of possible improvement.

Looking ahead, we’re gearing up to launch our private capital investment predictions for 2025. To get the insights from the survey as soon as it comes out, and for other private capital insights, sign up for our newsletter and follow Affinity on LinkedIn.

Simplify dealmaking with Affinity 

In a competitive environment where dealmaking is becoming more complex and time-consuming, technology is key to streamlining processes and saving time. 

Affinity—the CRM built for private capital—offers a range of features customized to optimize each stage of the investment process: 

• Deal sourcing: Find high-quality deals faster with a CRM that enriches your pipeline with critical data and uses relationship intelligence to facilitate warm introductions. 
• Due diligence: Accelerate your research with Affinity’s AI-driven market intelligence tool, Industry Insights, which generates a curated list of competitors in a given market along with essential data on funding, investor histories, and market saturation. 
• Deal management: Manage deals more effectively by using Affinity to automatically capture critical deal data, manage key workflows, and discover relationship insights across your firm’s network from a centralized source. 
• Portfolio support: Save time on reporting with Affinity Analytics, which allows you to create customized reporting dashboards with enriched data on funding, firmographics, and growth, alongside manually tracked information. 

To learn more about how you can use Affinity to transform your dealmaking, schedule a demo today. 

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