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The 2024 INVESTMENT BENCHMARK REPORT

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Why read this report?

01

Market trends

Understand how VC dealmaking activities have changed over the past year and what they look like today.

02

Benchmarks of top firms

Learn what differentiates top VC firms and see how your firm’s activities compare.

03

Practical guidance

Get actionable insights into adapting your deal strategies to get ahead this year.

introduction

The state of venture capital

source: Dealroom

There’s no doubt that 2023 was a challenging year for many in venture capital. 

There were fewer high-quality deals, as many of the most promising companies cut back to extend runways rather than take further investment at a lower valuation. And as exits dwindled, so did the supply of new investment in private markets.

Combine all of these factors and the result is a sense of hibernation in private capital.

So what can Affinity platform data on 3,000+ firms illuminate about how VCs performed last year, and what they’re doing differently now? How do these generalized trends compare to a predefined set of ‘top’ VC firms?

Keep reading to find out.

Global venture capital investment

source: Dealroom

Table of contents

01

How has VC engagement evolved?

02

Did network activity impact deals?

03

How did deal flow change?

04

Strategies of top firms

05

What comes next?

chapter 01

How has VC engagement evolved?

Engagement grew for top firms, but faltered for the rest in 2023

All firms showed inconsistent engagement; they were historically quiet mid-year, with 31% fewer emails sent and received QoQ in Q2, but rebounded by Q4.

Top firms consistently generated more engagement, sending and receiving as many as 30% more emails than all firms in Q4.

Why did we see this?

As deal flow slowed mid-year, top firms likely increased their focus on supporting their portfolio companies (a priority for 48% of firms) and strengthening existing relationships.

Top firms also worked on more deals than all firms; founders tend to move to more established funds during challenging times.

Median number of emails sent and received per user

Engagement is on the rise in 2024

With a 20% QoQ increase in emails in Q1 2024, all firms are working harder than the lows of 2023 to generate deals.

Engagement for top firms was at a two-year high in Q1 2024—with 86% more emails sent and received YoY—partly driven by an uptick in new deals in Q4 2023.

Median number of emails sent and received per user

chapter 02

Did network activity impact deals?

Network growth was not a priority in 2023

Similar to engagement, all firms had inconsistent network growth with large dips mid-year (33% fewer contacts were added QoQ in Q2) and a rebound in Q4.

Top firms followed a similar trend, but their network growth didn’t fully normalize by year-end, which saw a 31% drop in new contacts compared to Q1.

Median number of contacts added per user

Why did we see this?

All firms worked harder to grow their networks, likely in hopes of sourcing new deals after a slow year.

Top firms appear to have prioritized their existing relationships (network growth fell, but engagement increased) to support their portfolio companies, nurture existing LP relationships, or for deal sourcing.

All firms are focusing more on outreach in 2024

All firms grew their networks more than top firms in Q1 2024, adding 8% more contacts—appearing to be gearing up for a more active year.

With an uptick in network growth in Q4 2023 followed by slower growth in Q1 2024, top firms likely shifted their focus to maintaining their existing networks as their deal flow picked up in Q4 2023.

Median number of contacts added per user

chapter 03

How did deal flow change?

Deal flow was concentrated with top firms in 2023, with a surge in Q4

Deal volume steadily decreased for all firms, while it decreased then spiked for top firms, who added 69% more deals QoQ in Q4.

Why did we see this?

The consistent increase in engagement from top firms throughout the year appeared to culminate in a Q4 deal surge.

Top firms also appeared more comfortable taking risks than others, with larger swings in deal activity—arguably because their longer track record reduces the concern that LPs won’t invest in their next fund.

Median number of deals added per firm

Deal volume for 2024 reveals a mixed picture

With all firms increasing their engagement and outreach in H2 2023, we may see an uptick in deal volume later this year—73% of firms expect to see more deals this year1, and there was a 3% YoY growth in active founders in Q1 20242. 

In Q1 2024, deal volume for top firms fell back in line with early 2023 levels (down 6% YoY and 39% QoQ) after its year-end peak—making it unclear whether deal volume more broadly will increase the rest of the year.

Median number of deals added per firm

1 Affinity Survey for the 2024 Private capital investment predictions report

2 Live Data Technologies, data on U.S.-based founders only from a sample of 71M+ U.S.-based white-collar professionals

chapter 04

Strategies of top firms

of dealmakers expect over half of their deals to come from their existing network in 2024

source: Affinity's 2024 Private capital investment predictions report

Top firms prioritize engagement with their existing networks 

The trends in this report reveal three key differences in the dealmaking activities of top firms:

1. Provide consistent communication

  • Despite a mid-year dip in deal flow, top firms consistently engaged with their existing contacts during 2023—reinforcing connections and supporting their portfolio companies.
  • By reassuring your network during challenging times, firms can build trust and lay the groundwork for future dealmaking opportunities when conditions permit.

2. Focus on network depth

  • While outreach has its place, top firms garnered success in Q4 2023 by prioritizing existing relationships.
  • Investing in your existing connections pays off, especially considering that 33% of dealmakers expect over half of their deals to come from their existing network in 2024.

3. Collect, analyze, and act on data throughout the deal cycle

  • Of the top 20 firms in this report, 95% have more than 50 employees. Firms of this size are much more likely to analyze more data sources, with 58% using seven or more data sources to evaluate deals. In comparison, 60% of firms with 1-5 employees use three or fewer sources.
  • Firms can become more data-driven by assessing their data needs, experimenting with tools, and identifying where data is most impactful in their value chains.
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Data-driven VC landscape 2024
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Number of data sources by firm size

chapter 05

What comes next?

Affinity platform data paints an uncertain picture of what’s to come in venture capital. 

On the one hand, dealmaking activities are on the rise, and this suggests the industry thaw has begun. But at the same time, even top firms appear to be struggling to reach median deal volumes from before the peak of 2021.

To navigate a precarious macroeconomic backdrop, VCs will have to adhere to the fundamentals of the relationship-driven industry—focusing on steady communication and doubling down on their existing networks—while also taking whatever downtime is offered to invest and innovate in technologies that make them more efficient and agile.

"The industry is becoming more competitive, and investors need to always find new ways to see more deals, conduct more effective due diligence, and help founders at scale. I believe data can help streamline and potentially turbo-charge operations without increasing team size. When used wisely, data can act as a digital jetpack for investors.”

Francesco Corea
Director of Data Science at Greycroft
source
Open quote icon

"We know that when we go into Affinity, the data is automatically there, and it’s a 360-degree view from across our firm and communities. It enables us all to work together as a single cohesive team."

Dave Grenetz
Senior Vice President of IT at Notable Capital
source

Elevate your dealmaking with Affinity

Affinity combines AI, automation, and deal data to streamline sourcing, portfolio support, fundraising activities, and relationship management.

With Affinity, you can: 

  • Communicate more effectively: Reduce crossed wires with complete engagement histories and deal visibility through automated data capture.
  • Strengthen your existing network: Nurture connections over time with relationship strength scores and triggers that make it easy to act if a connection is at risk of going cold.‍
  • Make more data-driven decisions: Find deals that match your fund’s thesis with data enrichment, AI-driven industry insights, and relationship intelligence.
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About our data

The top firms cited in this report are defined by Dealroom in their global rankings as:

“A ranking of venture capital investors, based anywhere, investing in companies anywhere, and at any stage.

The ranking looks at how successful investors are at picking startups that go on to big outcomes – primarily looking at unicorns and future unicorns (companies valued $250M-$1B). Investments are weighted by the stage at which firms invest in the most successful companies, with the aim of creating insights from a level playing field, e.g. most points for backing a unicorn at Seed, then Series A and so on.”

Analysis of Dealroom's rankings alongside our global data set of more than 3,000 VC firm customers revealed that more than half of the top firms use Affinity. We refer to this cohort as “top firms” throughout the report.

The platform data displayed in this report represents dealmaking trends across the top 20 compared with all firms. The data is aggregated and anonymized and we have used median figures to provide an accurate picture of how the market has evolved on a quarterly basis from the beginning of 2023 until the end of the first quarter of 2024.

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