For years, the world's wealth management industry has been regaled about the case for private market investing, whether it be venture capital, private equity, private credit, infrastructure or forms of real estate.

Last week, this news service reflected on how family offices might pick up some of the funding slack for startups and venture capital-backed investment in the wake of the Silicon Valley Bank blow-up and the trend of higher interest rates. Whatever happens, the VC market has lost much of its fizz.

According to Preqin Research, which tracks alternative investments, VC fundraising has been on a downward trend from its peak in the first three months of 2022, when a record $77.6 billion of capital was raised globally. It totaled $29.6 billion in Q1 2023.  

As asset valuations have fallen and deal flow has slowed, investors' performance expectations have also declined, the firm said. Its PrEQIn Private Capital Quarterly Index of VC returns fell by 20 per cent in 2022.  

Despite this, the mood at the GVCC it was cautiously optimistic. Accelerating technological innovation still presents ample opportunities for VC, although the current market softness may force the industry to pay more attention to investment discipline. The idea of scaling up at all costs is under scrutiny, as are term sheets that are too founder-friendly. (These are documents which outline the key financial and other terms of a proposed investment.)

“Long-term investors could take advantage of the pricing dislocation to get access to quality assets, while founders could take the opportunity to set more realistic valuations,” Preqin said.

Delegates at a recent venture capital conference in Singapore, it said, hoped that SVB’s demise might open the way for other alternative lenders to come into the market.

For years, the world's wealth management industry has been regaled about the case for private market investing, whether it be venture capital, private equity, private credit, infrastructure or forms of real estate. Since the 2008 financial crash and until 2021, interest rates were on the floor – negative in real terms – and this prompted investors to push into the less liquid private markets space in the hunt for yield. As central banks have hiked rates to curb inflation, some of that dynamic has slowed.