Fundraising New funds raised by type of entity (GP) Domestic private entity Domestic public entity Source: SPAINCAP/webcapitalriesgo 4,000 3,000 2,000 1,000 0 2022 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0.84% 0.63% 0.42% 0.21% 0.00% € Millions Notes Third best figure on record for new funds raised1. The outlook of the new economic framework announced at the beginning of 2022 has materialized over the course of the year, progressively impacting all aspects of Venture Capital and Private Equity activity. Fundraising specifically was affected by the new environment, marked by uncertainty, rising inflation and monetary policy changes that have resulted in interest rate hikes. All of these factors have led LPs2 to be more cautious when establishing their policy for investment among the various asset options, increasing exposure in large funds3, which, together with the heightened presence of GPs fundraising in the global market, has stifled performance of this variable, in particular for mid-size funds and funds that first started operating in the market in 2022. As a result, fundraising shrank both in Spain and globally. Despite the changing environment, positive elements that were determining factors in fundraising in recent years have maintained and even strengthened, such as: the public sector's commitment to Venture Capital and Private Equity through several programs including funds of funds such as Fond – ICO Global (managed by Axis/ICO), Innvierte, managed by CDTI, and other European Investment Fund (EIF) vehicles at the European level, which have also been joined by new programs managed by Cofides and EIF4; as well as the attractiveness of the consistent positive returns offered by Venture Capital and Private Equity compared to other assets.5 In spite of this new landscape, new funds raised by private Private Equity and Venture Capital firms (PE&VCs) or General Partners (GPs) in Spain in 2022 exceeded €2,620M, representing a 11.5% decrease from 2021 (€2,960.9M), and the third best figure on record since 2007 (€3,758M) and 2021 (€2,960.9M). Including new funds for public entities6 (€102.5M), total new funds raised for the sector reached €2,722.8M (-15.4% from 2021). At least 68 Venture Capital & Private Equity firms headed the raising or extension of funds by private domestic firms. Traditionally, a majority of new funds raised were allocated to the middle market investment segment. However, in 2022, thanks to implementation of the new Next Tech funds managed by Axis Participaciones Empresariales/ICO, several Venture Capital funds are among the top 10 largest funds. In terms of the number of firms that increased funds, those aimed at funding start ups stood out (45 of the 68 firms). As is the case globally, although at a different scale, a significant part of funds raised are being concentrated in a small number of funds (approximately 54% of new funds raised were invested in nine funds, all of them above €100M). In terms of fundraising by Venture Capital & Private Equity firms, the following Private Equity vehicles7, inter alia, stood out by size: Suma Capital Climate Fund III (target of €300M) of Suma Capital, Aurica Growth Fund IV (first closing €170M) of Aurica Capital Desarrollo, Portobello Structured Partnerships Fund I (final closing €250M) of Portobello Capital, Embarcadero Pantheon Co-Inversión Global (first closing) de Embarcadero Private Equity, ABE Private Equity Fund (final closing, with a fund target of €200M) of ABE Capital Partners, Miura Expansion Fund I (first closing, with a fund target of €150M) of Miura Partners, GED Strategic Partnership I (first closing) of GED Iberian Private Equity, as well as Abac Sustainable Value (second closing, with a fund target of €350M) of Abac Capital. Several funds were launched and closed to finance startups, including Seaya Andromeda Sustainable Tech Fund I (first closing €195M) of Seaya, Lead Wind Ventures (first closing €140M) of K Fund, Klima Energy Transition Fund (final closing €250M) of Alantra, Alma Mundi Insurtech Fund II (first closing with a fund target of €200M) of Alma Mundi Ventures, Stellum Food Tech I and Stellum Growth I of Stellum Growth Private Equity, Beable Innvierte Science Equity Fund (first closing with a fund target of €70M) of Beable Capital, Innvierte Science Tech Clave Innohealth (first closing, with a fund target of €80M) of Clave Mayor and Innvierte Sciencetech Bullnet Capital IV (first closing €40M) of Bullnet Capital, as well as numerous undisclosed capital extensions in Venture Capital & Private Equity vehicles. In 2022, total funds raised by private domestic Private Equity GPs totaled €1,421M (€1,957M in 2021), whereas Venture Capital GPs totaled €1,199M (€1,003.6M in 2021), a record high for the third consecutive year for GPs operating in this segment, which confirms investor’s appetite for technology and innovative projects. An estimated €6,045M in dry powder is currently available for investment by private domestic GPs (+6% from 2021). Globally,8 the Private Equity and Venture Capital sector is undergoing a process of adaptation to the new economic environment that is expected to put an end to the growth period that began in 2010, in the aftermath of the global financial crisis. In 2022, new funds raised totaled €596,000M, representing a 15% decrease from 2021 (lowest figure on record since 2017, not including 2020). On the heels of a record year for fundraising globally, investors are feeling the uncertainty and denominator effect9 generated in their portfolios. To minimize investment volatility, Venture Capital & Private Equity allocations were primarily made in large funds10 managed by consolidated GPs, to the detriment of smaller general funds. This dynamic has led to a €373M increase in average fund size and a 46% decrease in the number of new funds raised compared to 2021. The term for fundraising and final closing also increased in 2022, with an average of 20.8 months compared to 17.1 months in 2021. Looking to 2023, the number of LPs expected to increase investments in Venture Capital and Private Equity has decreased11 and there is a general consensus among the large consulting firms for alternative markets that fundraising will be a challenge in 2023 due to the decreased exposure of investors to these assets, and therefore, a pause year12. Nevertheless, in the medium term, the outlook for Venture Capital and Private Equity is positive and expected to continue attracting investors thanks to their higher returns compared to other financial assets, even during recession periods. This is all in addition to the sophistication of an ever increasing number of Venture Capital and Private Equity GPs that are offering multiple strategies related to the technological development of the healthcare, artificial intelligence, big data, energy transition, and other sectors. Venture Capital and Private Equity Investment over the next couple years is guaranteed thanks to the dry powder available for Venture Capital and Private Equity GPs globally, totaling €1.7 trillion13 at the end of 2022.