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 2023 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 0.84% 0.63% 0.42% 0.21% 0.00% € Millions Notes Second best figure of the last decade for new funds raised1 by Private Equity and Venture Capital GPs in Spain. The changing landscape that started in 2022, caused by the uncertainty resulting from geopolitical tensions, upturn in inflation and interest rate hikes, among other factors, is hindering Venture Capital and Private Equity activity. Specifically, in terms of fundraising, the new framework had a two-way impact on institutional investors (LPs)2. On the one hand, this drove more cautious investment decisions by LPs, resulting in an increased interest in the large funds of Venture Capital and Private Equity GPs with proven experience and track records3. Simultaneously, the denominator effect4 has resulted in a reassignment of their investment portfolio, and consequently in a decreased exposure to alternative assets such as Venture Capital and Private Equity. However, and especially in Spain, the positive elements that were determining factors in fundraising in recent years were maintained, with the involvement of the public sector in Venture Capital and Private Equity standing out through various funds of funds programs, including Fond-ICO Global managed by Axis/ICO, Innvierte managed by CDTI and the Next Tech fund, as well as new programs managed by Cofides and other European Investment Fund (EIF) vehicles at the European level. Venture Capital and Private Equity also continues to attract investors thanks to the consistent positive returns offered to investors compared to other asset classes5. In this landscape, new funds raised by Private Equity and Venture Capital firms (PE&VCs) or General Partners (GPs) in Spain in 2023 exceeded €2,702M, representing a 3% increase from 2022 (€2,620M), and the second best figure of the last decade behind 2021 (€2,960.9M). Including new funds for public entities6 (€291M), total new funds raised for the sector reached €2,993.6M (-9.9% from 2022). As was the case last year, 68 Private Equity & Venture Capital firms headed the raising or extension of funds by private domestic firms. As is becoming the norm, a majority of new funds raised were allocated to the Private Equity investment segment. However, with the launch of the public fund of funds Next Tech, several Venture Capital funds are now ranked among the top 10 largest funds. In terms of the number of firms that increased funds, those aimed at funding start-ups stood out (46 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 50% of new funds raised were committed in five Private Equity funds, all of them above €100M). In terms of fundraising by Private Equity & Venture Capital firms the following Private Equity vehicles7, inter alia, stood out by size: Proa Capital Buyout fund IV (target of €600M) of Proa Capital, Arta Capital Fund III (first closing €306M) of Arta Capital, Miura Fund IV (target of €400M) of Miura Partners, Nexxus Iberia Private Equity Fund II (continuation fund) of Nexxus Iberia, Diana Capital III (first closing €150M) of Diana Capital, GPF Capital IV (first closing) of GPF Capital, Nzyme Fund I (first closing with a target of €200M) of Kibo Ventures, Alantra Private Equity Fund IV (first closing) of Alantra Private Equity and Everwood Transport & Logistic (first closing) of Everwood Capital. Several funds were launched and closed to finance startups, including, Leadwind Ventures (closing at €237M) of K Fund, Cardumen Deep Tech Fund II (final closing above €105M) of Cardumen Capital, Bonsai Partners Fund II (intermediate closing) of Bonsai Partners, Actyus Finthech I (final closing €60M) of Actyus Private Equity, extension of the company GoHub Ventures SCR, Seaya Andromeda Sustainable Tech Fund I (target €300M) of Seaya, Sabadell Asabys Health Innovation Investments II (first closing with a fund target of €200M) of Asabys, Inveready Biotech IV (first closing at €45M with a target of €50M) of Inveready, Alma Mundi Futuretail Fund (with a target of €100M) of Mundi Ventures and Swanlaab Tech Fund II (first closing at €50M) of Swanlaab Venture Factory as well as numerous undisclosed capital extensions in Private Equity & Venture Capital vehicles. In 2023, total funds raised by private domestic Private Equity GPs totaled €1,860.7M (€1,421M in 2022), whereas Venture Capital GPs raised €841.5M (€1,199M in 2022), the third best figure on record, reflecting the consolidation that the innovation technology landscape is experiencing. An estimated €6,038M in dry powder is currently available for investment by private domestic GPs. Globally8 the Private Equity and Venture Capital sector has been facing a new unprecedented landscape since 2022 that is putting an end to the growth period that began in 2010, in the aftermath of the global financial crisis. In 2023 new funds raised totaled €599,000M, representing a 15% decrease from 2022 and the lowest figure on record since 2017. Venture Capital and Growth funds saw the biggest decrease, compared to Buyout funds that achieved unprecedented record high fundraising. 2023 was undoubtedly a complex year for fundraising due to lower capital returns for investors9, the denominator effect generated in their portfolios and the high competitiveness driven by the large number of funds seeking new money in the global market10. As was the case in the previous year, to mitigate the risks caused by the uncertainty, international LPs were very selective in allocating funds to Venture Capital and Private Equity, the large majority of which were allocated to large funds11 launched by consolidated GPs. Globally, this dynamic has led to a 67% increase in average fund size, to €458M, and a 42% decrease in the number of new funds raised (851) compared to 2022. Likewise, fundraising by new Venture Capital and Private Equity firms (first-time funds) recorded its lowest level since 2013. The term for fundraising and final closing also remained high at levels similar to 2022, with an average of 20.1 months. Looking to 2024, despite the challenging market environment, optimism remains in light of the anticipated interest rate adjustment and decreased uncertainty that will help deal flow recovery. Nonetheless, the number of LPs expected to increase investments in Venture Capital and Private Equity over the next 12 months has slightly decreased12. In the medium term, the outlook for Venture Capital and Private Equity is positive and this asset class is 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 linked to innovative projects in domains such as sustainability, healthcare, artificial intelligence, etc. Investment over the next couple years is guaranteed thanks to the dry powder available for Venture Capital and Private Equity GPs globally, totaling €2.1 trillion at the end of 2023.