Lessons from 2024: How Smart GPs Can Navigate the Venture Market in 2025
Insights from AngelList’s State of Venture Report and Strategies to Address LP Expectations, Valuation Overhang, and Fundraising Challenges
The venture market in 2024 may have shown some signs of stability, but make no mistake—it’s far from business as usual. For most in the VC world, the shifting dynamics require fresh strategies and sharper focus.
As GPs move forward into 2025, understanding the evolving priorities of LPs and recalibrating fundraising and investment strategies to be in tune with that, is essential.
The latest AngelList data and insights provide a critical lens into these trends, offering valuable takeaways for every GP—especially 3rd, 4th, and 5th-time fund managers navigating this challenging landscape.
LPs Are Frustrated with Distributions
As we looked across venture market performance in 2024, we wanted to provide a deeper evaluation of how LPs were realizing (or not realizing) gains from their venture investments. In doing so, we found a provocative anecdote around fund DPI and TVPI.
DPI (Distributed to Paid-In Capital) is the ratio of a fund's cumulative distributions to the total amount of capital investors have contributed—also known as the realization multiple. A DPI above 1.0 indicates that a fund has returned more capital to investors than they initially paid in.
TVPI (Total Value to Paid-In Capital) measures both realized and unrealized value relative to the amount of money contributed. It consists of two parts:
Cumulative distributions – Capital already returned to investors.
Residual value – The unrealized value of portfolio holdings.
LPs typically expect limited distributions in the first six years of a fund’s lifetime.
After that, distributions should increase significantly until around year 12-13, when most investments should be realized. However, AngelList data shows that some of the oldest funds (2013-2015 vintages) have progressed into this later stage without delivering the expected increase in distributions. This has major implications for LP confidence and their willingness to commit new capital.
For a more detailed breakdown, AngelList has just published a 31-page report on the state of venture in 2024, which can be downloaded here: The State of Venture 2024 Report.
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How Smart GPs Should Respond
1. You Have To Own the Liquidity Narrative
LPs are increasingly scrutinizing DPI, not just TVPI. While high TVPI indicates strong paper returns, LPs care most about actual cash distributions. You read that right: cash money.
GPs should proactively communicate their exit strategies and explore ways to accelerate liquidity.
What to do:
Highlight past distributions and return profiles in investor communications.
Consider structured liquidity solutions, like secondary sales and/or M&A exits.
Set realistic expectations on exit timelines and potential liquidity windows.
2. Demonstrate Valuation Discipline
Valuation overhang remains a challenge, with inflated marks from the 2021-2022 era delaying LP realizations. If you’re not super familiar with valuation overhand, this means that many venture funds are still holding investments at prices that were set during the peak of the market. Since those valuations have not been adjusted downward, it creates an unrealistic picture of a fund’s performance.
For LPs, this is frustrating because it delays their ability to see real returns.
While a high TVPI may suggest strong performance on paper, it doesn’t translate to actual cash distributions. GPs must be proactive in adjusting valuations to reflect the current market reality and plan clear pathways to liquidity.
What to do:
Be transparent about markdowns and how they impact fund strategy.
Position new deals as benefiting from the reset in valuations.
Emphasize conservative underwriting and capital efficiency.
3. Focus on Early-Stage Resilience
Despite broader market challenges, seed-stage investing remains competitive and is one of the few areas showing resilience. If your fund plays in early-stage venture, lean into this narrative.
What to do:
Showcase access to strong early-stage deal flow.
Emphasize how your strategy benefits from the lower cost of entry in the current market.
Highlight how you support portfolio companies in capital-efficient scaling. Like, what real day to day things do you to to support these companies that the founders genuinely appreciate?
4. Address LP Concerns About Recent Vintages
Funds raised in 2021-2023 have underperformed due to high entry valuations and low markups. LPs are now more hesitant to commit fresh capital to GPs who haven’t addressed these issues.
What to do:
Show how you are applying lessons from 2021-2023 to your next fund.
Offer co-investment opportunities or sidecar vehicles to engage LPs with lower commitment risk. From what I recall Thrive Capital has used special purpose vehicles (SPVs) to facilitate co-investments. For instance, Thrive led a significant funding round for OpenAI, contributing over $1 billion and utilizing SPVs to enable LPs to co-invest alongside the main fund
Demonstrate active portfolio management and operational improvements.
5. Provide Transparency and Frequent LP Updates
LPs are being more selective and demanding better visibility into fund performance. GPs who provide clear, proactive communication will stand out.
What to do:
Increase the frequency of LP updates, emphasizing distributions, liquidity planning, and valuation adjustments. Be sure to have a good software solution for this. Visible is such an option.
Offer in-depth case studies showcasing successful exits and value creation.
Host LP roundtables to address concerns and reinforce fund positioning.
Addressing Pipeline Needs for Fundraising Success
Raising capital in this environment isn’t just about messaging—it’s about execution and getting sh*t done.
GPs need a robust pipeline strategy to hit their fundraising targets. Our recommendation is that GPs allocate 2.5% of fund size under $50M (or 2% over $50M) purely for marketing and investor relations.
To make meaningful progress toward a $1-4M daily pipeline, GPs should:
Invest in targeted LP outreach – Use personalized campaigns (with 99%+ deliverability) to engage institutional investors, family offices, and high-net-worth individuals. You may need to put real time into finding a service partner or vendor that does near flawless email delivery.
Leverage data-driven marketing – Use CRM-driven workflows to track LP engagement and optimize follow-ups.
Host high-impact events – Well-executed investor dinners, webinars, and roundtables can accelerate commitments.
Double down on thought leadership – Publishing insights, case studies, and fund updates keeps LPs engaged and builds credibility.
Hire or outsource IR professionals – Many GPs underestimate the importance of investor relations in securing commitments. Having dedicated IR staff is key to maintaining momentum.
Don’t Under-Budget Your Fundraise
One of the biggest mistakes a GP can make in this environment is under-budgeting their fundraise. Trying to run a lean fundraising effort might seem cost-effective, but it often leads to failed raises before even securing an anchor LP. If you don’t allocate sufficient capital to marketing, investor relations, and LP engagement, your fundraise will stall, forcing you to restart or scrap the effort altogether.
What to do:
If you don’t have the capital to run a well-resourced raise, delay instead of launching prematurely.
Ensure you have a clear strategy for reaching and converting LPs, backed by adequate funding.
Recognize that LPs expect multiple touchpoints before committing—this takes time and capital.
Final Thoughts
This 2024 report presents both challenges and opportunities for GPs. LPs are adjusting their venture capital allocations based on DPI performance, valuation concerns, and fund pacing.
Smart GPs will get real, pretty fast, and position themselves accordingly—by focusing on liquidity, valuation discipline, and capital efficiency while ensuring they build a strong LP pipeline.
For experienced fund managers, this is an opportunity to differentiate from the pack. LPs are still allocating capital, but they are prioritizing GPs who can demonstrate realized returns, a clear strategy for navigating this market, and a well-structured pipeline for fundraising success. If you really have all three, it might be a good year.