The Brutal Reality of VC Returns: What Carta’s Latest Data Reveals About the State of Venture Capital
A deep dive into the performance crisis hitting venture funds and what it means for founders, LPs, and the entire ecosystem
TL;DR: The Great VC Performance Reset is Underway
Per the latest Carta performance data, only 37% of 2019 venture funds have returned ANY capital to their LPs after 5 years. Let that sink in. Nearly two-thirds of funds from what we thought was still the “good times” haven’t given investors a single dollar back.
And for recent vintages? Just 7% of 2022 funds have distributed capital. We’re not talking about profits here—we’re talking about getting back even $0.01 on the dollar.
This isn’t just a bad couple of years. This is the industry’s toughest stretch in decades—but there are signs the reset is working.
The Numbers Don’t Lie: A Tale of Two Eras
The Golden Age (2017-2018): When VCs Were Heroes
Looking at 2017 funds—the darlings of the previous cycle:
- 81% returned capital after 5+ years
- Median IRR of 11.5% (that’s actually good!)
- Top quartile delivering 28%+ returns
- Even the 25th percentile was generating 5% IRRs
2018 was still solid:
- 54% returned capital
- 8% median IRR
- Distribution activity across all quartiles
These were the funds that made LPs feel smart. The funds that got GPs invited to the best conferences. The funds that made venture capital look like a real asset class.
The Warning Shots (2019-2020): Cracks in the Foundation
By 2019, the warning signs were flashing red:
- Only 37% of funds returned capital
- Median IRR dropped to 5.4%
- Distribution activity slowing dramatically
2020 got worse:
- Just 30% returned capital
- Median IRR of 2.6% (you could beat this with Treasury bills)
- Even 90th percentile funds showing compressed returns at 20%
But here’s the thing—everyone was too busy celebrating unicorns and mega-rounds to notice.
The Reckoning (2021-2024): Welcome to Fund Manager Hell
Then came the tsunami:
2021 Funds:
- 15% returned capital (and these are 3+ years old!)
- Median IRR: -0.4% (negative!)
- 25th percentile: -6.2% IRR
2022 Funds:
- 7% returned capital
- Median IRR: -1.9%
- 25th percentile: -8.5% IRR
2023 Funds:
- Median IRR: -5.8% (these are still early, but not promising)
- 25th percentile: -16.8% IRR
- Even 75th percentile: just 2.2%
2023 Funds:
- Median IRR: -5.8%
- 25th percentile: -16.8% IRR
- Even 75th percentile: just 2.2%
We’re not just talking about poor performance. We’re talking about negative returns across entire vintage years.
What the Hell Happened?
1. The Valuation Bubble Finally Popped for B2B. But It’s Back for AI
100x revenue multiples are now long gone for B2B companies. But for the fastest growing AI start-ups? They are back.
2. The Exit Market Froze — But Strong Signs of Life in 2025
IPO activity in 2022-2024 fell off a cliff:
- 2021: 1,035 IPOs globally
- 2022: 181 IPOs
- 2023: 154 IPOs
- 2024: ~180 IPOs
But here’s the thing—2025 is showing real signs of life.
We’ve seen successful IPOs from companies like CoreWeave (+250% from IPO price), Rubrik (+206%), ServiceTitan (+50%), and MNTN (+56%). The average first-day pop for recent tech IPOs is 31% with current returns averaging 77% above IPO price. The IPO window isn’t just cracking—it’s actually wide open for the right companies.
M&A is also stirring back to life. We’ve seen some massive deals in 2024-2025:
- Scale AI’s $14.3B investment by Meta (49% stake at $29B valuation, with CEO Alexandr Wang joining Meta’s new “Superintelligence” unit)
- Wiz’s $32B all-cash acquisition by Google (closed March 2025, up from the rejected $23B offer last year – showing how hot the market got)
- Multiple mid-market SaaS exits in the $1-5B range
Strategic buyers are getting antsy. They’ve been sitting on cash for 2+ years, and the pressure to deploy capital is building.
3. The Duration Extension Crisis
VCs used to return capital in years 3-7 of a fund’s life. Now? They’re holding positions for 15+ years, praying for a market recovery.
The problem: LPs committed to 2019-2022 vintages expecting cash back by now. Instead, they’re getting capital calls and no distributions.
4. The AI Winners vs. Everyone Else Divide
Here’s the plot twist: while most VCs are drowning, the outliers with AI exposure are absolutely crushing it.
Look at those 90th percentile numbers again:
- 2021: 13.0% IRR (decent)
- 2022: 17.6% IRR (very good)
- 2023: 21.8% IRR (exceptional)
These aren’t just surviving the downturn—they’re thriving. Why? They got into AI companies before the boom:
- Anthropic (valued at $60B+ in latest round)
- OpenAI (reportedly worth $157B)
- Scale AI (exploring $10B+ strategic options)
- Character.AI (sold to Google for hundreds of millions)
- Perplexity (valued at $8B+)
The markup velocity on these deals is unlike anything we’ve seen since the early Facebook/Google days. A $10M investment in Anthropic’s Series A is now worth $500M+ on paper.
Meanwhile, if you missed the AI wave? You’re stuck with a portfolio of overvalued SaaS companies from 2021-2022 that can’t find exits.
The LP Perspective: “Where’s My Money?”
Imagine you’re a pension fund or endowment. You committed $100M to venture funds in 2019-2022, expecting distributions to start flowing by 2024-2025.
Instead:
- You’ve gotten almost nothing back
- You’re still getting capital calls for follow-on investments
- Your VC allocation is way overweight because other asset classes have grown
- Your beneficiaries are asking tough questions
No wonder LP appetite for new commitments has dried up. They literally don’t have the cash—it’s all tied up in zombie funds.
What This Means for Different Players
For Founders Outside of Hottest Deals:
- Fundraising is 10x harder and will stay that way
- Burn efficiency is everything (finally!)
- Bridge rounds will have brutal terms
- Exit expectations need serious recalibration
For VCs:
- Fund raising cycles will extend from 18 months to 3+ years
- Fund sizes will shrink dramatically (unless you have AI wins to show)
- GP compensation under pressure (no distributions = no carry)
- Portfolio management becomes survival mode vs. AI portfolio management becomes “how do we deploy more capital fast?”
- The AI divide will determine fund survival—funds with meaningful AI exposure will thrive, others will struggle to raise Fund II
for LPs:
- Vintage diversification matters more than ever
- Due diligence on GP’s older funds critical
- Alternative allocation strategies required
- Patience will be tested like never before
The Path Forward: What Needs to Happen
1. Realistic Valuation Reset For Older Deals (Still Ongoing)
We’re probably 60% through the valuation correction for 2021 and earlier vintage companies. Chime and Hinge Health IPO’d as “down rounds” to their 2021 valuations.
2. Exit Market Recovery (Already Starting in 2025)
The good news? The exit markets are showing real signs of life in 2025.
IPO activity is picking up:
- Several high-profile tech IPOs have priced successfully
- The pipeline for H2 2025 is building
- Public market SaaS multiples have stabilized around 6-8x revenue
M&A is also heating up too:
- Scale AI just closed Meta’s massive $14.3B deal (49% stake, $29B valuation)
- Wiz’s rejection of Google’s $23B offer shows confidence is returning
- Multiple $1-5B SaaS exits happening quietly
- Strategic buyers sitting on record cash piles need to deploy capital
This doesn’t mean we’re back to 2021 craziness, but the exit door is finally opening again.
3. Portfolio Company Rationalization (Happening Now)
VCs will need to:
- Let some companies die instead of throwing good money after bad
- Negotiate realistic down rounds to reset cap tables
- Focus resources on actual winners
4. Fund Strategy Evolution (The AI Factor)
The successful funds of the next decade will fall into two camps:
The AI Winners:
- Raised large funds and got into AI early
- Can write $50M+ checks to keep up with AI funding rounds
- Have track record with AI founders from previous investments
- Will dominate fundraising for the next 3-5 years
Everyone Else:
- Raise smaller funds with longer deployment periods
- Focus on profitability from day one (since growth multiples are dead)
- Provide more hands-on operational support
- Target overlooked sectors where AI hasn’t penetrated yet
The brutal reality: if you don’t have meaningful AI exposure in your current fund, your next fundraise is going to be very difficult.
The Bottom Line
This isn’t just a bad couple of years. This is a fundamental reset of the venture capital industry.
The easy money era is over. The growth-at-any-cost era is over. The “fake it till you make it” era is over.
What’s emerging is an industry that will need to:
- Generate actual returns for LPs
- Build sustainable businesses
- Create real value, not just paper value
For founders who can adapt to this new reality—who can build capital-efficient, profitable businesses—the opportunities are enormous. The competition will be lower, the investors will be more committed, and the eventual exits will be more meaningful.
But for everyone else? Welcome to the venture capital winter. It’s probably going to be a long, cold season.
