The Real Truth About VC Fund Returns in 2025: 7 Things Every Founder (and LP) Needs to Know

Carta just released their Q3 2025 VC Fund Performance Report, analyzing 2,835 funds with $118 billion in commitments. It’s the most comprehensive look at how venture funds are actually performing — and the findings are sobering

The short version: Most VC funds raised since 2017 are not going to hit the returns LPs expected. But if you’re a founder, there are some important takeaways here about what it actually means for your fundraising.

Let’s break down the things that really matter:

1. A 3x TVPI Is Still the Gold Standard — And Most Funds Won’t Get There

In venture, a 3x TVPI (Total Value to Paid-In Capital) is the benchmark for “excellent” performance. It means a fund is on track to return 3x the capital LPs put in.

Here’s the sobering reality:

• 2017 vintage: 90th percentile TVPI is 3.52x ✓
• 2018 vintage: 90th percentile TVPI is 3.07x ✓
• 2017 median: Just 1.76x
• 2018 median: Just 1.38x

So even among the older, more mature funds, only the top 10% are hitting that 3x mark. The median fund from 2017 — now 8 years old — is returning less than 2x.

What this means for founders: The best VCs are still generating great returns. But there’s massive dispersion. Choosing the right partner matters more than ever, because the gap between top-decile and median funds is enormous.

2. The 2021 Vintage Is in Real Trouble

This one hurts. If you raised from a fund that closed in 2021, your investors likely paid premium prices right at the peak of the bubble.

The 2021 vintage has:

• 75th percentile IRR: Just 5.9% (lower than any vintage from 2017-2023)
• 90th percentile IRR: 14.8% (again, the worst among all recent vintages)
• Median TVPI: Just barely crossing 1.0x after nearly 4 years

For context, the 2017 vintage had a median IRR of 26% at the same point in its lifecycle. The 2021 vintage is at 0.2%.

These funds invested at peak valuations and then watched the market reset. Many of their early investments are still underwater on a marked-to-market basis.

What this means for founders: If your lead investor is from a 2021 fund, they may be more conservative about follow-ons. They’re nursing a lot of paper losses. Understand their portfolio dynamics.

3. Smaller Funds Still Generate Higher Returns

The data is clear: smaller funds continue to outperform larger funds at virtually every performance threshold.

This isn’t surprising — it’s a pattern we’ve seen for decades. Smaller funds can:

• Write smaller checks into earlier stages
• Get meaningful ownership at lower valuations
• Have outsized impact from a single winner

The median fund in this dataset is under $100 million, but about 67% of total committed capital is in funds over $100M. The big funds have the dollars, but the smaller funds have the returns.

What this means for founders: Don’t automatically chase the biggest names. That emerging manager with a $30M fund might be hungrier, more helpful, and ultimately a better partner than the mega-fund writing checks from their third billion.

4. 2022 and 2023 Vintages Are Looking Better Than 2021

Here’s a glimmer of hope. The funds that started deploying after the 2021 peak — in 2022 and 2023 — are actually tracking better than the 2021 vintage at the same points in time.

At the 90th percentile:

• 2022 vintage (11 quarters in): 18.4% IRR
• 2023 vintage (7 quarters in): 23.4% IRR
• 2021 vintage (at same point): Much lower

Post-correction entry points are working. Funds that bought into the reset valuations of 2022-2023 are building portfolios with more reasonable entry prices and legitimate paths to strong returns.

What this means for founders: If you raised in 2023 or 2024 at “reset” valuations, you’re probably in better shape than you think. Your investors bought you at a price where you can actually grow into your valuation.

5. The DPI Problem Is Real — Nobody Is Getting Paid.  But 2026/2027 IPOs May Change Everything.

TVPI measures the theoretical value of a fund. DPI (Distributions to Paid-In) measures what’s actually been returned to LPs in cash.

The DPI numbers are brutal:

• 2017 vintage median DPI: 0.28x (best of all vintages)
• 2018-2024 vintages: More than half of funds have DPI of exactly zero

Let me say that again: The majority of funds raised since 2018 have returned exactly $0 to their LPs.

This is the exit problem in stark relief. IPOs are down. M&A is slow. SPACs are dead. Even funds with good paper returns haven’t been able to actually distribute cash.

But the IPO class of 2026/2027 will probably change everything here.  Databricks, SpaceX, Canva, Stripe, Anthropic.  

6. The Time Between Rounds Is Finally Stabilizing

For years, the time between funding rounds kept extending. Companies were taking longer and longer to raise their next round.

The latest data suggests this trend may finally be flattening:

• Seed to Series A: Down to 25 months median (from higher peaks)
• Series A to Series B: About 30 months median (holding steady)

This is still much longer than the 18-month cadence that was common in the bull market, but the bleeding appears to have stopped.

What this means for founders: Plan for 2-2.5 years of runway between rounds. That’s the new normal. If you can raise faster, great — but don’t build your model around it.

5 More Quick Metrics Founders Should Know

• Down rounds have dropped to 16% — the lowest since 2022. For seven of the previous eight quarters, down rounds were 19%+ of all priced rounds. The valuation reset is largely behind us.
• 28% of Series A rounds are still bridges. That’s down from the 2023-2024 peak, but still elevated compared to pre-2022 norms. If you’re raising a “Series A-2,” you’re not alone.
• Only 49% of 2019 seed companies raised a Series A within 4 years. And conversion rates have gotten worse since. If you raised a seed in 2021 or 2022, your cohort is tracking well below that.
• VCs still have dry powder — but it’s concentrated in newer funds. 2017-2020 vintages are 89%+ deployed. The 2023 vintage still has 39% unspent. Capital exists, but it’s sitting with newer funds still building their portfolios.

VC Is Just So Different Today

The VC industry is going through a painful rationalization. Most funds raised in the last 5-6 years are not going to return what their LPs expected. This creates real pressure on your investors.

But here’s what hasn’t changed:

1. The best funds still generate exceptional returns. Top-decile is still a great place to be.
2. Great companies still get funded. AI is sucking up a lot of oxygen, but real businesses with real metrics can still raise.
3. Entry price matters. If you raised at reasonable valuations, you have room to grow.

And here’s what has changed:

1. Your VCs need liquidity. But 2026/2027 IPOs may bring a ton of it.
2. Bridge rounds are still elevated. About 28% of Series A rounds are bridges. Make sure you’re building toward a real next round.
3. Down rounds are less common now — just 16% of rounds vs. 19%+ through most of 2023-2024. The reset is largely complete.

The data is sobering, but it’s not hopeless. The best founders will navigate this by understanding their investors’ pressures, building real businesses, and staying patient on valuation.

We’re past the trough. But the climb back is going to take a while.

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Data source: Carta Q3 2025 VC Fund Performance Report, analyzing 2,835 funds representing $118.3B in commitments.