On the back of a depressed M&A market and lagging VC fund returns compared to other asset classes, LP liquidity in the VC ecosystem has declined signi昀椀cantly in 2023. Gavin Rees Head of Strategic Fund Solutions, HSBC Innovation Banking UK VC fundraising remains therefore challenging, with fund closing times continuing to lengthen this year. However, there are signs the market could be on track for a stronger performance in 2024. Similar to the Private Equity Market which has seen signi昀椀cantly more capital going into the hands of the biggest funds, LPs have shifted their focus in the VC space towards top managers. There has also been increased LP led activity for secondary transactions in the Private Equity Market, indicating we may be closer to market clearance - and providing much needed liquidity among LPs. We may see a similar dynamic in the VC ecosystem, creating opportunities for new LPs to enter the market whilst giving existing LPs the opportunity to realize their investments. VCs and LPs are aligned on future challenges Interestingly, there is much closer alignment in the perception of VCs and LPs when asked about the greatest potential challenges likely to be experienced by VC GPs over the next 12 months. There is clear agreement on the di昀케culties of navigating the fundraising environment and the impact of a muted exit landscape on 昀椀nding liquidity and realising distributions back to LPs. The most notable areas of divergence of perception here relate to follow-on capital management and the competitive landscape for investment. LP respondents ranked follow-on capital management much higher than VC respondents, while VC respondents were much more likely to perceive competition as a challenge than LPs. 193 | Fundraising