FirstFT: End of the ‘megafund’ era for venture capital

Good morning. Venture capitalists are struggling to raise money, signalling the end of an era of “megafunds” and a deepening slowdown in start-up dealmaking.

Globally, venture firms raised $30.4bn from university endowments, foundations and other institutional investors in the first three months of this year, down from $67bn in 2023 and well below the peak year of 2022 when VCs raised $173bn, according to private markets data provider PitchBook.

Investors in venture funds, known as limited partners, have reined in spending over the past two years, taking a more cautious approach as interest rates have risen, start-up exits including public listings and sales have slowed and returns from venture fund managers have cratered.

“Unless we see meaningful improvements from the exit market we’re expecting fundraising difficulties to linger and that will put downward pressure on dealmaking,” said Kaidi Gao, a venture capital analyst at PitchBook. Read the full story.

Here’s what else I’m keeping tabs on today:

• US-China relations: The US Treasury secretary Janet Yellen will depart for China later today. Last night, President Joe Biden spoke to his counterpart Xi Jinping in their first engagement since November. Here’s what they discussed.

• Economic data: ADP will release its US employment report for March, which will give insight into the labour market before the official government figures on Friday. We also get US services sector activity for February. 

• Federal Reserve: Chair Jay Powell speaks at the Stanford Business, Government and Society Forum in California. A top Fed rate-setter yesterday said US interest rates were unlikely to fall as far as expected in the longer term.

• Companies: Walt Disney shareholders vote at the entertainment giant’s annual general meeting on whether to award billionaire activist Nelson Peltz a board seat.

• Nato: Foreign ministers of the military alliance meet in Brussels to discuss a five-year, $100bn “Trump proof” military aid package for Ukraine. Henry Foy in Brussels has more details on the proposal.

Five more top stories

1. Eurozone inflation fell to 2.4 per cent in March, lower than forecast, bolstering expectations that the European Central Bank will cut interest rates by the summer. The slowdown of annual consumer price growth from 2.6 per cent the previous month reflected smaller increases in food and goods prices, which offset steady services prices. Here’s more on what the data means for interest rate expectations in the eurozone.

• More on the eurozone economy: The four biggest southern European economies have outgrown Germany by about 5 per cent since 2017, underlining the region’s two-speed recovery from recent shocks.

2. Four people have been killed and hundreds injured after Taiwan was struck by the island’s strongest earthquake in almost 25 years. The quake — which had a magnitude of 7.2 according to Taiwan’s earthquake monitoring agency and 7.4 according to the US Geological Survey — hit an area south of Hualien, a city of about 100,000. Kathrin Hille in Taipei has the latest.

3. Joe Biden said Israel “has not done enough” to protect aid workers and civilians in Gaza and blamed it for making it difficult to distribute humanitarian aid after the death of seven workers in an Israeli strike. In a lengthy statement that did not signal a shift in US policy but was repeatedly critical of the Jewish state, the president said he was “outraged and heartbroken” by the deaths of workers from World Central Kitchen. Here’s more from Biden’s remarks yesterday.

4. Blackstone’s flagship property fund failed to generate enough cash to cover its dividend last year, putting strain on a vehicle viewed by the private capital group as a beachhead in the retail investor marketplace. According to its annual report, the $60bn Blackstone Real Estate Income Trust generated $2.7bn in cash flows in 2023 but paid out a distribution of more than $2.8bn, resulting in the first annual shortfall of cash from operations to cover payouts to shareholders.

5. Elon Musk’s Tesla and Chinese rival BYD both reported sharp falls in electric vehicle sales yesterday, adding to concerns over the slowing shift towards EVs. Both companies — the world’s top two sellers of EVs — have cut prices to stimulate demand as they face increased competition, especially in China. Here’s a closer look at why Tesla and BYD sales are falling.

The Big Read

Earlier this week, Knight Insurance Group, one of a handful of companies owned by Los Angeles-based subprime auto loan billionaire Don Hankey, put up the $175mn bond for Donald Trump. Hankey told the Associated Press that Knight underwrote the bond for business reasons, not political ones but it is not the first time the businessman has backed Trump.

How do you think the 2024 US presidential election will affect you and your country? The FT is conducting a reader survey on the impact of the 2024 presidential election. Click here to send us a voice note.

We’re also reading and watching . . . 

• Democracy vs autocracy: All the evidence shows that despotism cannot consistently deliver the economic goods for developing countries, writes Martin Wolf.

• The limits of AI: A short-lived retail crime wave linked to self-checkout systems is a warning about the unintended consequences of automation, writes Brooke Masters.

• China’s rival to Boeing and Airbus: State-backed aircraft maker Comac sees south-east Asia as its best opportunity for overseas sales of its new C919 passenger jet.

Chart of the day

Africa had to import $43bn of food in 2019, and the World Bank estimates it could rise to $110bn by next year. The continent’s agriculture is generally inefficient; average yields from cereals are half those of India and a fifth of those of the US. Yet improvements in farming could prove transformational, with Bill Gates, whose foundation invests across the continent, telling the FT: “Africa can be a net food exporter”.

Take a break from the news

There are about 4,000 snake species, living in oceans, lakes, deserts, forests and even underground. A new study shows the twisting backstory of the species, an animal touted as a new superfood, writes science commentator Anjana Ahuja.

Additional contributions from Tee Zhuo and Benjamin Wilhelm